Role of entrepreneurship in economic dvelopment.

Entrepreneur
An enrepreneur can be regarded as a person who has the initiative skill and motivation to set up a business or enterprice of his own and who always look for high acheivements. He is the catalyst for social change and works for the common good. They looks for opportunities, identifies them and seizes them mainly for economic gains. An action oriented enrepreneur is a highly calculative individual who is always willing to to undertake risks inorder to achieve their goals.

Need for Entrepreneurship Development

Economic development essentially means a process of upward change whereby the real pr capita income of a country increases over a period of time .Entrepreneurship has an important role to play in the development of a country. It is one of the most important inputs in economic development. The number and competense of entrepreneurs affect the economic growth of the country. The economic history of the presently advanced countries like USA, Russia and japan supports the fact that economic development is the outcome for which entrepreneurship is an inevitable cause. The crucial and significant role played by the entrepreneurs in the economic development of advanced countries has made the people of developing and under developed countries consious of the importance of entrepreneuship for economic development. It is now a widely accepted fact that active and enthusiastic entrepreneurs can only explore the potentials of the countries availability of resourses such as labour, capital and technology. The role of entrepreneurs is not identical in the various economies. Depending on the material resources, industry climate and responsiveness of the political system, it varies from economy to economy. The contribution of entrepreneurs may be more in favourable opportunity conditions than in economies with relatively less favourable opportunity conditions.

Entrpreneurship and Economic Development

Entrepreneurship helps in the process of economic development in the following ways : 1) Employment Generation : Growing unemployment particularly educated unemployment is the problem of the nation. The available employment opportunities can cater only 5 to 10 % of the unemployed. Entrepreneurs generate employment both directly and indirectly. Directly, self employment as an entrepreneur and indirectly by starting many industrial units they offer jobs to millions. Thus entrepreneurship is the best way to fight the evil of unemployment. 2) National Income : National Income consits of the goods and services produced in the country and imported. The goods and services produced are for consumption within the country as well as to meet the demand of exports. The domestic demand increases with increase in population and increase in standard of living. The export demand also increases to meet the needs of growing imports due to various reasons. An increasing number of entrepreneurers are required to meet this increasing demand for goods and services. Thus entrepreneurship increases the national income. 3) Balanced Regional Development :

The growth of Industry and business leads to a lot of Public benefits like transport facilities, health, education, entertainment etc. When the industries are concentrated in selected cities, development gets limited to these cities. A rapid development . When the new entrepreneurers grow at a faster rate, in view of increasing competition in and around cities, they are forced to set up their enterprises in the smaller towns away from big cities. This helps in the development of backward regions.

4) Dispersal of economic power : Industrial development normally may lesd to concentration of economic powers in a few hands. This concentration of power in a few hands has its own evils in the form of monopolies. Developing a large number of entrepreneurers helps in dispersing the economic power amongst the population. Thus it helps in weakening the harmful effects of monopoly.

5) Better standards of living : Entrepreneurers play a vital role in achieving a higher rate of economic growth. Entrepreneurers are able to produce goods at lower cost and supply quality goods at lower price to the community according to their requirements.When the price of of the commodies decreases the consumers get the power to buy more goods for their satisfaction. In this way they can increase the standard of living of the people.

6) Creating innovation : An entrepreneur is a person who always look for changes. apart from combining the factors of production, he also introduces new ideas and new combination of factors. He always try to introduce newer and newer technique of production of goods and services. An entrepreneur brings economic development through innovation. Entrepreneurship also helps in increasing productivity and capital formation of a nation. In short, the development of the entrepreneurship is inevitable in the economic development of the country. The Role played by the entrepreneurship development can be expressed in the following words : " Economic development is the effect for which entrepreneurship is a cause "

1 Paper presented to the 14th Nordic Conference on Small Business Research, May 11-13, 2006, Stockholm, Sweden

The Role of Entrepreneurship in Economic Development and Implications for SME Policy in Estonia1
Urve Venesaar* and Piret Loomets** * Associate Professor, **Masters degree student Tallinn University of Technology, School of Economics and Business Administration Kopli Str. 101, 11712 Tallinn, Estonia. Email: venesaar@tami.ee; Piret.Loomets@mkm.ee Abstract

Entrepreneurship in new member states has been assessed as a driving force of decentralisation, economic restructuring and movement in the direction of market economy. As countries vary markedly in a way they regulate and provide an environment for enterprises, Estonia is an interesting case with its notably open small economy, extremely liberal economic policy and the ability to stay on the economic growth trend during the last 10 years. The aim of the paper is to analyse development and contribution of entrepreneurship in the economic development during the last ten years through SME development as well as new firms formation as an important indicator of entrepreneurial activity in Estonia. This is supplemented with the analysis of main constraints hindering new business start-ups. The empirical evidence is drawn from statistical databases and two large-scale telephone surveys undertaken in 2002 and 2005. The Likert scale method is used for measurement of the assessments of respondents based on their own opinions on the main constraints in enterprise development and support needs for policy measures. Statistical analysis indicated a remarkable contribution of entrepreneurship into economic development in the form of fast growth of the enterprise sector. A more detailed research of this, however, detects large fluctuations in the creation of new enterprises across counties and economic activities, indicating the need to direct entrepreneurship policy especially to support counties and activities with below the average firm formation rates. Also we can distinguish factors that hinder development of start-up enterprises compared with those faced by older enterprises. For eliminating these constraints it would be needful to find appropriate policy measures to support the development of entrepreneurship in the country.
1

The research is supported by the grant of the Estonian Science Fund No 5651

1. Introduction The influence of the role of entrepreneurship on economic development has been explained by a number of authors (e.g. Audretsch and Acs, 2003; Reynolds, 2000). Conditioned by a number of forces and factors (incl. legal, institutional, cultural, societal etc.), the role of entrepreneurship has been different across countries. Development of new member states can be characterized as a distinctive experience that started 15 years ago and where entrepreneurship has been assessed as a driving force of decentralisation, economic restructuring and movement in the direction of market economy (e.g. Smallbone et al., 1996). As countries vary markedly in a way they regulate and provide an environment for enterprises, Estonia is an interesting case with its notably open small economy, extremely liberal economic policy and the ability to stay on the economic growth trend during the last 10 years. For that reason it is needful to better understand and analyse the contribution of SMEs to economic development over the last decade as well as new firms formation as an important indicator of entrepreneurial activity in the country. It is needful also to analyse the main constraints hindering new business start-ups in Estonia. For eliminating these constraints it would be needful to find appropriate policy measures to support the development of entrepreneurship in the country. In Estonia, development of enterprise sector has been assessed in general as a positive factor in economic development since the early years of transition, based on the fast growth of enterprises and the role of SMEs in generation of employment (Smallbone et al, 1999; Venesaar, 1999; Estonia country, 2002; Smallbone & Venesaar, 2004). A number of studies have been carried out in Estonia about regional development of small enterprises, which have evaluated differences in socio-economic development

across regions, sources of regional problems, analysed possible policy strategy choices, use of support from foreign donors (Regional, 1996; Estonia Country, 2002; Raagmaa, 1996; Kudela & Venesaar, 1999). In those studies, a kind of success from establishing a support system and participation of foreign assistance in this has been mentioned. The studies about manufacturing SMEs in transition countries and the influence of internationalisation have helped to find out the contribution of SMEs to economic development, characteristics in firms' behaviour and their support needs for future development (Smallbone et al., 1996, 1999). In recent years, some studies have been made to assess the results of measures implemented as entrepreneurship support policies and to identify more precisely entrepreneurs demands in the country as a whole as well as in different regions (e.g. Jrgenson et al, 2003; Eesti, 2005). But the role of SMEs during such a long period and activity on firm formation rates across counties and economic activities have been studied less thoroughly, which will be a contribution of the current article into the entrepreneurship studies in Estonia. There is a wide-spread opinion that national or regional economic development is associated with new firms creation intensity. New firms formation is considered as an important indicator of entrepreneurial activity and key component in economic development and growth, which has been explained by the creation of new capacities into the market and through improvement of the competitiveness of the economy, industry or region (Fritsch & Mueller, 2004). There is a number of empirical studies to show that new firms have a significant role to play in employment generation (e.g. Baptista et al, 2005; Stel & Suddle, 2005), innovation (e.g. Fritsch & Mueller, 2005), economic growth and reduction of unemployment. Consequently resulting from

3 different impact of these roles several surveys have indicated spatial variations in business formation rates by countries as well as within countries (Bartelsman et al, 2004; Reynolds, 2002; Johnson, 2004). It is therefore important for every region (e.g. county) to understand more thoroughly the reasons of spatial variations, which may have important implications for entrepreneurship policy. For policy interest it is needful to know, how to increase the activity of firm formation rates in regions (counties). The aim of the current article is to assess the SME contribution to the economic development through employment generation, creation of added value, GDP, export activities etc. Next, the empirical analysis is directed to the examination of regional firm formation activity, focusing on their differences compared with the average firm formation rates in the country and to understand why such variations exist. A firm formation analysis in counties and among sectors is studied for explaining the regional differences. Relying on the results of analysis the research tries to find implications for entrepreneurship promotion policy. The paper is based on empirical evidence drawn from the database of the National Tax Board and of two large-scale telephone surveys undertaken in 2002 and 2005, supplemented by a review of secondary data from other studies conducted in Estonia. The structure of the article is as follows. The next section describes the data and methodology of analysis. The third section presents the results of the analysis of the role of SMEs in economic development. The fourth section includes regional analysis of firm formation, and the differences in the flows of jobs in enterprises. The fifth section analyses the main constraints of newly established enterprises and the need for

policy support. Based on the results of analysis, the paper will conclude with a summary of the implications of the analysis for SME policy in Estonia. 2. Data and Methodology The analysis of SME contribution in the economic development in 1994-2004 is based on the data of the National Tax Board and Statistical Office of Estonia. National The Tax Boards database provides information about all registered and active enterprises and the self-employed. Enterprises and self-employed are here considered active if their declared yearly turnover is bigger than 0. Differences in declaring the turnover between companies and self-employed lead to a lack of comparable data, therefore self-employed are excluded from the analysis in terms of enterprise sectors structure, employment, turnover and export. The research of new firm formation is based on the database of the National Tax Board for the period of 1999-2003 (in some cases up to 2004), where the registered number of enterprises is used as the number of births and the number of enterprises at the end of the year as the stock of enterprises. As the database contains only enterprises, then some inaccuracies are connected with underrepresentation of selfemployed. Nevertheless, the database is the best basis for assessing business formation rates in regions. The firm formation rates are calculated and used in the analysis in two ways. First of all, the firm formation rate is defined as the average annual number of registrations 4 per 1000 of the adult population (B1). This indicator is measuring the activity of population in setting up new businesses. Age group 18-64, which reflects more real activity of citizens in new firm formation, has been used for calculating the indicator. Secondly, the firm formation rate is calculated as the ratio of new firm registrations to the registered stock of businesses at the end of the year (B2). This indicator shows the extent to which the business sector has been rejuvenated.

The subject of the research includes 15 counties of Estonia and their activity in firm formation. As Tallinn exceeds several times other counties by the number of firms and the formation activity per 1000 inhabitants, the in order to explain differences in entrepreneurship activity across counties more clearly, Tallinn has been excluded from the calculation of average figures. The average figure of counties has been used in the analysis, whereas the contrast of Tallinn from the counties average has been brought out. Based on the firm formation rates per 1000 adult population (18-64), the counties can be divided into two groups: those where activity of firm formation in the period of 1999-2003 was above the average (excluding Tallinn) and the others where the respective figure was below the average. Differences in economic structures of counties and firm formation by fields of activity in counties have been looked upon as significant factors for firm formation activity. In this case the firm formation rate has been calculated as a percentage from the stock of enterprises. The analysis of factors that influence the formation of new firms and the development of enterprises is based on empirical evidence drawn from two large-scale telephone surveys undertaken in 2002 and 2005. The main policy implications are drawn about the support needs of SMEs with the aim of achieving the growth of new firm formation rates and their increasing contribution to regional economic development of the country. 3. SME Sector and its Role in Economic Development At the end of 2004 the number of active enterprises in Estonia was 40,627 and the number of active sole traders was 50,260. The total number of registered enterprises and self-employed was 135,436. To make a distinction in statistics between the registered and operating enterprises hereafter non-trading businesses are excluded

from the analysis. 59% of the active self-employed were also employees receiving salary; this percentage has remained almost the same since 1999. As nearly 60% of active self-employed were also employees in enterprises receiving salary leading to double accounting and as there is insufficient data for the years 1994-1998, the selfemployed are excluded from the analysis of the structure of enterprise sector. The structure of the SME sector by size class points out that micro enterprises hold the main share comprising 81% of total number of enterprises (Table 1). Small enterprises make up 16% of all enterprises. The average yearly 8% increase in total stock of enterprises during the period of 19992004 was due to the increase of micro enterprises. While the number of small and medium-sized enterprises remained stable during 19992004, the number of micro enterprises increased 60% accompanied by a 10% decrease of large companies. 5 Table 1. Distribution of active enterprises by size groups in Estonia in 1994 2004, %
Year Size groups by employees 0-9 10-49 50-249 > 250 Total 1994 66,60% 25,60% 6,50% 1,30% 1995 70,70% 23,10% 5,40% 0,80% 1996 71,30% 23,10% 4,90% 0,70% 1997 72,20% 22,60% 4,60% 0,70% 1998 72,30% 22,70% 4,40% 0,60% 1999 73,00% 22,10% 4,30% 0,60% 2000 76,00% 19,80% 3,70% 0,60% 2001 77,50% 18,60% 3,40% 0,50% 2002 78,50% 17,80% 3,30% 0,50% 2003 79,70% 16,70% 3,20% 0,40% 2004 81,00% 15,70% 2,90% 0,40% Source: National Tax Board 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Chart 1 describes changes in the total stock of enterprises, both registered and operating. During 1998-1999 all entities were entered from the Enterprise Register into Commercial Register and enterprises not engaged in business activities or fulfilling the minimum share capital requirement were deleted from the register,

causing a significant decrease in the number of registered enterprises. Since 2001 the growth of registered enterprises has again been faster than that of active enterprises. This is connected with the time-consuming and complicated company establishment procedures that create market for shell companies. Entrepreneurs prefer to buy a company already registered rather than do all the time-consuming paperwork and procedures. In recent years the Estonian government has made efforts to reduce the administrative burden and quicken the procedures, as a result of which the differences between the growth of registered and active enterprises showed a diminishing trend in 2003-2004. During the period of 1995-2004 one substantial decline was observed in the number of active enterprises between 1998 and 1999. This was connected with the Russian economic crisis forcing Estonian companies to re-orientate and find new markets. During the recovery period from the impact of Russian crisis there was a significant shift in the number of active enterprises in 2000, followed by a moderate growth during the next two years. The overall economic growth during 2003-2004 influenced strongly the shift in the number of active enterprises and the trend appears to continue also in 2005. 6
-15000 -10000 -5000 0 5000 10000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Change in stock of active enterprises Change in stock of registred enterprises

Chart 1. Change in stock of enterprises, 1995 2004

Source: National Tax Board, Central Commercial Register

As shown in Table 2, Estonian and Lithuanian SME sectors structure differs from the European average and new EU member states. In Estonia and Lithuania small enterprises account for a higher share than in other European countries due to the relatively low entrepreneurial activity. The entrepreneurial activity can be measured as a number of enterprises per 1000 inhabitants. In Estonia and Lithuania this indicator is significantly lower compared to other European countries indicating, on the one hand, the growth potential of micro enterprise sector and on the other hand, the need for governments to implement appropriate measures aimed to raise the entrepreneurial activity. Table 2. Structure of enterprise sector in European countries, 2003 Share of enterprises (%)
Country 0-9 10-49 50-249 Total enterprises per 1000 inhabitants Estonia 79,7% 16,7% 3,2% 28 Lithuania 77,4% 18,0% 4,0% 15 Hungary 92,4% 6,1% 1,2% 41 Slovakia 95,4% 3,7% 0,8% 46 Slovenia 93,5% 5,0% 1,2% 68 Europe 192 92,3% 6,5% 0,9% 49 Source: Small and medium sized enterprises in countries in transition, UNECE 2006 Observatory of European SMEs, 2003/7

At the end of 2004, Estonian SME sector employed 339,303 people making up 78% of total enterprise sector employment (Table 3). Micro enterprises accounted for 21% of employment, small enterprises 30% and medium-sized enterprises 28%. The proportion of total employment in micro enterprises has increased considerably (93%) during 19942004, whilst that in large enterprises has declined (33%). Similar changes are typical to all post-socialist countries as a result of the privatization process dividing large state-owned enterprises into smaller private companies

EU 15 plus Iceland, Liechtenstein, Norway and Switzerland

7 complemented by the growth of entrepreneurial activity. This has led to a rapid increase in the creation of micro enterprises, which offer jobs to those made redundant during the restructuring of large enterprises. Table 3. Employment in enterprises by enterprise size group in Estonia in 19942004, %
Size groups by employees Year 0-9 10-49 50-249 > 250 Total 1994 10,70% 25,10% 30,10% 34,10% 100,00% 1995 14,10% 27,20% 30,30% 28,40% 100,00% 1996 14,90% 28,60% 28,90% 27,60% 100,00% 1997 15,90% 29,40% 28,10% 26,60% 100,00% 1998 16,50% 30,50% 27,70% 25,40% 100,00% 1999 17,40% 29,70% 26,90% 26,00% 100,00% 2000 18,70% 29,80% 26,20% 25,40% 100,00% 2001 19,30% 29,90% 26,60% 24,20% 100,00% 2002 19,40% 29,60% 26,70% 24,30% 100,00% 2003 20,30% 29,60% 27,30% 22,90% 100,00% 2004 20,70% 29,30% 26,80% 23,10% 100,00% Source: National Tax Board

Table 4 compares employment growth by size class in Europe 193 and in new member states. There are some apparent differences between new member states average and Estonia that can be explained by the differences in the privatization processes. Estonia had higher employment growth rate among micro enterprises while employment in medium sized enterprises declined. The shift in the share of employment in large enterprises was not as dramatic during the period as in the average. Privatization in Estonia was relatively rapid and efficient, thus the biggest changes in the structure of enterprise sector had already taken place by 1995 and after that the employment decrease in large companies slowed down. In 1994, the SME sectors share in Estonian total employment was 43% compared to 27% in Latvia4. Table 4. Employment growth by size-class 1995-1999, average annual change in %
Size group EU 19 New member states Estonia 0-9 1,3 2,8 3,5 10-49 1 3,6 0,3

50-249 0,7 7,8 -4,4 > 250 0,7 -12,5 -3,8 Total 1 -2,2 -1,9 Source: Observatory of European SMEs, 2002/2

The average enterprise size in 19 European countries in 2002 was 6 employees, which is similar also in Hungary, Slovakia and Slovenia. In the Baltic countries this figure is higher than the European average 11 in Estonia and Lithuania and 15 in Latvia,5 indicating a continuous growth perspective in the micro enterprise sector in the Baltic countries.
EU 15 plus Iceland, Liechtenstein, Norway and Switzerland Small and medium sized enterprises in countries in transition, UNECE 1996 5 Observatory of European SMEs, 2002/2, European Commission
3 4

8 SMEs together accounted for 80% of the enterprise sector turnover. This percentage has remained almost constant during the period of 19972003 because the increase in the share of micro enterprises turnover was balanced by the decrease in small enterprises turnover. The export turnover of Estonian enterprises has increased constantly. Compared to 1996 the total export turnover has increased 3.5 times, the most substantial increase was experienced by medium-sized enterprises (average annual growth 20%). The share of exports in total turnover has increased in SMEs, especially in micro enterprises (from 14 to 28%) and decreased in large enterprises (from 35 to 23%). In 2003, large companies contributed about 20% of total exports of Estonia whilst they accounted only 0.4% of total number of enterprises. Moreover, the 50 biggest exporters made up nearly 40% of Estonian total exports in 2003. 15% of Estonian companies export; the share has increased by 8% compared to 1999. The total growth in the number of enterprises has been bigger than the increase of exporters. Such development may be due to two main reasons. First, the expansions in the share of

micro enterprises which obviously are less capable to start export activities. Secondly, sectors where the enterprise birth rate is high wholesale, construction, business services, hotels and restaurants are mainly oriented to the domestic market. The fluctuations in the sales and exports are possible indicators of different size groups ability to act in the changing market environment. An economic crisis and sharp diminution of Russian markets in 1998 caused a slowdown in turnover and export growth in all size groups. As a result, export turnover declined in micro and small enterprises and remained on the same level in large enterprises. Surprisingly medium sized enterprises were able to increase their exports 11% during 1999. A most significant decline was experienced by construction and trade sector where micro enterprises are dominating. However, micro and small companies were most successful in reorientation and finding new markets. This conclusion is supported by the fact that the fastest growth in export turnover during the next two years was in these size groups, reaching 64% in micro and 30% in small enterprises compared to an average 2.5% in large enterprises. Estonian SME sector accounts for 80% of total exports. This is considerably higher than that of the counterparts in other new member states6. This can be explained with higher concentration of the sectors exports in these countries as a few large manufacturing enterprises account for a majority of exports.
For example, SMME sector accounts for 18,5% in Hungary, 24,1% in Slovakia, 33% in Slovenia, 34% in Czech Republic and 41,8% in Lithuania. Source: Small and medium sized enterprises in countries in transition, UNECE 2006.
6

9
0 20 000 40 000 60 000 80 000 100 000 120 000 140 000 1996 1997 1998 1999 2000 2001 2002 2003

2004 1996 1997 1998 1999 2000 2001 2002 2003 2004 1996 1997 1998 1999 2000 2001 2002 2003 2004 1996 1997 1998 1999 2000 2001 2002 2003 2004 1-9 10-49 50-249 over 250 Domestic Exports

Chart 1. Net turnover of Estonian enterprise sector by size groups Estonian SME sector also performs better in terms of export share in turnover compared to EU average shown in Table 5. As Estonias domestic market size is relatively limited, enterprises with a growth potential in all size groups will have to start export activities and find new markets at the early stage of their development. Table 5. Share of exports in turnover, Europe 19 and Estonia in 2003, (percentage)
Size group Europe 19 Estonia 0-9 9 19 10-49 13 20 50-249 17 29 > 250 23 24 Source: Observatory of European SMEs, 2003/7, European Commission Statistical Office of Estonia

As the GDP calculation methods of the Statistical Office of Estonia changed recently there are no comparable data available for the period of 1994-1998 by size groups. Therefore the analysis below is based on the 5-year period only. The contribution of SMEs to the generation of Gross Domestic Product in 2003 was

73%, of which the share of micro enterprises was 18%, small enterprises 25% and medium-sized enterprises 30% (Table 6). The SME contribution to GDP has grown by 5 percentage points during the period 1999-2001 and remained stable in 200210 2003. The rapid growth of value added created in micro enterprises slowed down in 2003, which was mainly due to diminishing growth in profits and payroll expenses. Payroll expenses increased 63% in micro enterprises during 1999-2003 while the growth in large enterprises was only 24% in these years.
Table 6. Value added created in enterprise sector by size groups (percentage) Size group 1999 2000 2001 2002 2003 0-9 12,3% 15,2% 16,2% 18,0% 18,1% 10-49 24,4% 25,8% 26,1% 26,3% 25,3% 50-249 32,1% 31,1% 31,7% 28,9% 29,7% > 250 31,2% 27,9% 26,0% 26,8% 26,9% Source: Statistical Office of Estonia

The value added in industrial processing and transport and communications was the highest among medium and large companies, while retail and wholesale micro and small enterprises create the highest value added. In the construction sector small and medium sized companies had higher value added than other size groups. In 2003, average gross value added per employee amounted to EEK 181,000, being the highest in large enterprises and lowest in small enterprises. Value added per employee has been rising in all size groups, especially in micro enterprises raising this size groups productivity even higher than the corresponding indicator in small enterprises (Table 8).
Table 8. Labour force productivity based on value added by size groups (thousand EEK) Size groups 1999 2000 2001 2002 2003 0-9 80 104 122 145 162 10-49 109 111 130 144 154 50-249 152 154 174 180 197 > 250 160 146 164 191 213 Source: Statistical Office of Estonia

Entrepreneurial activity across regions in Estonia indicates differences in entrepreneurship environment and possibilities, especially between the capital city

Tallinn and other counties, as regional economic development has been strongly polarised to the territory around the capital city. Tallinn is the business centre of Estonia. With its close to 400,000 population (29% of the Estonian population) the capital city is the heart of the national economy. The share of Tallinn and the surrounding Harju county in the total number of operating enterprises has been gradually rising. Big differences can be found in the economic structure of counties. One of the reasons for this is definitely the legacy of planned economy but also different paths of development in the transition period and the firm formation rate among sectors and regions. The following analysis examines the regional firm formation activity to understand why the variations exist. 4. Explanation of regional differences by analysing firm formation rates by regions and sectors. 11 In the period of 1999-2003 over 35 thousand firms were formed in Estonia, 59% of those in Tallinn. The firm formation activity has constantly increased its relevance in Tallinns entrepreneurship sector. There was a difference of more than five times between Ida-Virumaa, the county with the lowest figure, and Tallinn. Based on the countys average firm formation rate (B1)(excluding Tallinn), the counties can be divided into two groups: firm formation activity in 1999-2003 was above the countrys average in Tallinn, Harju, Hiiu, Prnu, Saare and Tartu counties. Rapla and Lne-Viru counties, where the firm formation rate was relatively close to the countrys average, can also be included in this group (Table 9). The second group of counties with below the average firm formation rate includes the remaining eight counties (Ida-Viru, Jgeva, Jrva, Lne, Plva, Valga, Viljandi and Vru counties). The grouping is also supported by the increase/decrease of the number of employees, whereas the number of employees increased in counties with higher firm formation

rate and decreased in counties where it was below the average. This rule does not imply to Valga and Vru counties where the firm formation activity is below the average, but where the number of employees has increased on account of bigger firms. The second indicator (B2) for characterising the firm formation rate expressing the extent of rejuvenation of the stock of enterprises, is different but in correlation with the first indicator (B1). Some exemptions of this indicator are obvious in the counties with a smaller than average number of enterprises, for example, in Ida-Viru and Viljandi counties where the firm formation rates per 1000 of adult population in general are among the lowest and the firm formation activity is also low, but the number of enterprises formed in the period of analysis reached the average level of the country (Ida-Viru 52%) or even exceeded it (Viljandi 54.1%). Such rejuvenation of enterprises allows supposing that the business activity in these counties will increase. The analysis suggested that the counties with lower firm formation rates have more frequently lower employment and higher unemployment rates, but some exceptions indicate the impact of other external influences, which needs to be studied in the future. Next we look the factors that influence the firm formation activity in counties. The differences in economic structure of the counties and in firm formation activity across sectors in the above-mentioned groups of counties are considered as substantial factors influencing the employment generation and development of regions. It is convenient to use the firm formation indicator as a ratio of firms to overall number of firms in the sector, which shows the share of firms being renewed in the investigated period.

Table 9: Business activity and employment change in enterprises in 1999-2004.

County Firm formation 1999-2004 Change in the no of employees in enterprises Firm formation 19992003

12
Total B1 (Per 1000 inhabitant 18-64) Variation from average employees in enterprises (B2) % of total no of firms Variation from average Tallinn 20597 78.4 53.7 6437 64.7 12.6 Harju 2632 32.6 8.0 4130 56.2 4.1 Hiiu 165 26.6 1.9 -21 45.5 -6.7 Ida-Viru 1605 14.5 -10.2 -8426 52.0 -0.1 Jgeva 414 18.5 -6.2 -1299 51.8 -0.4 Jrva 403 17.3 -7.4 -1532 45.7 -6.4 Lne 307 17.9 -6.7 -187 37.9 -14.2 Lne-Viru 957 23.8 -0.9 438 51.3 -0.8 Plva 327 17.5 -7.2 -711 41.8 10.3 Prnu 1808 33.2 8.5 -1244 54.6 2.5 Rapla 536 23.7 -1.0 -314 52.4 0.3 Saare 624 29.4 4.8 178 47.7 -4.4 Tartu 3283 35.0 10.3 1326 55.3 3.2 Valga 378 18.5 -6.2 145 46.6 -5.5 Viljandi 683 20.2 -4.5 -1 54.1 2.0 Vru 393 17.2 -7.4 445 42.4 -9.7 Total 35112 41.2 16.6 -636 58.8 6.7 Without Tallinn 14515 24.7 0.0 -7073 52.1 0.0 Source: National Tax Board; Statistical Office, authors calculations

The firm formation has been more active in retail and wholesale trade, service and agriculture. In the group of counties where the firm formation rates per 1000 of adult

population are over the average, the firm formation rates by sectors are also higher than in other groups of counties. The biggest differences are in retail and wholesale trade, service and agriculture (Table 10). Table 10: Firm formation rates (B2) by groups and economic activity in 19992003, %
Firm formation rate, % Economic activity Group 1 Group2 Variation Mining, electricity etc 4.2 3.3 0.9 Manufacturing 6.5 5.7 0.8 Construction 7.2 6.8 0.4 Wholesale 19.7 15.7 4.0 Retail trade 9.2 6.3 2.9 Transport, communication 8.3 7.8 0.5 Services 12.4 10.6 1.8 Education, health 8.4 9.0 -0.6 Agriculture, forestry 11.1 7.9 3.2 Total 12.6 9.7 2.9 Source: Source: National Tax Board; Statistical Office, authors calculations Note: 1) Some discrepancy in the table is connected with 8% of unknown enterprises by sectors 2) Group 1 includes counties with firm formation rates above the average (Tallinn, Harju, Hiiu, Prnu, Saare, Tartu, Rapla, Lne-Viru); Group 2 includes counties with firm formation rates below the average (Ida-Viru, Jgeva, Jrva, Lne, Plva, Valga, Viljandi, Vru).

When analysing the formation rate of firms by sectors in greater detail we can see that in addition to the more active firm formation rate in four above-listed sectors, firms in 13 the first group are formed more actively also in manufacturing (Tallinn and other big cities), construction (Tallinn, Tartu) and other sectors. In the counties with the general firm formation rate below the average in some sectors, the rate exceeds the average of the republic. But in both groups there are counties where the firm formation rate in some sectors is very low. The present analysis enables to identify those sectors where the implementation of entrepreneurial policy measures could contribute to increasing firm formation rate and mitigate regional contrasts.

Business activity of the counties can also be influenced by the size structure of enterprises and several other factors (ownership, market orientation, etc). For example, a previous analysis of job flows across groups of enterprises suggested enterprise groups with different job creation potentials. On the basis of ownership, the job creation rate of foreign-owned enterprises was higher than that of Estonian-owned enterprises (Venesaar, 2003). Better growing capacity of foreign-owned enterprises is due to the higher number of their employees and turnover in the sample studied, as well as their location in a region with better infrastructure (in Tallinn). By orientation to markets, restructuring has been faster in exporting enterprises, which is expressed by high rates of job creation. By size of enterprises, as a rule, the job creation rates are expected to be higher in micro-enterprises, although few of them are able to survive in the market. The findings of previous research indicated that the average job creation rate was higher in small enterprises (with 10-49 employees) than in micro-enterprises, followed by medium-sized enterprises (Venesaar, 2003). Although both labour policy and entrepreneurship policy in Estonia have promoted creation of new enterprises, the entrepreneurship environment has not favoured, if to regard labour market flows, job creation in micro-enterprises. In conclusion, the firm formation and job creation rates vary considerably across counties and enterprise groups classified on the basis of various characteristics, and there are a number of enterprise groups which could be the subject of entrepreneurship policies with the aim of bringing more new jobs to the market. 5. Managers opinions about the constraints of newly established firms The overall opinion is that indirect support to business development prevailed through macroeconomic stabilisation and improvement of legal external environment during a

first decade of private sector development in Estonia (Venesaar, 1999; Estonia Country.., 2002). Since 2000, the aim of SME policy has become increasingly linked to improving the competitiveness of firms in domestic and foreign markets and by today a working support system has been developed, based on the entrepreneurship support principles used in the European Union. This support system has worked almost five years and some studies have been made to ask entrepreneurs opinions about the impact of entrepreneurship services on setting up new enterprises and entrepreneurship development (Jrgenson et al, 2003; Eesti , 2005). The following analysis is dedicated to the opinions of managers of newly established firms (young firms operating up to 2 years) on the basis of two surveys (2002 and 2005). We try to identify differences in the opinions of start-up enterprises about which problems and difficulties they seem to encounter more frequently than old 14 enterprises. Not surprisingly, the results of the analysis showed that finding financial resources and markets were more frequently mentioned as factors constraining the development of enterprises by the managers of newly established firms than by managers of older enterprises. The need to improve financing opportunities for SMEs is one of the priorities identified in the SME policy document. The surveys revealed that only a minority of Estonian SMEs received external finance at start-up. This means that the vast majority of business start-ups in Estonia are still reliant on selffinancing, in the context where the scope of accumulated or inherited wealth is smaller than in most of the developed countries. When respondents were asked about the type of information they need to overcome difficulties, then the managers of newly established enterprises mentioned more frequently (in both surveys) the information about markets, regulations and standards

in foreign markets, and about foreign partners. As for the reasons for not using consultancy, they explained that consultancy has not been necessary (92% in 2002 and 83% in 2005) or they did not find appropriate consultancy (more in 2005). The need for consultancy was assessed as needful twice more frequently by managers of newly established firms than by older ones (Table 11). Among the concrete types of consultancy they mentioned more often a need for consultancy about accounting, taxation, sales and marketing, business planning and financial sources. It is noticeable, that a need for consultancy has arisen much in 2005 compared with the previous survey, which may indicate increasing competitiveness in the markets as well as awareness of managers about the availability of consultancy. Table 11. What do you think, does your enterprise need advice or consultancy from outside?
Does your enterprise need Age of firms (2005) (2002) advice? Over 5 years 3-5 years Up to 2 years Up to 2 years Definitely yes 7,7 7,6 14,8 13,0 Probably yes 19,5 20,5 15,8 18,8 Probably not 39,8 39,7 36,8 40,4 Definitely not 26,6 26,6 25,2 23,9 Dont know 6,3 5,5 7,4 3,9 What kind of advice is needful? Accounting 21,8 26,6 25,3 16,9 Taxation 26,0 24,8 32,7 9,3 Sales and marketing 38,5 40,8 50,6 9,2 ICT technology 14,7 15,2 7,2 2,1 Exporting 8,6 13,3 5,2 4,5 Legal advice 43,3 42,2 23,0 14,9 Business planning 36,4 36,3 54,7 5,0 Financial sources 22,6 23,7 24,1 7,4 Quality requirements 20,9 18,1 18,6 9,7 Other 10,8 10,1 6,8 1,2 Dont know 2,5 0,6 4,0 10,8 Source: (Eesti vikese, 2005); authors calculations.

In addition on the growth of awareness of entrepreneurs, the activity of using the offered services by starting companies has also grown. For example the starting subsidy has been used by ca 5% and training subsidy by 7% of respondents, that is still quite a low level. This implies to a necessity to increase the impact of

15 entrepreneurship policy, especially to support the regions and fields where the level of establishing new companies is low. A new Entrepreneurship Policy Programme document has been worked out based on the results of various studies conducted during 2004-2005 and compared with the current policy document (2004-2006) it is a step forward in the development of entrepreneurship and entrepreneurial initiative through a favourable entrepreneurship environment and appropriate support schemes. Entrepreneurship policy has established four purposes to achieve: strong enterprise culture; legal environment favourable to entrepreneurship; SMEs access to finance; capability for SME growth and exports (Eesti ettevtluspoliitika, 2005). A lot of measures on that document are directed towards solving the abovementioned problems and increasing the activeness of establishing new companies. The results of the research brought out in the article can be of use in composing and specifying entrepreneurship policy action plans. Conclusion Development of entrepreneurship has been a dynamic process in Estonia influenced considerably by changes in domestic business environment as well as the external influences, which is typical for a small country with open economy. Development of entrepreneurship through SME development and regional firm formation has supported economic development in Estonia, the growth in employment and decrease in unemployment. However, based on the firm formation rates per 1000 adult population, the counties vary considerably, which allows suggesting differences in entrepreneurship environment and possibilities. Differences in economic structures and firm formation as a percentage of the stock of enterprises by sectors in counties have been looked upon as a significant factor for firm formation activity. The low firm formation rate in a number of counties and groups of enterprises (e.g.

manufacturing, construction) allows assuming that the regulation influencing the establishment and activity of enterprises, other policy measures or external influences during the period under study have not encouraged formation of firms. In the development of entrepreneurship policy in Estonia we should take into consideration differences between regional and sectoral firm formation rates. First of all, the counties with below the average firm formation rates can be suggested for policy support to facilitate SME development and employment generation. It is still useful to study more thoroughly these groups of counties where firm formation rates were lower than average, which may help to discover deeper problems in different enterprise groups that need to be solved to make the entrepreneurship environment more acceptable. The results of the analysis showed that finding financial resources and markets for newly established forms were more frequently mentioned as factors constraining the development of these enterprises. The managers of newly established enterprises mentioned more frequently about the difficulties in finding information about markets, regulations and standards in foreign markets, and about foreign partners. The need for consultancy was assessed as needful twice more frequently by managers of newly established firms than by managers of older ones. Although considerable progress has been made in institutionalisation of entrepreneurship policy, there is a need to offer more actively services which can better consider the needs of newly 16 established firms and entrepreneurs in regions with the aim to strengthen the role of entrepreneurship in economic development in Estonia References Audretsch, D.B., Acs, Z.J. (2003) Handbook of Entrepreneurship Research, Boston/Dordrecht: Kluwer Academic Publishers. Baptista, R., Escaria, V., Madruga, P. (2005). Entrepreneurship, Regional Development and Job Creation: Case for Portugal. _ Discussion papers on Entrepreneurship, Growth and Public Policy No 0605, Max Planck Institute

for Research into Economic Systems Group Entrepreneurship, Growth and Public Policy. Bartelsman, E.J., Haltiwanger, J.C. and Scarpetta, S. (2004).Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries. IZA Discussion Paper No. 1374; Tinbergen Institute Discussion Papers No. TI 2004-114/3; World Bank Policy Research Paper No. 3464. Eesti ettevtluspoliitika 2007-2013. Tversioon (2005). Majandus- ja Kommunikatsiooniministeerium, Tallinn. Eesti vikese ja keskmise suurusega ettevtete arengusuundumused. (2005). Saar Poll O uuringu aruanne, Tallinn. Entrepreneurial Initiative of Estonian Population (results of a population survey) (2004). Estonian Institute of Economic Research, Tallinn (in Estonian). Estonia Country Assessment (2002) OECD. Forum for Enterprise Development. Baltic Regional Programme. May, 2002. Fritsch, M., Mueller, P. (2004). The Effects of New Firm Formation on Regional Development over Time. Paper presented at the DRUID Summer Conference 2004 on Industrial Dynamics, Innovation and Development, Elsinore, Denmark, June 14-16, 2004. Fritsch, M., Mueller, P. (2005). The persistence of regional New Business Formation Activity over Time Assessing the Potential of Policy Promotion Programs. _ Discussion papers on Entrepreneurship, Growth and Public Policy No 0205, Max Planck Institute for Research into Economic Systems Group Entrepreneurship, Growth and Public Policy. Johnson, P. (2004). Differences in regional Firm Formation Rates: A Decomposition Analysis. _ Entrepreneurship Theory and Practice, pp. 431-445. Jrgenson, A., A. Oks, R. Selliov and K. Varno (2004). Development Problems and State Support Measures of SMEs in Estonia: Final Report, University of Tartu. Kudela J.-J., Venesaar U. (1999). An evaluation of Phare SME Programmes. Estonia. Draft Report, European Commission, Brussels; Raagmaa G. (1996). 'Majanduskeskkonna globaalsed muutused, Eesti regionaalne areng ja vikeettev_tlus selle kujundajana', Avatud Hariduse Liit, Tartu. Regional SME Study (1996). Estonian Ministry of Economic Affairs, Tallinn; Reynolds, P., Bygrave, W., Erkko, A. & Hay, M. (2002). Global Entrepreneurship Monitor 2002 Summary Report. Babson Park, MA: Babson College, Ewing

Marion Kauffman Foundation and the London Busines School. Reynolds, P.D., Hay, M., Bygrave, W.D., Camp, S.M., Autio, E. (2000). Global Entrepreneurship Monitor. Kauffman Centre for Entrepreneurial Leadership at the Ewing Marion Kauffman Foundation. Smallbone D., Piasecki B., Rogut A., Venesaar U., Rumpis L., Budreikaite D. 1996. 'The Survival, Growth and Support Needs of Manufacturing SMEs in Poland and the 17 Baltic States'. Final Report under Phare ACE Programme, Centre for Enterprise & Economic Development Research, Middlesex University, London. Smallbone D., Piasecki B., Venesaar U., Todorov K. , Labrianidis L. (1999). Internationalisation and SME Development in Transition Economies: An International Comparison In: Journal of Small Business and Enterprise Development, Henry Stewart Publications, Vol. 5, No 4, pp. 363-375; Smallbone D., Venesaar U. (2004). The Strenghts and Weaknesses of Estonian SMEs in the Context of an Enlarged Europe. In: Managing Complexity an Change in SMEs. RENT XVIII Conference Programme and Abstracts, 24-26 November 2004, Coopenhagen, Denmark, Holmen Centertryk, p. 172 (Full paper in CD). Van Stel, A. & Suddle, K. The Impact of New Firm Formation on Regional Development in the Netherlands. ERIM Report Series Research in Management, Erasmus University Rotterdam;EIM Business and Policy Research, Zoetemeer; Max Planck Institute of Economics, Jena. Venesaar U. (1999). Development of SME Policy in Estonia and the Role of Government, Paper to the 22nd ISBA National Small Firms Policy and Research Conference: "Small Firms: European Strategies, Growth and Development", 17-19th November, 1999, Leeds, UK, pp. 1395-1411.
Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

81

ECONOMIC DEVELOPMENT IN INDIA: THE ROLE OF INDIVIDUAL ENTERPRISE (AND ENTREPRENEURIAL SPIRIT)
Anil K. Lal* and Ronald W. Clement** The Indian economy provides a revealing contrast between how individuals react under a government-controlled environment and how they respond to a market-based environment. Evidence suggests that recent market reforms that encouraged individual enterprise have led to higher economic growth in that country. India can generate additional economic growth by fostering entrepreneurial activity within its borders. To pursue further the entrepreneurial approach to economic growth, India must now provide opportunities for (1) education directed specifically at entrepreneurial skills, (2) financing of entrepreneurial efforts, and (3) networking among potential entrepreneurs and their experienced counterparts. Further, although the Indian government should establish policies supportive of entrepreneurial efforts, its role overall should be minimized so that the influence of the free market and individual self-interest can be fully

realized. Economic development, achieved largely through productivity growth, is very important to both developed and developing nations. However, even though we know that higher productivity leads to improved economic outcomes (for example, higher income, more choices to the consumers, better quality products, etc.), there has been no consensus among researchers about either the desired path of development or the role of state in economic development. Concerning the path of development, Lall (2001) says that the appropriate strategy for any country depends not only on its objective economic situation but also on its government policies and national views regarding the appropriate role of the state.
* Associate Professor of Economics, Pittsburg State University, Pittsburg, Kansas, U.S.A. ** Professor of Management, Pittsburg State University, Pittsburg, Kansas, U.S.A. Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

82

Regarding the appropriate role of the state, it seems that for every argument in favour of a smaller government role one can find a counter argument in favour of a more active government role. The role of the state in economic development began to change dramatically with the advent of the Industrial Revolution. In the West, the resulting industrialization and economic development were based on the establishment of individual property rights that encouraged the growth of private capital. Competition and individual enterprise thrive in this environment because individuals pursue their self-interest of survival and wealth accumulation. The instinct to survive under competitive pressures yields innovation and productivity increases, which eventually lead to both increased profits for business and lower prices to consumers.1 However, the rise and spread of capitalism led a number of thinkers to examine the consequences of the market-based approach to development. Socialists argued that capitalism (or private ownership of capital) can lead to greater inequalities of income and wealth, while developmental economists argued that private decisions may not always lead to socially desirable outcomes (particularly in the case of market imperfections). Indeed, many policymakers at the time saw market failures as quite common and therefore assumed that only appropriate government interventions could guide an economy to a path of sustained economic development (Krueger, 1993). In the early 20th century, the former Soviet Union attempted a bold experiment of improving individual well-being without sacrificing the objective of greater equality of income and wealth through total ownership of capital by the government. Initially, the Soviet Government was able to raise productivity through directed industrialization and, within a span of 25 years (by the end of World War II), emerged as a superpower. It was around this time that a substantial number of colonized nations were gaining their independence (for example, India, Pakistan and Burma). Unfortunately, during their time as colonies to the Western nations, these countries, for the most part, had been deprived of the industrialization that had engulfed those same Western nations. Based on the successful experience of the former Soviet Union, many economists and policymakers concluded that, particularly in a poor country, planning was essential for the efficient allocation of an economys resources (Panagariya, 1994, p. 194).
The history of U.S. business has shown how the pursuit of self-interest by individual economic agents has led to benefits for the larger society. Consider the well-known example of Henry Fords introduction of assembly line production. This technological advancement led to a significant increase in productivity at Ford Motor Company. Indeed, despite paying higher wages to his workers, Ford could still produce automobiles at a much lower cost and pass on part of that lower cost to consumers in terms of lower prices. Asia-Pacific Development Journal Vol. 12, No. 2, December 2005
1

83
The governments in these newly independent nations assumed a significant role in economic development. They sought to quickly and substantially raise the standard of living through directed and controlled economic development. Apart from everything else, these developing countries invested heavily in education to promote literacy and to ensure an adequate supply of technical manpower to meet

their growing needs. Further, these previously colonized nations did not want to subject their poor and weak economies to international economic fluctuations and thus sought to industrialize through import substituting industrialization, where imports were expected to be increasingly replaced by domestic production. In this paper we examine economic development in India, a former British colony that became one of the most closed economies in the world, to contrast the roles of government intervention and individual enterprise in that countrys economic growth. In particular, we demonstrate that, given recent economic reforms in India, along with the evidence for the role that individual enterprise can play in a countrys economic growth, the Indian government should devise policies that rely more on individual enterprise, with its emphasis upon individual initiative and self-interest, to spur economic development. Further, we describe the special role that can be played in the economic development of India by a greater emphasis upon entrepreneurship. The plan of the paper is as follows. Section I summarizes the strategy of economic development and the overall economic environment that has prevailed in India since its independence from the United Kingdom. Section II analyses the consequences of regulated economic development in India, with particular emphasis on the implications of the microeconomic aspects of Indias approach to its economic environment. Section III assesses the results of Indias economic reforms since the countrys economic crisis of 1990, and highlights the role that individual enterprise has played and can continue to play in that countrys economic fortunes. Section IV describes the special role that entrepreneurship can play in Indias efforts at economic growth. Finally, section V summarizes the main findings and concludes the paper.

I. INDIAS STRATEGY OF ECONOMIC DEVELOPMENT

Indias economic development strategy immediately after Independence was based primarily on the Mahalanobis model, which gave preference to the investment goods industries sector, with secondary importance accorded to the services and household goods sector (Nayar, 2001). For example, the Mahalanobis model placed strong emphasis on mining and manufacturing (for the production of capital goods) and infrastructural development (including electricity generation and
Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

84
transportation). The model downplayed the role of the factory goods sector because it was more capital intensive and therefore would not address the problem of high unemployment in India. Any increase in planned investments in India required a higher level of savings than existed in the country. Because of the low average incomes in India, the needed higher levels of savings had to be generated mainly by restrictions on the growth of consumption expenditures. Therefore, the Indian government implemented a progressive tax system not only to generate the higher levels of savings2 but also to restrict increases in income and wealth inequalities.3 Among other things, this strategy involved canalization of resources into their most productive uses.4 Investments were carried out both by the government and the private sector, with the government investing in strategic sectors (such as national defense) and also those sectors in which private capital would not be forthcoming because of lags or the size of investment required (such as infrastructure). The private sector was required to contribute to Indias economic growth in ways envisaged by the government planners. Not only did the government determine where businesses could invest in terms of location, but it also identified what businesses could produce, what they could sell, and what prices they could charge. Thus the strategy of economic development in India meant (1) direct participation of the government in economic activities such as production and selling and (2) regulation of private sector economic activities through a complex system of controls. In addition, the Indian economy was sheltered from foreign competition through use of both the infant industry argument and a binding foreign exchange constraint. Imports were limited to goods considered essential either to

the development of the economy (such as raw materials and machines) or to the maintenance of minimal living standards (such as crude oil and food items). It was further decided that exports should play a limited role in economic development, thereby minimizing the need to compete in the global market place. As a result, India became a relatively closed economy, permitting only limited economic transactions with other countries. Domestic producers were sheltered from foreign competition not only from abroad but also from within India itself.
The huge savings-investments gap could not be filled by the amount of foreign aid that was both sought and available. Further, additional foreign investments (both direct and portfolio) were never seriously considered as a way to close this savings-investment gap. 3 Higher levels of income and wealth were taxed at much higher rates relative to lower income and wealth. Further, as Rao (2000) notes, the marginal rate of taxation including a tax surcharge was 93.5 per cent in early 1970s. 4 In India, this meant transfer of savings from the private to the public sector. Asia-Pacific Development Journal Vol. 12, No. 2, December 2005
2

85
Over time, India created a large number of government institutions to meet the objective of growth with equity. The size of the government grew substantially as it played an increasingly larger role in the economy in such areas as investment, production, retailing, and regulation of the private sector. For example, in the late 1950s and 1960s, the government established public sector enterprises in such areas as production and distribution of electricity, petroleum products, steel, coal, and engineering goods. In the late 1960s, it nationalized the banking and insurance sectors. To alleviate the shortages of food and other agricultural outputs, it provided modern agricultural inputs (for example farm machinery, irrigation, high yielding varieties of seeds, chemical fertilizers) to farmers at highly subsidized prices (World Economic Indicators, 2001). In 1970, to increase foreign exchange earnings, it designated exports as a priority sector for active government help and established, among other things, a duty drawback system, programmes of assistance for market development, and 100 per cent export-oriented entities to help producers export (Government of India, 1984). Finally, from the late 1970s through the mid-1980s, India liberalized imports such that those not subject to licensing as a proportion to total imports grew from five per cent in 1980-1981 to about 30 per cent in 1987-1988 (Pursell, 1992). However, this partial removal of quantitative restrictions was accompanied by a steep rise in tariff rates. This active and dominant participation by the government in economic activities resulted in the creation of a protected, highly-regulated, public sector-dominated economic environment. Along with this government domination of the economy, India soon faced not only some major problems in its overall approach to development, particularly in the area of industrialization (Ahluwalia, 1985), but also a dramatic increase in corruption in its economy. Finally, like any other growing economy, the Indian economy faced a number of serious sectoral imbalances, with shortages in some sectors and surpluses in others. These consequences of Indias government-controlled economy are discussed in depth in the next section.

II. THE CONSEQUENCES OF INDIAS REGULATED ECONOMIC DEVELOPMENT

Indias environment of regulated economic development led to the formulation of policies that were concerned with both macroeconomic and microeconomic aspects. Whereas much attention in the literature has been devoted to the macroeconomic issues, we focus primarily on the microeconomic aspects of Indian economic policies. In particular, we examine how individuals guided by their self-interests of survival and wealth accumulation will act in a regulated environment, which in fact discourages the pursuit of those self-interests. To do
Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

86
so, we describe the consequences of Indias use of price ceilings, in which prices are set below their equilibrium level to make products and services affordable to relatively poorer sections of the society.

Figure 1 illustrates how price ceilings can influence a nations economy. Specifically, when prices are kept artificially low, demand outstrips supply. To alleviate the resulting shortage of products and services, the government can either help to increase the supply or help to decrease demand for those products and services. Considering the supply side options first, the government had the following choices: (1) increase the price of the product; (2) subsidize production of existing suppliers so they will produce and sell more; (3) encourage new businesses to enter the line of production and selling; or (4) permit imports to reduce or eliminate the shortage. In India, none of these options was seen as satisfactory. First, the government certainly did not wish to increase prices, because price ceilings appealed to a majority of the vote bank. Second, although the government did subsidize production in several sectors considered essential, the resulting increased production was not sufficient to eliminate the large shortages. Third, the government decided to restrict rather than increase the entry of new producers under the pretext of directing scarce resources into their efficient uses. Finally, it allowed only limited recourse to imports, in order to protect Indian producers, unless the shortage reached a stage of crisis. The overall result was that inadequate amounts of products and services were supplied to the market. Figure 1. Price ceiling
Rs per unit Quantity (million of units)
Equilibrium Price Government Price Shortage Government Price Supply Demand

0 1 2 3 4 5 6

1234567

Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

87
In contrast to the supply side options just considered, if the government had decided instead to limit demand, it could have done so by increasing taxes or by regulating the level of demand itself, usually by restricting how much an individual or a family could consume. To ensure the availability of the scarce products and services to Indian consumers, albeit at less than desired levels, the Indian government in fact resorted to large-scale rationing. This rationing was undertaken by government agencies themselves or by licensed private retailers. As might be expected, the rationing regulations required those licensed private retailers to follow government stipulations in their sale of the scarce products and services. The policy of price ceilings, along with the quantitative restrictions on production and consumption, led to an economic environment ripe for corruption. Specifically, because of the general scarcity of products and services, individuals competed to receive the privilege of economic rights to produce or consume. The implementing authority responsible for allocating these economic rights politicians, government officials and businesses enjoyed monopoly power in this situation and, as might be expected, were susceptible to bribes and other illegal favours. The result was an informal and illegal market in which the desired economic rights could be traded. Also, the lure of higher profits led producers and sellers (1) to have little concern for quality such that many deliberately produced and sold inferior quality products, and (2) to resort to the creation of artificial shortages by not releasing to the market all of the products that were available for selling.

Bardhan (1997) defines corruption as the use of public office for private gain, in which an official entrusted with the responsibility for certain public duties engages in malfeasance for personal enrichment that is not easy to monitor. He says that corruption has multiple effects on economic development. For example, it diminishes the efficiency of economic transactions, because corrupt officials will delay or otherwise obstruct those transactions until they receive their expected favours. Also, the payment of a bribe to receive an investment license tends to reduce the incentive to in vest. Honest investors will see the futility of competing with dishonest investors who are guaranteed, through their bribes, to receive the privilege of investment rights. To fully understand the widespread nature of the corruption that existed in India at this time, it is necessary to consider the roles played by the many participants. For example, business people bribed government officials not only for the right to enter a particular line of business, but also to prevent others from entering that same line of business. Government officials made payoffs to politicians to receive the premium government positions that would allow them to easily contact businesses to seek illegal income and wealth. Indeed, as Wade (1985) indicates, those officials could earn far more through bribes and other corrupt behaviour than
Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

88

they could earn in salary. Consumers bribed government officials, politicians, and business people to receive a particular amount of a scarce good or a higher quality version of the good. Even individuals and organizations outside India took part in the corruption. Some bribed both officials and politicians, particularly those connected with the revenue and police departments, to smuggle scarce goods into India at a high profit. The complex system of government controls, including price ceilings, along with the resultant corruption, meant that decision making was arbitrary and the transactions non-transparent. The result was an increase in transaction costs. For example, businesses had to spend more to stay connected with appropriate government officials and politicians. And consumers, in addition to waiting in line to purchase needed products and services, also made illegal payments for what they should have received at a reasonable price in the first place. It has already been explained how Indias government grew in size as it played an increasing role in controlling the economy. It grew even further in trying to be appropriately vigilant in dealing with the increased corruption among government officials, businesses, and other participants. Price controls were only one example of the regulated economic environment. Another example of a harmful policy was the control of ownership of private capital (both income and wealth) by Indian nationals in India and also by foreign nationals doing business in India. Such policies, coupled with high individual and corporate income tax rates and high customs and excise duties, led to outcomes similar to those resulting from price ceilings namely, increased corruption and higher transaction costs. In conclusion, this section has shown how individuals guided by their selfinterests, will act in a regulated environment. Government controls based on arbitrary and ad hoc administrative decisions lead not only to greater concealed income and wealth but also to diminished productivity, particularly due to the resulting higher transaction costs.

III. ECONOMIC REFORMS: THE MIXED RESULTS FOR INDIA

Due to government intervention, particularly the high levels of government subsidies, it was clear by 1990 that India was living beyond its means. The result was a severe payments crisis in which, for the first time, the government physically transported gold overseas to prevent defaulting on foreign commitments. To meet its immediate balance of payments crisis, India also entered into a structural loan adjustment agreement with the International Monetary Fund (IMF). However, one
Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

89

condition of this loan required India to undertake economic reforms to move from a centrally-planned development strategy to one based on market-based resource allocations. As a result, the government of India undertook a package of economic reforms between 1991 and 1993, with the intent of placing the market in place of government controls as the prime mover in the economic development process. As one might expect, macroeconomic policy played a major role in Indias economic progress in the 1990s. For example, Acharya (2001) concludes that Indias devaluation of the rupee and its decision to increase the level of allowable foreign investment helped it to make considerable economic progress. Joshi (2001) and Karunaratne (2001) both say that Indias policy of selective capital account liberalization helped it to achieve important economic objectives (and still avoided the crises faced by the East Asian countries). Gupta (1999) highlights the important role played by Indias prudent management of exchange rate policy and its tight monetary policy. Bhalla (2000) notes both the privatization of the public sector enterprises and the gradual dismantling of the government planning process in favour of market forces. Overall, there can be no doubt that the reforms implemented since 1991 have led to considerable economic progress in India. For example, from 1992-1993 through 2000-2001, economic growth averaged an unprecedented 6.3 per cent per year (Acharya, 2001). Further, as Bhalla (2000) indicates, the rate of inflation and the fiscal deficit have both decreased substantially. He also says that Indias improved exchange rate management has restored the confidence of foreign investors, which in turn has led to improved financing of the current account deficit and higher levels of foreign exchange reserves. However, even though India has made substantial economic progress in recent years, it still has several areas in need of major market-based reforms.5 Below, we identify three examples from Indias economy that reveal a restriction of the pursuit of individual self-interest and a diversion of resources away from their most efficient use. The first example concerns the obstacle still presented by the Indian tax system, the second highlights the inefficiencies of the Indian civil service, and the third describes the need for further land reform in India.
A study undertaken by McKinsey Global Institute found that the Indian product markets are still over-regulated; government still owns about 43 per cent of total capital stock; and the real estate market is still substantially distorted. This study concluded that this over-regulation is still the major barrier to economic growth in India (see Lewis (2001). Asia-Pacific Development Journal Vol. 12, No. 2, December 2005
5

90
1. In spite of recent tax reforms in India, the present tax system still works against the individual self-interest to survive and accumulate wealth and, as a result, still leads to the hiding of income, wealth and expenditures. Indeed, whereas in the United States and the Republic of Korea, the highest tax rate applies to an income level of $250,000 and $66,000, respectively, in India that same tax rate applies to an income of only $3,400. Simply reforming its tax system to bring it in line with comparable nations should yield several substantial benefits to the Indian economy.6 2. The Indian civil service provides attractive career choices for young job seekers due mainly to the excellent job security, non-monetary compensation, and opportunities for influence available in those careers. For example, despite minimal salaries for individuals holding top-tier positions in such areas as administration, police, revenue and railways,7 these civil servants are entitled to high job security and heavily subsidized housing, transport, medical services, telephone privileges, and at times domestic help. We believe that the policies underlying compensation to government employees should be reformed such that they are based primarily on market principles. The advantages of doing so include eliminating departments known for corrupt practices, making explicit the true cost of a government employees performance, and giving

government employees a good sense of their market worth. 3. Finally, considerable reform is needed in the Indian real estate sector. A large proportion of the land is owned by the government, and any land made available for private use is governed by archaic ownership, zoning, tenancy, and rent laws. Further, this government control of land has reduced the amount of land available for trading purposes. The result is that Indian land prices are the highest among all Asian nations relative to average income (Lewis, 2001).
Most of the illegal income is concealed by people at higher income brackets trying to avoid paying higher taxes. Consider the following illustration: suppose the extent of unreported income is 100 per cent of reported income. Since the tax on income, profits, and capital gains was about three per cent of GDP, we can assume that unreported income, once reported, should yield at least three per cent of GDP (or around $13.42 billion in 1999). This total should be enough to cover more than 67 per cent of the overall budget deficit of the Indian Central Government (World Economic Indicators, 2001). 7 The starting salaries for these positions are in the range of $1,800 to $2,200 per year, with the highest salary at about $10,000 per year. Asia-Pacific Development Journal Vol. 12, No. 2, December 2005
6

91

Further, the officially assessed values of real estate are low, while the true market price is very high.8 This situation leads, among other things, to higher levels of corruption as individuals use real estate as a major hiding place for investments of illegally acquired income (DiLodovico, Lewis, Palmade and Sankhe, 2001). Examples such as these indicate that there are still a large number of areas where the individual self-interests of survival and wealth accumulation are not respected. In the next section, we examine how one fairly new approach to microeconomic policy the encouragement of entrepreneurship can help India to continue its recent economic growth.

IV. THE ROLE OF ENTREPRENEURSHIP IN INDIAS FUTURE ECONOMIC DEVELOPMENT

The progress of Indian economic development from 1947 to the present provides further evidence that individuals do respond to incentives in their pursuit of self-survival and accumulation of wealth. Further, the nature of this response depends on the economic climate, particularly the role of the government. Indias economy struggled as long as it was based in a system of government regulation with little interaction with economic forces outside the country. The economic reforms of the early 1990s set the stage for substantial improvements in the Indian economy. As was stated earlier, Indias economy grew at an average of 6.3 per cent from 1992-1993 to 2000-2001 (Acharya, 2001). Further, its rate of inflation and fiscal deficit both decreased substantially (Bhalla, 2000). Improved exchange rate management led to improved financing of the current account deficit and higher foreign exchange reserves. Finally, Indias GDP and per capita income both increased substantially from 1990-1991 to 1998-1999. India can do more, however, to further advance its economic development. Indeed, one of the more recent microeconomic approaches to economic growth is the promotion of entrepreneurial activities. Entrepreneurial efforts have been found to generate a wide range of economic benefits, including new businesses, new jobs, innovative products and services, and increased wealth for future community investment (Kayne, 1999). The following narrative explains in considerable depth how entrepreneurial activities have succeeded in several countries and how it can now be used to further Indias economic development.
It is entirely possible that the officially assessed value may be 5 to 10 per cent of the actual market price of the dwelling of the plot of land. Asia-Pacific Development Journal Vol. 12, No. 2, December 2005
8

92
Following an extensive study of entrepreneurship in 21 countries, Reynolds, Hay, Bygrave, Camp and Autio (2000) concluded that successful entrepreneurial activity is strongly associated with economic growth. Their research was subsumed under the Global Entrepreneurship Monitor (GEM), a joint research initiative

conducted by Babson College and London Business School and supported by the Kauffman Center for Entrepreneurial Leadership. Their findings, based on surveys of the adult population of each country, in-depth interviews of experts on entrepreneurship in each country, and the use of standardized national data, supported their conceptual model depicting the role of the entrepreneurial process in a countrys economic development (see figure 2). Figure 2. The GEM Conceptual Model The GEM Conceptual Model suggests that the social-cultural-political context within a country must foster certain General National Framework Conditions, which can generate not only the opportunities for entrepreneurship but also the capacity for entrepreneurship in particular, the skills and motivation necessary to succeed. Together, the entrepreneurship opportunities, on the one hand, and the skills and motivation, on the other, lead to business dynamics that yield creative destruction, a process in which new firms are created and older, less efficient firms are destroyed. The overall result for a country is economic growth. Of the eight General National Framework Conditions listed in figure 2, the three that Reynolds, et al. (2000) highlighted as especially important are the availability of financing for new entrepreneurs, the need for government policies which are supportive of entrepreneurial efforts, and the opportunities for education and training in entrepreneurship.
Social, cultural, political context Entrepreneurial Framework Conditions Availability of financing Supportive government policies Education and training Cultural & social norms R & D transfer Commercial & legal infrastructure Internal market openness Access to physical infrastructure Entrepreneurial opportunities Entrepreneurial capacity Skills Motivation Business dynamics National economic growth

Source: Reynolds, Paul D., Michael Hay, William D. Bygrave, S. Michael Camp, and Erkko Autio, 2000. Global Entrepreneurship Monitor: 2000 Executive Report (Kansas City, Kauffman Center for Entrepreneurial Leadership), p. 6.

Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

93

Given Indias economic progress in recent years, the country may now be ready for the implementation of microeconomic policies that will foster entrepreneurial activities. Fortunately, in addition to the macroeconomic reforms mentioned earlier, India has taken other steps to lay the foundation for the type of economic growth that can be fostered only by entrepreneurial activities and appropriate economic policies that reflect individual rights and responsibilities. For example, in recent years India has made several important structural changes, including the construction of telecommunications networks and the implementation of a nationwide road-construction programme (Solomon, 2003). Further, several thousand new economy businesses the types of businesses especially suited for entrepreneurship efforts-were started in 2000 alone. However, more than just opportunities should lead India to consider entrepreneurial activities as a way to economic growth. At least one major threat, a growing population, also should motivate it to consider entrepreneurial effort as an economic policy. Specifically, the countrys population is expected to increase by 110 to 130 million people over the next 10 years, with approximately 80 to 100 million of those new citizens seeking jobs that do not currently exist (Gupta, 2001).

Entrepreneurial efforts can help to provide those jobs. Recent research on entrepreneurship around the world indicates that the cultural characteristics that can foster successful entrepreneurial activities and its related economic benefits are a strong education base, the necessary financial support, opportunities for networking among entrepreneurs, and a well-defined, minimal role for the government. In the case of India specifically, an emphasis upon entrepreneurial activities in the information technology sector also seems relevant. Consider first the need for a strong education base. The study of 21 nations by Reynolds, et al. (2000) found that providing opportunities for education in entrepreneurship was critical to success in new entrepreneurship efforts. For example, experts interviewed in the 21 nations felt strongly that new entrepreneurs needed training in the skills needed to convert a market opportunity into a commercial enterprise. Gupta (2001) says that India now has an extraordinary talent pool suited to entrepreneurship. However, he also says that the government must ensure that new entrepreneurs have access to both the functional and entrepreneurial skills needed for success in business startups. He sees both sets of skills as still somewhat lacking in India. The functional skills include abilities in such areas as marketing, finance and product development. The entrepreneurial skills include managing risk, building an effective team and raising funds. Gupta says that Indias educational institutions can play a major role in the development of these skills. For example, the Indian School of Business (ISB) at Hyderabad
Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

94

has already produced a curriculum suited to the development of entrepreneurial leaders. It will soon have a new Entrepreneurship Centre that will be founded, led and managed by several leading Silicon Valley entrepreneurs. Lall (2001) says that the structure of a countrys exports affects its prospects for economic growth. He claims that a technology-intensive structure is desirable for a country that has a substantial industrial base. Although India has such an industrial base, its export structure is still dominated by low-technology products. Lall says that a low-technology export structure is based in such products as textiles, garments, simple metal and plastics products, and furniture. However, these types of products are produced by low-skilled labour and are undifferentiated, so they do not yield the competitive advantages necessary for broad economic growth. A high-technology export structure, on the other hand, relies upon such products as complex electronic machinery, precision instruments and fine chemicals. This type of structure, based in complex skills and fast-changing technologies, generally does yield competitive advantages and export-based economic development. Given Indias extraordinary talent pool (Gupta, 2001), it would seem that the country is poised to take advantage of a high-technology export structure. Consider next the financial support required to produce successful entrepreneurial efforts. On the one hand, as Solomon (2003) indicates, foreign capital has been pouring into India recently, with one of its aims being to tap the countrys emergence as a center for software development and information technology services. However, much remains to be done, and the government can play a major role in this area. Among other things, India must ensure that its new entrepreneurs will have access to venture capital. Gupta (2001) suggests the establishment of a global support network of venture capitalists and other funding sources (also known as angels) who would be willing to support the new entrepreneurs. He also says that India must create areas of excellence breeding grounds where ideas grow into new businesses similar to those created in Silicon Valley in the United States. They can attract the ideas, the venture capital, and the management talent often found to succeed in other entrepreneurial efforts around the world. India can begin to create these areas of excellence by drawing upon the resources of its universities and other educational institutions, including the Indian Institutes of Technology. Providing opportunities for networking among entrepreneurs themselves

also can help new businesses get started on the right foot. In particular, Gupta (2001) says that India needs to foster networking and exchange among both new and established entrepreneurs. The obvious reason is that entrepreneurs can learn not only through their own experience but also through that of others. An effective approach to encouraging this type of networking might be to follow the academic
Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

95
model and begin to schedule conferences throughout India at which these individuals could interact. At these conferences, experienced entrepreneurs could present their ideas on what has worked for them (and what has not). Entrepreneurs just getting started could describe what they hope to achieve in their new businesses and get feedback on their plans from other entrepreneurs present. Obviously, newer entrepreneurs will want to be careful not to divulge important company secrets. The Indian government might have to provide small grants to subsidize the travel and lodging expenses of individuals lacking the resources to attend such conferences. However, just as in the academic setting, those grants could be awarded based on the merits of an individuals ideas for a startup business. The role that the government can play in the encouragement of entrepreneurial efforts has already been noted in the above narrative. Clearly, the government can develop policies concerning educational and financial support. Government policies on taxing and regulation of business also are relevant here, given that such policies can either promote or hamper entrepreneurial efforts. And the government can certainly help to provide networking opportunities among new and experienced entrepreneurs. Kayne (1999) identifies additional actions that the Indian government can take to provide a solid foundation for entrepreneurial efforts. He says that, in any country, the advocates of an entrepreneurial economy must promote and communicate policies that will provide a clear link between entrepreneurial efforts and overall economic prosperity. That is, voters and taxpayers must understand the reasons why their government is investing in anything as new as entrepreneurship. Rodrik (1996) also addressed this issue by concluding that reforms will be resisted if they are seen as being primarily redistributive (i.e., zerosum) in nature. He further says that, while most economists prefer speedy economic reforms administered from above (i.e. the state), the best approach might be a gradual approach that considers the political economy of the situation (and involves relevant powerful groups). Panagariya (1994) further addressed this issue when he said that, especially in a democratic society like India, the government must mobilize public opinion in favour of new economic policies. He says that one reason for the relative success of the economic reforms beginning in 1991 was that the Rao government moved quickly to announce major economic reforms. Finally, Reynolds, et al. (2000) also found that the perceived social legitimacy of entrepreneurship can be a critical factor in its success. Specifically, they found that respect for individuals starting new firms was an important cultural factor for countries with high levels of entrepreneurial activities. In short, uncertainty within the culture can lead to resistance.
Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

96
However, as Reynolds et al. (2000) concluded, the role of government beyond laying the foundation for entrepreneurship through tax and regulatory policies, support for education in entrepreneurship, and so forth should be minimized. Specifically, they found that a reduced government role in the economy including a low tax burden on both firms and individuals could yield substantially higher levels of entrepreneurial activity. They also found that, in India, excessive government regulations and related bureaucratic complexities did indeed handicap entrepreneurs. As was reported extensively earlier in this paper, India has for decades been saddled with a government that is far too involved in its economy.

V. CONCLUSION

The Indian economy provides a revealing contrast between how individuals

react under a government-controlled environment and how they respond to a market-based environment. The evidence presented here suggests that recent market reforms encouraging individual enterprise have led to higher economic growth in that country. The reasoning here is not new, although it is refreshing to discover that this tried-and-true reasoning applies to developing as well as to developed nations. Specifically, reliance upon a free market, with its emphasis upon individual self-interest in survival and wealth accumulation, can yield a wide range of economic benefits. In India those benefits have included, among other things, increased economic growth, reduced inflation, a smaller fiscal deficit, and higher inflows of the foreign capital needed for investment. We further conclude that India can generate additional economic growth by fostering entrepreneurial activities within its borders, particularly within its burgeoning middle class. Not only has entrepreneurship been found to yield significant economic benefits in a wide variety of nations, but India specifically has reached a point in its development where it can achieve similar results through entrepreneurial efforts. Among other things, India is poised to generate new business startups in the high technology area that can help it become a major competitor in the world economy. For example, it has a strong education base suited to entrepreneurial activities, increased inflows of foreign capital aimed at its growing information technology services sector, and a host of successful new business startups. To pursue further the entrepreneurial approach to economic growth, India must now provide opportunities for (1) education directed specifically at developing entrepreneurial skills, (2) financing of entrepreneurial efforts, and (3) networking among potential entrepreneurs and their experienced counterparts. Obviously, the government can play a substantial role in helping to provide these types of opportunities. It can also provide the appropriate tax and regulatory
Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

97

policies and help the citizens of India to understand the link between entrepreneurial efforts and economic prosperity. However, its role overall must be minimized so that the influence of the free market and individual self-interest can be fully realized. Only time will tell if increased entrepreneurial activities in India will actually yield the economic benefits found in so many other nations of the world. Should India decide to pursue that avenue of economic development, then future research needs to examine the results of Indias entrepreneurial programme. Perhaps more important, that research also needs to determine how Indias success in entrepreneurial efforts might differ from those pursued in developed nations.
Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

98

REFERENCES

Acharya, Shankar, 2001. Indias Macroeconomic Management in the Nineties (New Delhi, Indian Council for Research on International Economic Relations). Ahluwalia, I.J., 1985. Industrial Growth in India: Stagnation Since the Mid- Sixties (London, Oxford University Press). Bardhan, Pranab, 1997. Corruption and development: a review of issues, Journal of Economic Literature, vol. 35, September, pp. 1320-1346. Bhalla, G.S., 2000. Political economy of Indian development in the 20th century: Indias road to freedom and growth, Presidential Address at the 83rd Annual Conference of the Indian Economic Association, University of Jammu, Jammu and Kashmir, 30 December. Di Lodovico, Amadeo M., William W. Lewis, Vincent Palmade and Shirish Sankhe, 2001. India-from emerging to surging, The McKinsey Quarterly, http://www.mckinsey quarterly.com/article_abstract.aspx?ar=1117&L2=7&L3=8 Government of India, 1984. Committee on Trade Policies (New Delhi, Ministry of Commerce). Gupta, Rajat, 2001. Creating Indian entrepreneurs, India Today, February 12. Gupta, S.P., 1999. Development experience of the nineties and search for a new paradigm, A.K. Dasgupta Memorial Lecture at the 82nd Annual Conference of the Indian Economic Association, Guru Nanak Dev University, Amritsar, December 29. Joshi, Vijay, 2001. Capital controls and the national advantage: India in the 1990s and beyond, Oxford Development Studies, vol. 29, 3, pp. 305-320. Karunaratne, Neil Dias, 2001. Revisiting capital account convertibility in the aftermath of the Currency Crisis, Intereconomics, vol. 36, 5 September/October, pp. 264-271. Kayne, Jay, 1999. State Entrepreneurship Policies and Programs (Kansas City, Kauffman Center

for Entrepreneurial Leadership). Krueger, Anne O., 1993. Political Economy of Policy Reform in Developing Countries (Cambridge, MIT Press). Lall, Sanjaya, 2001. Competitiveness, Technology, and Skills (Northampton, MA, Edward Elgar). Lewis, William, 2001. Unlocking potential: remove barriers to Indias growth, The Wall Street Journal, September 11. Nayar, Baldev Raj, 2001. Globalization and Nationalism: The Changing Balance in Indias Economic Policy, 1950-2000 (London, Sage Publications). Panagariya, Arvind, 1994. India: a new tiger on the block? Contemporary Issues in World Trade, vol. 48, 1 Summer, pp. 193-221. Pursell, Gary, 1992. Trade Policies in India, in Dominick Salvatore, ed National Trade Policies: Handbook of Comparative Economic Policies, vol. 2 (New York, Greenwood Press). Rao, M. Govinda, 2000. Tax reform in India: achievements and challenges, Asia-Pacific Development Journal, vol. 7, No. 2, December 2000, pp. 59-74. Reynolds, Paul D., Michael Hay, William D. Bygrave, S. Michael Camp and Erkko Autio, 2000. Global Entrepreneurship Monitor: 2000 Executive Report (Kansas City, Kauffman Center for Entrepreneurial Leadership). Asia-Pacific Development Journal Vol. 12, No. 2, December 2005

99

Rodrik, Dani, 1996. Understanding economic policy reform, Journal of Economic Literature, vol. XXXIV, March, pp. 9-41. Solomon, Jay, 2003. Indias elephantine economy may be poised to run, The Wall Street Journal, 25 September, p. A17. Wade, Robert, 1985. The market for public office: Why the Indian State is not better at development, World Development, vol. 13, 4, April, pp. 467-497. World Economic Indicators 2001, 2001. (Washington, D.C., The World Bank).

ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT Industrial development could be said to be a major component of economic development and industrial development envisages entrepreneurial development i.e., entrepreneurial development leading to industrial development and the later leading to economic development, and so, the emphasis on entrepreneurial development. Effectiveness of small enterprises depends upon the entrepreneurial and managerial capabilities of those involved in the business .management and entrepreneurial skills must be blended in the small enterprise owners total make-up. He/she must be both efficient and effective and, skill has to be developed into an effective manager by inculcating in him/her the entrepreneurial spirit. Significant Contributions There is a wide range of significant contributions that entrepreneurs and entrepreneurship can make to the development process. These include the following: 1. Entrepreneurship raises productivity through technical and other forms of innovation. 2. Entrepreneurship is a powerful tool of job creation. 3. Entrepreneurs facilitate the transfer of technology. 4. Entrepreneurs play a strategic role in commercializing new inventions and products. 5. Entrepreneurs play critical role in the restructuring and transformation of economy. 6. Entrepreneurs help reduce the ossification of established social institutions and the concentration of economic power. 7. Entrepreneurs and Entrepreneurial behavior can breathe vitality into the life of large corporations and governmental enterprises. 8. Entrepreneurs make markets more competitive and there by reduce both static and dynamic market inefficiencies. 9. Micro- entrepreneurs operating in the informal sector circumvent established government authority when government and their programmes inhibit economic development. 10. Entrepreneurs stimulate a redistribution of wealth income and political power within societies in ways that are economically positive and without being politically disruptive. 11. Entrepreneurs improve the social welfare of a country by harnessing dormant previously overlooked talent. 12. Entrepreneurs create new markets and facilitate expansion into international markets.

The unique feature of entrepreneurship is that it is a low-cost strategy of economic development job creation and technical innovations. The local entrepreneurs offer a cost effective strategy of development because they are an integral part of their community .unlike foreign firms or plant relocations from another region or province ,small scale entrepreneurial firms are home growth ,and available evidence shows that, they remain in their community.

Industrial Revolution
From Wikipedia, the free encyclopedia

A Watt steam engine, the steam engine fuelled primarily by coal that propelled the Industrial Revolution in Great Britain and the world.[1]

The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transport and technology had a profound effect on the socioeconomic and cultural conditions starting in the United Kingdom, then subsequently spreading throughout Europe, North America, and eventually the world. The onset of the Industrial Revolution marks the major turning point in human history; almost every aspect of daily life was eventually influenced in some way. Most notably, average income and population began to exhibit unprecedented sustained growth. In the two centuries following 1800, the world's average income increased over 10-fold, while the world's population increased over 6-fold.[2] In the words of Nobel Prize winning Robert E. Lucas, Jr., "For the first time in history, the living standards of the masses of ordinary people have begun to undergo sustained growth. ... Nothing remotely like this economic behavior has happened before."[3] Starting in the later part of the 18th century there began a transition in parts of Great Britain's previously manual labour and draft-animalbased economy towards machine-based manufacturing. It started with the mechanisation of the textile industries, the development of iron-making techniques and the increased use of refined coal.[4] Trade expansion was enabled by the introduction of canals, improved roads and railways. The introduction of steam power fuelled primarily by coal, wider utilisation of water wheels and powered machinery (mainly in textile manufacturing) underpinned the dramatic increases in production capacity.[5] The development

of all-metal machine tools in the first two decades of the 19th century facilitated the manufacture of more production machines for manufacturing in other industries. The effects spread throughout Western Europe and North America during the 19th century, eventually affecting most of the world, a process that continues as industrialisation. The impact of this change on society was enormous.[6] The first Industrial Revolution, which began in the 18th century, merged into the Second Industrial Revolution around 1850, when technological and economic progress gained momentum with the development of steam-powered ships, railways, and later in the 19th century with the internal combustion engine and electrical power generation. The period of time covered by the Industrial Revolution varies with different historians. Eric Hobsbawm held that it 'broke out' in Britain in the 1780s and was not fully felt until the 1830s or 1840s,[7] while T. S. Ashton held that it occurred roughly between 1760 and 1830.[8] Some twentieth century historians such as John Clapham and Nicholas Crafts have argued that the process of economic and social change took place gradually and the termrevolution is not a true description of what took place. This is still a subject of debate among historians.[9][10] GDP per capita was broadly stable before the Industrial Revolution and the emergence of the modern capitalist economy.[11] The Industrial Revolution began an era of per-capita economic growth in capitalist economies.[12] Economic historians are in agreement that the onset of the Industrial Revolution is the most important event in the history of humanity since the domestication of animals and plants.[13]
Contents
[hide]

1 Innovations

1.1 Transfer of knowledge 1.2 Technological developments in Britain

1.3 Transport in Britain

2 Social effects

2.1 Factories and urbanisation 2.2 Child labour 2.3 Housing 2.4 Luddites 2.5 Organisation of labour 2.6 Standards of living

2.7 Population increase 2.8 Other effects

3 Continental Europe

3.1 Wallonia, Belgium 3.2 France

4 United States 5 Japan 6 Second Industrial Revolution and later evolution 7 Intellectual paradigms and criticism

8 Causes

7.1 Capitalism 7.2 Marxism 7.3 Romanticism

8.1 Causes for occurrence in Europe 8.2 Causes for occurrence in Britain

9 Name history 10 See also 11 References

11.1 Bibliography 11.2 Notes

12 External links

[edit]Innovations

The only surviving example of a Spinning Mule built by the inventor Samuel Crompton

The commencement of the Industrial Revolution is closely linked to a small number of innovations,[14] made in the second half of the 18th century:

Textiles Cotton spinning using Richard Arkwright's water frame, James Hargreaves's Spinning Jenny, and Samuel Crompton's Spinning Mule (a combination of the Spinning Jenny and the Water Frame). This was patented in 1769 and so came out of patent in 1783. The end of the patent was rapidly followed by the erection of many cotton mills. Similar technology was subsequently applied to spinning worsted yarn for various textiles and flax for linen.

Steam power The improved steam engine invented by James Watt and patented in 1775 was initially mainly used for pumping out mines, but from the 1780s was applied to power machines. This enabled rapid development of efficient semi-automated factories on a previously unimaginable scale in places where waterpower was not available.

Iron founding In the Iron industry, coke was finally applied to all stages of iron smelting, replacing charcoal. This had been achieved much earlier forlead and copper as well as for producing pig iron in a blast furnace, but the second stage in the production of bar iron depended on the use of potting and stamping (for which a patent expired in 1786) or puddling (patented by Henry Cort in 1783 and 1784).

These represent three 'leading sectors', in which there were key innovations, which allowed the economic take off by which the Industrial Revolution is usually defined. This is not to belittle many other inventions, particularly in the textile industry. Without some earlier ones, such as the spinning jenny and flying shuttle in the textile industry and the smelting of pig iron with coke, these achievements might have been impossible. Later

inventions such as the power loom and Richard Trevithick's high pressuresteam engine were also important in the growing industrialisation of Britain. The application of steam engines to powering cotton mills and ironworks enabled these to be built in places that were most convenient because other resources were available, rather than where there was water to power a watermill. In the textile sector, such mills became the model for the organisation of human labour in factories, epitomised by Cottonopolis, the name given to the vast collection of cotton mills, factories and administration offices based in Manchester. The assembly line system greatly improved efficiency, both in this and other industries. With a series of men trained to do a single task on a product, then having it moved along to the next worker, the number of finished goods also rose significantly. Also important was the 1756 rediscovery of concrete (based on hydraulic lime mortar) by the British engineer John Smeaton, which had been lost for 13 centuries.[15]

[edit]Transfer

of knowledge

A Philosopher Lecturing on the Orrery(ca. 1766) Informal philosophical societies spread scientific advances

Knowledge of new innovation was spread by several means. Workers who were trained in the technique might move to another employer or might be poached. A common method was for someone to make a study tour, gathering information where he could. During the whole of the Industrial Revolution and for the century before, all European countries and America engaged in study-touring; some nations, like Sweden and France, even trained civil servants or technicians to undertake it as a matter of state policy. In other countries, notably Britain and America, this practice was carried out by individual manufacturers anxious to improve their own methods. Study tours were common then, as now, as was the keeping of travel diaries. Records made by industrialists and technicians of the period are an incomparable source of information about their methods. Another means for the spread of innovation was by the network of informal philosophical societies, like the Lunar Society of Birmingham, in which members met to discuss 'natural philosophy' (i.e. science) and often its application to manufacturing. The Lunar Society flourished from 1765 to 1809, and it has been said of them, "They were, if you like, the revolutionary committee of that most far reaching of all the eighteenth century

revolutions, the Industrial Revolution".[16] Other such societies published volumes of proceedings and transactions. For example, the London-based Royal Society of Arts published an illustrated volume of new inventions, as well as papers about them in its annual Transactions. There were publications describing technology. Encyclopaedias such as Harris's Lexicon Technicum (1704) and Dr Abraham Rees's Cyclopaedia (18021819) contain much of value. Cyclopaedia contains an enormous amount of information about the science and technology of the first half of the Industrial Revolution, very well illustrated by fine engravings. Foreign printed sources such as the Descriptions des Arts et Mtiers and Diderot's Encyclopdie explained foreign methods with fine engraved plates. Periodical publications about manufacturing and technology began to appear in the last decade of the 18th century, and many regularly included notice of the latest patents. Foreign periodicals, such as the Annales des Mines, published accounts of travels made by French engineers who observed British methods on study tours.

[edit]Technological

developments in Britain

[edit]Textile manufacture
Main article: Textile manufacture during the Industrial Revolution

Model of the spinning jenny in a museum in Wuppertal, Germany. The spinning jenny was one of the innovations that started the revolution

In the early 18th century, British textile manufacture was based on wool which was processed by individual artisans, doing the spinning and weaving on their own premises. This system is called a cottage industry. Flax and cotton were also used for fine materials, but the processing was difficult because of the preprocessing needed, and thus goods in these materials made only a small proportion of the output. Use of the spinning wheel and hand loom restricted the production capacity of the industry, but incremental advances increased productivity to the extent that manufactured cotton goods became the dominant British export by the early decades of the 19th century. India was displaced as the premier supplier of cotton goods.

Lewis Paul patented the Roller Spinning machine and the flyer-and-bobbin system for drawing wool to a more even thickness, developed with the help of John Wyatt in Birmingham. Paul and Wyatt opened a mill in Birmingham which used their new rolling machine powered by a donkey. In 1743, a factory was opened in Northampton with fifty spindles on each of five of Paul and Wyatt's machines. This operated until about 1764. A similar mill was built by Daniel Bourn in Leominster, but this burnt down. Both Lewis Paul and Daniel Bourn patented carding machines in 1748. Using two sets of rollers that travelled at different speeds, it was later used in the first cotton spinning mill. Lewis's invention was later developed and improved by Richard Arkwright in his water frameand Samuel Crompton in his spinning mule. Other inventors increased the efficiency of the individual steps of spinning (carding, twisting and spinning, and rolling) so that the supply of yarn increased greatly, which fed a weaving industry that was advancing with improvements to shuttles and the loom or 'frame'. The output of an individual labourer increased dramatically, with the effect that the new machines were seen as a threat to employment, and early innovators were attacked and their inventions destroyed. To capitalise upon these advances, it took a class of entrepreneurs, of which the most famous is Richard Arkwright. He is credited with a list of inventions, but these were actually developed by people such as Thomas Highs and John Kay; Arkwright nurtured the inventors, patented the ideas, financed the initiatives, and protected the machines. He created the cotton mill which brought the production processes together in a factory, and he developed the use of powerfirst horse power and then water powerwhich made cotton manufacture a mechanised industry. Before long steam power was applied to drive textile machinery.

[edit]Metallurgy

Coalbrookdale by Night, 1801, Philipp Jakob Loutherbourg the Younger Blast furnaces light the iron making town ofCoalbrookdale

The Reverberatory Furnace could produce wrought iron using mined coal. The burning coal remained separate from the iron ore and so did not contaminate the iron with impurities like sulphur. This opened the way to increased iron production.

The major change in the metal industries during the era of the Industrial Revolution was the replacement of organic fuels based on wood with fossil fuel based on coal. Much of this happened somewhat before the Industrial Revolution, based on innovations by Sir Clement Clerke and others from 1678, using coal reverberatory furnacesknown as cupolas. These were operated by the flames, which contained carbon monoxide, playing on the ore andreducing the oxide to metal. This has the advantage that impurities (such as sulphur) in the coal do not migrate into the metal. This technology was applied to lead from 1678 and to copper from 1687. It was also applied to iron foundry work in the 1690s, but in this case the reverberatory furnace was known as an air furnace. The foundry cupola is a different (and later) innovation. This was followed by Abraham Darby, who made great strides using coke to fuel his blast furnaces atCoalbrookdale in 1709. However, the coke pig iron he made was used mostly for the production of cast iron goods such as pots and kettles. He had the advantage over his rivals in that his pots, cast by his patented process, were thinner and cheaper than theirs. Coke pig iron was hardly used to produce bar iron in forges until the mid 1750s, when his son Abraham Darby II built Horsehay and Ketley furnaces (not far from Coalbrookdale). By then, coke pig iron was cheaper than charcoal pig iron. Bar iron for smiths to forge into consumer goods was still made in finery forges, as it long had been. However, new processes were adopted in the ensuing years. The first is referred to today as potting and stamping, but this was superseded by Henry Cort's puddling process. From 1785, perhaps because the improved version of potting and stamping was about to come out of patent, a great expansion in the output of the British iron industry began. The new processes did not depend on the use of charcoal at all and were therefore not limited by charcoal sources. Up to that time, British iron manufacturers had used considerable amounts of imported iron to supplement native supplies. This came principally from Sweden from the mid 17th century and later also from Russia from the end of the 1720s. However, from 1785, imports decreased because of the new iron making technology, and Britain became an exporter of bar iron as well as manufactured wrought iron consumer goods.

Since iron was becoming cheaper and more plentiful, it also became a major structural material following the building of the innovative The Iron Bridge in 1778 by Abraham Darby III.

The Iron Bridge, Shropshire, England

An improvement was made in the production of steel, which was an expensive commodity and used only where iron would not do, such as for the cutting edge of tools and for springs. Benjamin Huntsman developed his crucible steel technique in the 1740s. The raw material for this was blister steel, made by thecementation process. The supply of cheaper iron and steel aided the development of boilers and steam engines, and eventually railways. Improvements in machine tools allowed better working of iron and steel and further boosted the industrial growth of Britain.

[edit]Mining

Men working their own coal mines. Early 1900s, USA

Coal mining in Britain, particularly in South Wales started early. Before the steam engine, pits were often shallowbell pits following a seam of coal along the surface, which were abandoned as the coal was extracted. In other cases, if the geology was favourable, the coal was mined by means of an adit or drift mine driven into the side of a hill. Shaft mining was done in some areas, but the limiting factor was the problem of removing water. It could be done by hauling buckets of water up the shaft or to a sough (a tunnel driven into a hill to drain a mine). In either case, the water had to be discharged into a stream or ditch at a level where it could flow away

by gravity. The introduction of the steam engine greatly facilitated the removal of water and enabled shafts to be made deeper, enabling more coal to be extracted. These were developments that had begun before the Industrial Revolution, but the adoption of James Watt's more efficient steam engine from the 1770s reduced the fuel costs of engines, making mines more profitable. Coal mining was very dangerous owing to the presence of firedamp in many coal seams. Some degree of safety was provided by the safety lamp which was invented in 1816 by Sir Humphry Davy and independently by George Stephenson. However, the lamps proved a false dawn because they became unsafe very quickly and provided a weak light. Firedamp explosions continued, often setting off coal dust explosions, so casualties grew during the entire nineteenth century. Conditions of work were very poor, with a high casualty rate from rock falls.

[edit]Steam power
Main article: Steam power during the Industrial Revolution

The 1698 Savery Engine the world's first engine built byThomas Savery as based on the designs of Denis Papin.

The development of the stationary steam engine was an essential early element of the Industrial Revolution; however, for most of the period of the Industrial Revolution, the majority of industries still relied on wind and water power as well as horse and man-power for driving small machines. The first real attempt at industrial use of steam power was due to Thomas Savery in 1698. He constructed and patented in London a low-lift combined vacuum and pressure water pump, that generated about one horsepower (hp) and was used as in numerous water works and tried in a few mines (hence its "brand name", The miner's Friend), but it was not a success since it was limited in pumping height and prone to boiler explosions.

Newcomen's steam powered atmospheric engine was the first practical engine. Subsequent steam engines were to power the Industrial Revolution

The first safe and successful steam power plant was introduced by Thomas Newcomen before 1712. Newcomen apparently conceived the Newcomen steam engine quite independently of Savery, but as the latter had taken out a very wide-ranging patent, Newcomen and his associates were obliged to come to an arrangement with him, marketing the engine until 1733 under a joint patent.[17][18] Newcomen's engine appears to have been based on Papin's experiments carried out 30 years earlier, and employed a piston and cylinder, one end of which was open to the atmosphere above the piston. Steam just above atmospheric pressure (all that the boiler could stand) was introduced into the lower half of the cylinder beneath the piston during the gravity-induced upstroke; the steam was then condensed by a jet of cold water injected into the steam space to produce a partial vacuum; the pressure differential between the atmosphere and the vacuum on either side of the piston displaced it downwards into the cylinder, raising the opposite end of a rocking beam to which was attached a gang of gravity-actuated reciprocating force pumps housed in the mineshaft. The engine's downward power stroke raised the pump, priming it and preparing the pumping stroke. At first the phases were controlled by hand, but within ten years an escapement mechanism had been devised worked by a vertical plug treesuspended from the rocking beam which rendered the engine self-acting. A number of Newcomen engines were successfully put to use in Britain for draining hitherto unworkable deep mines, with the engine on the surface; these were large machines, requiring a lot of capital to build, and produced about 5 hp (3.7 kW). They were extremely inefficient by modern standards, but when located where coal was cheap at pit heads, opened up a great expansion in coal mining by allowing mines to go deeper. Despite their disadvantages, Newcomen engines were reliable and easy to maintain and continued to be used in the coalfields until the early decades of the nineteenth century. By 1729, when Newcomen died, his engines had spread (first) to Hungary in 1722, Germany, Austria, and Sweden. A total of 110 are known to have been built by 1733 when the joint patent expired, of which 14 were abroad. In the 1770s, the engineer John

Smeaton built some very large examples and introduced a number of improvements. A total of 1,454 engines had been built by 1800.[19]

James Watt

A fundamental change in working principles was brought about by James Watt. In close collaboration with Matthew Boulton, he had succeeded by 1778 in perfecting his steam engine, which incorporated a series of radical improvements, notably the closing off of the upper part of the cylinder thereby making the low pressure steam drive the top of the piston instead of the atmosphere, use of a steam jacket and the celebrated separate steam condenser chamber. All this meant that a more constant temperature could be maintained in the cylinder and that engine efficiency no longer varied according to atmospheric conditions. These improvements increased engine efficiency by a factor of about five, saving 75% on coal costs. Nor could the atmospheric engine be easily adapted to drive a rotating wheel, although Wasborough and Pickard did succeed in doing so towards 1780. However by 1783 the more economical Watt steam engine had been fully developed into a double-acting rotative type, which meant that it could be used to directly drive the rotary machinery of a factory or mill. Both of Watt's basic engine types were commercially very successful, and by 1800, the firm Boulton & Watt had constructed 496 engines, with 164 driving reciprocating pumps, 24 serving blast furnaces, and 308 powering mill machinery; most of the engines generated from 5 to 10 hp (7.5 kW). The development of machine tools, such as the lathe, planing and shaping machines powered by these engines, enabled all the metal parts of the engines to be easily and accurately cut and in turn made it possible to build larger and more powerful engines. Until about 1800, the most common pattern of steam engine was the beam engine, built as an integral part of a stone or brick engine-house, but soon various patterns of self-contained portative engines (readily removable, but not on wheels) were developed, such as the table engine. Towards the turn of the 19th century, the Cornish

engineer Richard Trevithick, and the American, Oliver Evans began to construct higher pressure noncondensing steam engines, exhausting against the atmosphere. This allowed an engine and boiler to be combined into a single unit compact enough to be used on mobile road and rail locomotives and steam boats. In the early 19th century after the expiration of Watt's patent, the steam engine underwent many improvements by a host of inventors and engineers.

[edit]Chemicals

The Thames Tunnel (opened 1843) Cement was used in the world's first underwater tunnel

The large scale production of chemicals was an important development during the Industrial Revolution. The first of these was the production of sulphuric acidby the lead chamber process invented by the Englishman John Roebuck (James Watt's first partner) in 1746. He was able to greatly increase the scale of the manufacture by replacing the relatively expensive glass vessels formerly used with larger, less expensive chambers made of riveted sheets of lead. Instead of making a small amount each time, he was able to make around 100 pounds (50 kg) in each of the chambers, at least a tenfold increase. The production of an alkali on a large scale became an important goal as well, and Nicolas Leblanc succeeded in 1791 in introducing a method for the production of sodium carbonate. The Leblanc process was a reaction of sulphuric acid with sodium chloride to give sodium sulphate and hydrochloric acid. The sodium sulphate was heated with limestone (calcium carbonate) and coal to give a mixture of sodium carbonate and calcium sulphide. Adding water separated the soluble sodium carbonate from the calcium sulphide. The process produced a large amount of pollution (the hydrochloric acid was initially vented to the air, and calcium sulphide was a useless waste product). Nonetheless, this synthetic soda ash proved economical compared to that from burning specific plants (barilla) or from kelp, which were the previously dominant sources of soda ash,[20] and also to potash (potassium carbonate) derived from hardwood ashes. These two chemicals were very important because they enabled the introduction of a host of other inventions, replacing many small-scale operations with more cost-effective and controllable processes. Sodium carbonate

had many uses in the glass, textile, soap, and paper industries. Early uses for sulphuric acid included pickling (removing rust) iron and steel, and for bleaching cloth. The development of bleaching powder (calcium hypochlorite) by Scottish chemist Charles Tennant in about 1800, based on the discoveries of French chemist Claude Louis Berthollet, revolutionised the bleaching processes in the textile industry by dramatically reducing the time required (from months to days) for the traditional process then in use, which required repeated exposure to the sun in bleach fields after soaking the textiles with alkali or sour milk. Tennant's factory at St Rollox, North Glasgow, became the largest chemical plant in the world. In 1824 Joseph Aspdin, a British bricklayer turned builder, patented a chemical process for making portland cement which was an important advance in the building trades. This process involvessintering a mixture of clay and limestone to about 1,400 C (2,552 F), then grinding it into a fine powder which is then mixed with water, sand and gravel to produce concrete. Portland cement was used by the famous English engineer Marc Isambard Brunel several years later when constructing the Thames Tunnel.[21] Cement was used on a large scale in the construction of the London sewerage system a generation later.

[edit]Machine tools

Sir Joseph Whitworth

The Industrial Revolution could not have developed without machine tools, for they enabled manufacturing machines to be made. They have their origins in the tools developed in the 18th century by makers of clocks and watches and scientific instrument makers to enable them to batch-produce small mechanisms. The mechanical parts of early textile machines were sometimes called 'clock work' because of the metal spindles and gears they incorporated. The manufacture of textile machines drew craftsmen from these trades and is the origin of the modern engineering industry.

Machines were built by various craftsmencarpenters made wooden framings, and smiths and turners made metal parts. A good example of how machine tools changed manufacturing took place in Birmingham, England, in 1830. The invention of a new machine by Joseph Gillott, William Mitchell and James Stephen Perryallowed mass manufacture of robust, cheap steel pen nibs; the process had been laborious and expensive. Because of the difficulty of manipulating metal and the lack of machine tools, the use of metal was kept to a minimum. Wood framing had the disadvantage of changing dimensions with temperature and humidity, and the various joints tended to rack (work loose) over time. As the Industrial Revolution progressed, machines with metal frames became more common, but they required machine tools to make them economically. Before the advent of machine tools, metal was worked manually using the basic hand tools of hammers, files, scrapers, saws and chisels. Small metal parts were readily made by this means, but for large machine parts, production was very laborious and costly.

A lathe from 1911, a machine tool able to make other machines

Apart from workshop lathes used by craftsmen, the first large machine tool was the cylinder boring machine used for boring the large-diameter cylinders on early steam engines. The planing machine, the slotting machine and the shaping machinewere developed in the first decades of the 19th century. Although the milling machine was invented at this time, it was not developed as a serious workshop tool until during the Second Industrial Revolution. Military production, as well, had a hand in the development of machine tools. Henry Maudslay, who trained a school of machine tool makers early in the 19th century, was employed at the Royal Arsenal, Woolwich, as a young man where he would have seen the large horse-driven wooden machines for cannonboring made and worked by the Verbruggans. He later worked for Joseph Bramah on the production of metal locks, and soon after he began working on his own. He was engaged to build the machinery for making ships' pulley blocks for the Royal Navy in the Portsmouth Block Mills. These were all metal and were the first machines for mass production and making components with a degree of interchangeability. The lessons Maudslay learned about the need for stability and precision he adapted to the development of machine tools, and in his workshops he

trained a generation of men to build on his work, such as Richard Roberts, Joseph Clement and Joseph Whitworth. James Fox of Derby had a healthy export trade in machine tools for the first third of the century, as did Matthew Murray of Leeds. Roberts was a maker of high-quality machine tools and a pioneer of the use of jigs and gauges for precision workshop measurement.

[edit]Gas lighting
Main article: Gas lighting Another major industry of the later Industrial Revolution was gas lighting. Though others made a similar innovation elsewhere, the large scale introduction of this was the work of William Murdoch, an employee of Boulton and Watt, the Birmingham steam engine pioneers. The process consisted of the large scale gasification of coal in furnaces, the purification of the gas (removal of sulphur, ammonia, and heavy hydrocarbons), and its storage and distribution. The first gas lighting utilities were established in London between 1812-20. They soon became one of the major consumers of coal in the UK. Gas lighting had an impact on social and industrial organisation because it allowed factories and stores to remain open longer than with tallow candles or oil. Its introduction allowed night life to flourish in cities and towns as interiors and streets could be lighted on a larger scale than before.

[edit]Glass making

The Crystal Palace held the Great Exhibition of 1851

A new method of producing glass, known as the cylinder process, was developed in Europe during the early 19th century. In 1832, this process was used by the Chance Brothers to create sheet glass. They became the leading producers of window and plate glass. This advancement allowed for larger panes of glass to be created without interruption, thus freeing up the space planning in interiors as well as the fenestration of buildings. The Crystal Palace is the supreme example of the use of sheet glass in a new and innovative structure.

[edit]Effects on agriculture

The invention of machinery played a big part in driving forward the British Agricultural Revolution. Agricultural improvement began in the centuries before the Industrial revolution got going and it may have played a part in freeing up labour from the land to work in the new industrial mills of the eighteenth century. As the revolution in industry progressed a succession of machines became available which increased food production with ever fewer labourers. Jethro Tull's seed drill invented in 1701 was a mechanical seeder which distributed seeds efficiently across a plot of land. Joseph Foljambe's Rotherham plough of 1730, was the first commercially successful iron plough. Andrew Meikle's threshing machine of 1784 was the final straw for many farm labourers, and led to the 1830 agricultural rebellion of the Swing Riots.

[edit]Transport

in Britain

Main article: Transport during the British Industrial Revolution At the beginning of the Industrial Revolution, inland transport was by navigable rivers and roads, with coastal vessels employed to move heavy goods by sea. Railways or wagon ways were used for conveying coal to rivers for further shipment, but canals had not yet been constructed. Animals supplied all of the motive power on land, with sails providing the motive power on the sea. The Industrial Revolution improved Britain's transport infrastructure with a turnpike road network, a canal and waterway network, and a railway network. Raw materials and finished products could be moved more quickly and cheaply than before. Improved transportation also allowed new ideas to spread quickly.

[edit]Coastal sail
Sailing vessels had long been used for moving goods round the British coast. The trade transporting coal to London from Newcastle had begun in medieval times. The transport of goods coastwise by sea within Britain was common during the Industrial Revolution, as for centuries before. This became less important with the growth of the railways at the end of the period.

[edit]Navigable rivers
See also: List of rivers of United Kingdom All the major rivers of the United Kingdom were navigable during the Industrial Revolution. Some were anciently navigable, notably the Severn, Thames, and Trent. Some were improved, or had navigation extended upstream, but usually in the period before the Industrial Revolution, rather than during it. The Severn, in particular, was used for the movement of goods to the Midlands which had been imported into Bristol from abroad, and for the export of goods from centres of production in Shropshire(such as iron goods from Coalbrookdale) and the Black Country. Transport was by way of trowssmall sailing vessels which could

pass the various shallows and bridges in the river. The trows could navigate the Bristol Channel to the South Wales ports and Somerset ports, such as Bridgwater and even as far as France.

[edit]Canals
Main article: History of the British canal system

Pontcysyllte Aqueduct, Llangollen, Wales

Canals began to be built in the late eighteenth century to link the major manufacturing centres in the Midlands and north with seaports and with London, at that time itself the largest manufacturing centre in the country. Canals were the first technology to allow bulk materials to be easily transported across country. A single canal horse could pull a load dozens of times larger than a cart at a faster pace. By the 1820s, a national network was in existence. Canal construction served as a model for the organisation and methods later used to construct the railways. They were eventually largely superseded as profitable commercial enterprises by the spread of the railways from the 1840s on. Britain's canal network, together with its surviving mill buildings, is one of the most enduring features of the early Industrial Revolution to be seen in Britain.

[edit]Roads
Much of the original British road system was poorly maintained by thousands of local parishes, but from the 1720s (and occasionally earlier) turnpike trusts were set up to charge tolls and maintain some roads. Increasing numbers of main roads were turnpiked from the 1750s to the extent that almost every main road in England and Wales was the responsibility of some turnpike trust. New engineered roads were built by John Metcalf, Thomas Telford and John Macadam. The major turnpikes radiated from London and were the means by which the Royal Mail was able to reach the rest of the country. Heavy goods transport on these roads was by means of slow, broad wheeled, carts hauled by teams of horses. Lighter goods were conveyed by smaller carts or by teams of pack horse. Stage coaches carried the rich, and the less wealthy could pay to ride on carriers carts.

[edit]Railways
Main article: History of rail transport in Great Britain

Puffing Billy, an early railway steam locomotive, constructed in 1813-1814 for colliery work.

Wagonways for moving coal in the mining areas had started in the 17th century and were often associated with canal or river systems for the further movement of coal. These were all horse drawn or relied on gravity, with a stationary steam engine to haul the wagons back to the top of the incline. The first applications of the steam locomotive were on wagon or plate ways (as they were then often called from the cast iron plates used). Horse-drawn public railways did not begin until the early years of the 19th century. Steam-hauled public railways began with the Stockton and Darlington Railway in 1825 and the Liverpool and Manchester Railwayin 1830. Construction of major railways connecting the larger cities and towns began in the 1830s but only gained momentum at the very end of the first Industrial Revolution. After many of the workers had completed the railways, they did not return to their rural lifestyles but instead remained in the cities, providing additional workers for the factories. Railways helped Britain's trade enormously, providing a quick and easy way of transport and an easy way to transport mail and news.

[edit]Social

effects

Main article: Life in Great Britain during the Industrial Revolution In terms of social structure, the Industrial Revolution witnessed the triumph of a middle class of industrialists and businessmen over a landed class of nobility and gentry. Ordinary working people found increased opportunities for employment in the new mills and factories, but these were often under strict working conditions with long hours of labour dominated by a pace set by machines. However, harsh working conditions were prevalent long before the Industrial Revolution took place. Pre-

industrial society was very static and often cruelchild labour, dirty living conditions, and long working hours were just as prevalent before the Industrial Revolution.[22]

[edit]Factories

and urbanisation

Manchester, England ("Cottonopolis"), pictured in 1840, showing the mass of factory chimneys

Industrialisation led to the creation of the factory. Arguably the first was John Lombe's water-powered silk mill at Derby, operational by 1721. However, the rise of the factory came somewhat later when cotton spinning was mechanised. The factory system was largely responsible for the rise of the modern city, as large numbers of workers migrated into the cities in search of employment in the factories. Nowhere was this better illustrated than the mills and associated industries of Manchester, nicknamed "Cottonopolis", and arguably the world's first industrial city. For much of the 19th century, production was done in small mills, which were typically waterpowered and built to serve local needs. Later each factory would have its own steam engine and a chimney to give an efficient draft through its boiler. The transition to industrialisation was not without difficulty. For example, a group of English workers known as Luddites formed to protest against industrialisation and sometimes sabotaged factories. In other industries the transition to factory production was not so divisive. Some industrialists themselves tried to improve factory and living conditions for their workers. One of the earliest such reformers was Robert Owen, known for his pioneering efforts in improving conditions for workers at the New Lanark mills, and often regarded as one of the key thinkers of the early socialist movement. By 1746, an integrated brass mill was working at Warmley near Bristol. Raw material went in at one end, was smelted into brass and was turned into pans, pins, wire, and other goods. Housing was provided for workers on site. Josiah Wedgwood and Matthew Boulton were other prominent early industrialists, who employed the factory system.

[edit]Child

labour

A young "drawer" pulling a coal tub along a mine gallery

The Industrial Revolution led to a population increase, but the chance of surviving childhood did not improve throughout the industrial revolution (although infant mortality rates were reduced markedly).[23][24] There was still limited opportunity for education, and children were expected to work. Employers could pay a child less than an adult even though their productivity was comparable; there was no need for strength to operate an industrial machine, and since the industrial system was completely new there were no experienced adult labourers. This made child labour the labour of choice for manufacturing in the early phases of the Industrial Revolution between the 18th and 19th centuries. In England and Scotland in 1788, two-thirds of the workers in 143 waterpowered cotton mills were described as children.[25] Child labour had existed before the Industrial Revolution, but with the increase in population and education it became more visible. Many children were forced to work in relatively bad conditions for much lower pay than their elders.[26] Reports were written detailing some of the abuses, particularly in the coal mines[27] and textile factories[28] and these helped to popularise the children's plight. The public outcry, especially among the upper and middle classes, helped stir change in the young workers' welfare. Politicians and the government tried to limit child labour by law, but factory owners resisted; some felt that they were aiding the poor by giving their children money to buy food to avoid starvation, and others simply welcomed the cheap labour. In 1833 and 1844, the first general laws against child labour, the Factory Acts, were passed in England: Children younger than nine were not allowed to work, children were not permitted to work at night, and the work day of youth under the age of 18 was limited to twelve hours. Factory inspectors supervised the execution of the law. About ten years later, the employment of children and women in mining was forbidden. These laws decreased the number of child labourers; however, child labour remained in Europe and the United States up to the 20th century.[29] By 1900, there were 1.7 million child labourers reported in American industry under the age of fifteen.[30]

[edit]Housing

Over London by Rail Gustave Dor c. 1870. Shows the densely populated and polluted environments created in the new industrial cities

Living conditions during the Industrial Revolution varied from the splendour of the homes of the owners to the squalor of the lives of the workers. Poor people lived in very small houses in cramped streets. These homes would share toilet facilities, have open sewers and would be at risk of damp. Disease was spread through a contaminated water supply. Conditions did improve during the 19th century as public health acts were introduced covering things such as sewage, hygiene and making some boundaries upon the construction of homes. Not everybody lived in homes like these. The Industrial Revolution created a larger middle class of professionals such as lawyers and doctors. The conditions for the poor improved over the course of the 19th century because of government and local plans which led to cities becoming cleaner places, but life had not been easy for the poor before industrialisation. However, as a result of the Revolution, huge numbers of the working class died due to diseases spreading through the cramped living conditions. Chest diseases from the mines, cholerafrom polluted water and typhoid were also extremely common, as was smallpox. Accidents in factories with child and female workers were regular. Strikes and riots by workers were also relatively common.

[edit]Luddites
Main article: Luddite

The Leader of the luddites, engraving of 1812

The rapid industrialisation of the English economy cost many craft workers their jobs. The movement started first with lace and hosiery workers nearNottingham and spread to other areas of the textile industry owing to early industrialisation. Many weavers also found themselves suddenly unemployed since they could no longer compete with machines which only required relatively limited (and unskilled) labour to produce more cloth than a single weaver. Many such unemployed workers, weavers and others, turned their animosity towards the machines that had taken their jobs and began destroying factories and machinery. These attackers became known as Luddites, supposedly followers of Ned Ludd, a folklore figure. The first attacks of the Luddite movement began in 1811. The Luddites rapidly gained popularity, and the British government took drastic measures using the militia or army to protect industry. Those rioters who were caught were tried and hanged, or transported for life. Unrest continued in other sectors as they industrialised, such as agricultural labourers in the 1830s, when large parts of southern Britain were affected by theCaptain Swing disturbances. Threshing machines were a particular target, and rick burning was a popular activity. However the riots led to the first formation oftrade unions, and further pressure for reform.

[edit]Organisation

of labour

See also: Trade union#History

The Great Chartist Meeting on Kennington Common, 1848

The Industrial Revolution concentrated labour into mills, factories and mines, thus facilitating the organisation of combinations or trade unions to help advance the interests of working people. The power of a union could demand better terms by withdrawing all labour and causing a consequent cessation of production. Employers had to decide between giving in to the union demands at a cost to themselves or suffer the cost of the lost production. Skilled workers were hard to replace, and these were the first groups to successfully advance their conditions through this kind of bargaining. The main method the unions used to effect change was strike action. Many strikes were painful events for both sides, the unions and the management. In England, the Combination Act forbade workers to form any kind of trade union from 1799 until its repeal in 1824. Even after this, unions were still severely restricted. In 1832, the year of the Reform Act which extended the vote in England but did not grant universal suffrage, six men from Tolpuddle in Dorset founded the Friendly Society of Agricultural Labourers to protest against the gradual lowering of wages in the 1830s. They refused to work for less than 10 shillings a week, although by this time wages had been reduced to seven shillings a week and were due to be further reduced to six shillings. In 1834 James Frampton, a local landowner, wrote to the Prime Minister, Lord Melbourne, to complain about the union, invoking an obscure law from 1797 prohibiting people from swearing oaths to each other, which the members of the Friendly Society had done. James Brine, James Hammett, George Loveless, George's brother James Loveless, George's brother in-law Thomas Standfield, and Thomas's son John Standfield were arrested, found guilty, and transported to Australia. They became known as the Tolpuddle martyrs. In the 1830s and 1840s the Chartist movement was the first large scale organised working class political movement which campaigned for political equality and social justice. Its Charter of reforms received over three million signatures but was rejected by Parliament without consideration. Working people also formed friendly societies and co-operative societies as mutual support groups against times of economic hardship. Enlightened industrialists, such as Robert Owen also supported these organisations to improve the conditions of the working class.

Unions slowly overcame the legal restrictions on the right to strike. In 1842, a General Strike involving cotton workers and colliers was organised through theChartist movement which stopped production across Great Britain.[31] Eventually effective political organisation for working people was achieved through the trades unions who, after the extensions of the franchise in 1867 and 1885, began to support socialist political parties that later merged to became the British Labour Party.

[edit]Standards

of living

The history of the change of living conditions during the industrial revolution has been very controversial, and was the topic that from the 1950s to the 1980s caused most heated debate among economic and social historians.[32] A series of 1950s essays by Henry Phelps Brown and Sheila V. Hopkins later set the academic consensus that the bulk of the population, that was at the bottom of the social ladder, suffered severe reductions in their living standards.[32] During the period 1813-1913 there was a significant increase in worker wages .[33][34][35]

[edit]Population

increase

According to Robert Hughes in The Fatal Shore, the population of England and Wales, which had remained steady at 6 million from 1700 to 1740, rose dramatically after 1740. The population of England had more than doubled from 8.3 million in 1801 to 16.8 million in 1851 and, by 1901, had nearly doubled again to 30.5 million.
[36]

As living conditions and health care improved during the 19th century,[citation needed] Britain's population doubled

every 50 years.[37][38] Europes population doubled during the 18th century, from roughly 100 million to almost 200 million, and doubled again during the 19th century, to around 400 million.[39]

[edit]Other

effects

The application of steam power to the industrial processes of printing supported a massive expansion of newspaper and popular book publishing, which reinforced rising literacy and demands for mass political participation. During the Industrial Revolution, the life expectancy of children increased dramatically. The percentage of the children born in London who died before the age of five decreased from 74.5% in 17301749 to 31.8% in 18101829.[23] The growth of modern industry from the late 18th century onward led to massive urbanisation and the rise of new great cities, first in Europe and then in other regions, as new opportunities brought huge numbers of migrants from rural communities into urban areas. In 1800, only 3% of the world's population lived in cities,[40] a figure that has risen to nearly 50% at the beginning of the 21st century.[41] In 1717 Manchester was merely a market town of 10,000 people, but by 1911 it had a population of 2.3 million.[42]

The greatest killer in the cities was tuberculosis (TB).[43] By the late 19th century, 70 to 90% of the urban populations of Europe and North America were infected with M. tuberculosis, and about 40% of working-class deaths in cities were from TB.[44]

[edit]Continental

Europe

The Industrial Revolution on Continental Europe came a little later than in Great Britain. In many industries, this involved the application of technology developed in Britain in new places. Often the technology was purchased from Britain or British engineers and entrepreneurs moved abroad in search of new opportunities. By 1809 part of the Ruhr Valley in Westphalia was called 'Miniature England' because of its similarities to the industrial areas of England. The German, Russian and Belgian governments all provided state funding to the new industries. In some cases (such as iron), the different availability of resources locally meant that only some aspects of the British technology were adopted.

[edit]Wallonia,

Belgium

Lifts on Canal du Centre (1888 - 1917) near La Louvire, Wallonia

Workers' housing at Bois-du-Luc (1838-1853) in La Louvire

Renowned for its coal and steel, Wallonia has experienced strong industrial growth since the Middle Ages. For many years, heavy industry was the driving force behind the region's economy. Indeed, Wallonia was the birthplace of the industrial revolution on continental Europe:

Before railway construction on the Continent demanded huge quantities of maleable iron mainly for rails, for which low quality iron sufficed, Wallonia was the only Continental region to follow the British model successfully. Since the middle of the 1820s, numerous works comprising coke blast furnaces as well as puddling and rolling mills were built in the coal mining areas around Lige and Charleroi. Excelling all others, John Cockerill's factories at Seraing integrated all stages of production, from engineering to the supply of raw materials, as early as 1825.[45] Wallonia came to be regarded as an example of the radical evolution of industrial expansion. Thanks to coal (the French word "houille" was coined in Wallonia),[46] the region geared up to become the 2nd industrial power in the world after England. But it is also pointed out by many researchers, with itsSillon industriel, 'Especially in the Haine, Sambre and Meuse valleys, between the Borinage and Lige, (...) there was a huge industrial development based on coal-mining and iron-making...'.[47] Philippe Raxhon wrote about the period after 1830: "It was not propaganda but a reality the Walloon regions were becoming the second industrial power all over the world after England."[48] "The sole industrial centre outside the collieries and blast furnaces of Walloon was the old cloth making town of Ghent."[49] Michel De Coster, Professor at the Universit de Lige wrote also: "The historians and the economists say that Belgium was the second industrial power of the world, in proportion to its population and its territory (...) But this rank is the one of Wallonia where the coal-mines, the blast furnaces, the iron and zinc factories, the wool industry, the glass industry, the weapons industry... were concentrated" [50]

[edit]Demographic effects

Wallonia's Sillon industriel, not the blue bloth in the N

Gallow frame of the Crachet in FrameriesIN Wallonia's French Chssis molettes orBelfleur (French Chevalement

Official Poster of the Lige's World fair in 1905

Wallonia was also the birthplace of a strong Socialist party and strong trade-unions in a particular sociological landscape. At the left, the Sillon industriel, which runs from Mons in the west, to Verviers in the east (except part of North Flanders, in another period of the industrial revolution, after 1920). Even if Wallonia is the second industrial country after England, the effect of the industrial revolution there was very different. In 'Breaking stereotypes', Muriel Beven and Isabelle Devos say: The industrial revolution changed a mainly rural society into an urban one, but with a strong contrast between northern and southern Belgium. During the Middle Ages and the Early Modern Period, Flanders was characterised by the presence of large urban centres (...) at the beginning of the nineteenth century this region (Flanders), with an urbanisation degree of more than 30 per cent, remained one of the most urbanised in the world. By comparison, this proportion reached only 17 per cent in Wallonia, barely 10 per cent in most West European countries, 16 per cent in France and 25 per cent in England. Nineteenth century industrialisation did not affect the traditional urban infrastructure, except in Ghent (...) Also, in Wallonia the traditional urban network was largely unaffected by the industrialisation process, even though the proportion of city-dwellers rose from 17 to 45 per cent between 1831 and 1910. Especially in the Haine, Sambre and Meuse valleys, between the Borinage and Lige, where there was a huge industrial development based on coal-mining and iron-

making, urbanisation was rapid. During these eighty years the number of municipalities with more than 5,000 inhabitants increased from only 21 to more than one hundred, concentrating nearly half of the Walloon population in this region. Nevertheless, industrialisation remained quite traditional in the sense that it did not lead to the growth of modern and large urban centres, but to a conurbation of industrial villages and towns developed around a coal-mine or a factory. Communication routes between these small centres only became populated later and created a much less dense urban morphology than, for instance, the area around Lige where the old town was there to direct migratory flows.[51]

[edit]France
The industrial revolution in France was a particular process for it did not correspond to the main model followed by other countries. Notably, most French historians argue that France did not go through a clear take-off.
[52]

Instead, France's economic growth and industrialisation process was slow and steady along the eighteenth

and nineteenth centuries. However, some stages were identified by Maurice Lvy-Leboyer : French Revolution and Napoleonic wars (17891815), industrialisation, along with Britain (18151860), economic slowdown (18601905), renewal of the growth after 1905.

This section requires expansion.

[edit]United

States

Main article: Technological and industrial history of the United States

Slater's Mill

The United States originally used horse-powered machinery to power its earliest factories, but eventually switched to water power, with the consequence that industrialisation was essentially limited to New

England and the rest of the Northeastern United States, where fast-moving rivers were located. Horse-drawn production proved to be economically challenging and a more difficult alternative to the newer water-powered production lines. However, the raw materials (cotton) came from the Southern United States. It was not until after the Civil War in the 1860s that steam-powered manufacturing overtook water-powered manufacturing, allowing the industry to fully spread across the nation. Thomas Somers and the Cabot Brothers founded the Beverly Cotton Manufactory in 1787, the first cotton mill in America, the largest cotton mill of its era,[53] and a significant milestone in the research and development of cotton mills in the future. This cotton mill was designed to utilise horse-powered production, however the operators quickly learned that the economic stability of their horse-drawn platform was unstable, and had fiscal issues for years after it was built. Despite the losses, the Manufactory served as a playground of innovation, both in turning a large amount of cotton, but also developing the water-powered milling structure used in Slater's Mill.[54] Samuel Slater (17681835) is the founder of the Slater Mill. As a boy apprentice in Derbyshire, England, he learned of the new techniques in the textile industry and defied laws against the emigration of skilled workers by leaving for New York in 1789, hoping to make money with his knowledge. Slater founded Slater's Mill at Pawtucket, Rhode Island, in 1793. He went on to own thirteen textile mills.[55] Daniel Day established a wool carding mill in the Blackstone Valley at Uxbridge, Massachusetts in 1810, the third woollen mill established in the U.S. (The first was in Hartford, Connecticut, and the second at Watertown, Massachusetts.) The John H. Chafee Blackstone River Valley National Heritage Corridor retraces the history of "America's Hardest-Working River', the Blackstone. TheBlackstone River and its tributaries, which cover more than 45 miles (72 km) from Worcester to Providence, was the birthplace of America's Industrial Revolution. At its peak over 1100 mills operated in this valley, including Slater's mill, and with it the earliest beginnings of America's Industrial and Technological Development. While on a trip to England in 1810, Newburyport merchant Francis Cabot Lowell was allowed to tour the British textile factories, but not take notes. Realising the War of 1812 had ruined his import business but that a market for domestic finished cloth was emerging in America, he memorised the design of textile machines, and on his return to the United States, he set up the Boston Manufacturing Company. Lowell and his partners built America's second cotton-to-cloth textile mill at Waltham, Massachusetts, second to the Beverly Cotton Manufactory After his death in 1817, his associates built America's first planned factory town, which they named after him. This enterprise was capitalised in a public stock offering, one of the first uses of it in the United States. Lowell, Massachusetts, utilising 5.6 miles (9.0 km) of canals and ten thousand horsepower delivered by the Merrimack River, is considered by some to be a major contributor to the success of the American Industrial Revolution. The short-lived utopia-like Lowell System was formed, as a direct response to the poor working conditions in Britain. However, by 1850, especially following the Irish Potato Famine, the system had been replaced by poor immigrant labour.

The industrialisation of the watch industry started 1854 also in Waltham, Massachusetts, at the Waltham Watch Company, with the development of machine tools, tools, gauges and assembling methods adapted to the micro precision required for watches. See also: History of Lowell, Massachusetts

[edit]Japan
Main articles: Meiji Restoration and Economic history of Japan In 1871 a group of Japanese politicians known as the Iwakura Mission toured Europe and the USA to learn western ways. The result was a deliberate state led industrialisation policy to prevent Japan from falling behind. The Bank of Japan, founded in 1877, used taxes to fund model steel and textile factories. Education was expanded and Japanese students were sent to study in the west.

[edit]Second

Industrial Revolution and later evolution

Main article: Second Industrial Revolution

Bessemer converter

The insatiable demand of the railways for more durable rail led to the development of the means to cheaply mass-produce steel. Steel is often cited as the first of several new areas for industrial mass-production, which are said to characterise a "Second Industrial Revolution", beginning around 1850, although a method for mass manufacture of steel was not invented until the 1860s, when Sir Henry Bessemer invented a new furnace which could make wrought iron and steel in large quantities. However, it only became widely available in the 1870s. This second Industrial Revolution gradually grew to include the chemical industries, petroleum refining and distribution, electrical industries, and, in the twentieth century, the automotive industries, and was marked by a transition of technological leadership from Britain to the United States and Germany.

The introduction of hydroelectric power generation in the Alps enabled the rapid industrialisation of coaldeprived northern Italy, beginning in the 1890s. The increasing availability of economical petroleum products also reduced the importance of coal and further widened the potential for industrialisation. Marshall McLuhan analysed the social and cultural impact of the electric age. While the previous age of mechanisation had spread the idea of splitting every process into a sequence, this was ended by the introduction of the instant speed of electricity that brought simultaneity. This imposed the cultural shift from the approach of focusing on "specialised segments of attention" (adopting one particular perspective), to the idea of "instant sensory awareness of the whole", an attention to the "total field", a "sense of the whole pattern". It made evident and prevalent the sense of "form and function as a unity", an "integral idea of structure and configuration". This had major impact in the disciplines of painting (with cubism), physics, poetry, communication and educational theory.[56] By the 1890s, industrialisation in these areas had created the first giant industrial corporations with burgeoning global interests, as companies like U.S. Steel, General Electric, and Bayer AG joined the railroad companies on the world's stock markets.

[edit]Intellectual [edit]Capitalism

paradigms and criticism

Main article: Capitalism The advent of the Age of Enlightenment provided an intellectual framework which welcomed the practical application of the growing body of scientific knowledgea factor evidenced in the systematic development of the steam engine, guided by scientific analysis, and the development of the political and sociological analyses, culminating in Adam Smith's The Wealth of Nations. One of the main arguments for capitalism, presented for example in the book The Improving State of the World, is that industrialisation increases wealth for all, as evidenced by raised life expectancy, reduced working hours, and no work for children and the elderly.

[edit]Marxism
Main article: Marxism Marxism began essentially as a reaction to the Industrial Revolution.[57] According to Karl Marx, industrialisation polarised society into the bourgeoisie (those who own the means of production, the factories and the land) and the much larger proletariat (the working class who actually perform the labour necessary to extract something valuable from the means of production). He saw the industrialisation process as the logical dialectical progression of feudal economic modes, necessary for the full development of capitalism, which he saw as in itself a necessary precursor to the development of socialism and eventually communism.

[edit]Romanticism

Main article: Romanticism During the Industrial Revolution an intellectual and artistic hostility towards the new industrialisation developed. This was known as the Romantic movement. Its major exponents in English included the artist and poet William Blake and poets William Wordsworth, Samuel Taylor Coleridge, John Keats, Lord Byron and Percy Bysshe Shelley. The movement stressed the importance of "nature" in art and language, in contrast to "monstrous" machines and factories; the "Dark satanic mills" of Blake's poem "And did those feet in ancient time". Mary Shelley's novel Frankenstein reflected concerns that scientific progress might be two-edged.

[edit]Causes

Regional GDP per capita changed very little for most of human history before the Industrial Revolution. (The empty areas mean no data, not very low levels. There is data for the years 1, 1000, 1500, 1600, 1700, 1820, 1900, and 2003)

The causes of the Industrial Revolution were complicated and remain a topic for debate, with some historians believing the Revolution was an outgrowth of social and institutional changes brought by the end of feudalism in Britain after the English Civil War in the 17th century. As national border controls became more effective, the spread of disease was lessened, thereby preventing the epidemics common in previous times.
[58]

The percentage of children who lived past infancy rose significantly, leading to a larger workforce.

The Enclosure movement and theBritish Agricultural Revolution made food production more efficient and less labour-intensive, forcing the surplus population who could no longer find employment in agriculture into cottage industry, for example weaving, and in the longer term into the cities and the newly developedfactories.
[59]

The colonial expansion of the 17th century with the accompanying development of international trade,

creation of financial marketsand accumulation of capital are also cited as factors, as is the scientific revolution of the 17th century.[60]

Until the 1980s, it was universally believed by academic historians that technological innovation was the heart of the Industrial Revolution and the key enabling technology was the invention and improvement of the steam engine.[61] However, recent research into the Marketing Era has challenged the traditional, supply-oriented interpretation of the Industrial Revolution.[62] Lewis Mumford has proposed that the Industrial Revolution had its origins in the Early Middle Ages, much earlier than most estimates.[63] He explains that the model for standardised mass production was the printing press and that "the archetypal model for the industrial era was the clock". He also cites the monastic emphasis on order and time-keeping, as well as the fact that medieval cities had at their centre a church with bell ringing at regular intervals as being necessary precursors to a greater synchronisation necessary for later, more physical, manifestations such as the steam engine. The presence of a large domestic market should also be considered an important driver of the Industrial Revolution, particularly explaining why it occurred in Britain. In other nations, such as France, markets were split up by local regions, which often imposed tolls and tariffs on goods traded amongst them.[64] Internal tariffs were abolished byHenry VIII of England, they survived in Russia till 1753, 1789 in France and 1839 in Spain. Governments' grant of limited monopolies to inventors under a developing patent system (the Statute of Monopolies 1623) is considered an influential factor. The effects of patents, both good and ill, on the development of industrialisation are clearly illustrated in the history of the steam engine, the key enabling technology. In return for publicly revealing the workings of an invention the patent system rewarded inventors such as James Watt by allowing them to monopolise the production of the first steam engines, thereby rewarding inventors and increasing the pace of technological development. However monopolies bring with them their own inefficiencies which may counterbalance, or even overbalance, the beneficial effects of publicising ingenuity and rewarding inventors.[65] Watt's monopoly may have prevented other inventors, such as Richard Trevithick, William Murdoch or Jonathan Hornblower, from introducing improved steam engines, thereby retarding the industrial revolution by about 16 years.[66]

[edit]Causes

for occurrence in Europe

A 1623 Dutch East India Company bond. European 17th century colonial expansion, international trade, and creation of financial markets produced a new legal and financial environment, one which supported and enabled 18th century industrial growth.

One question of active interest to historians is why the industrial revolution occurred in Europe and not in other parts of the world in the 18th century, particularly China, India, and the Middle East, or at other times like in Classical Antiquity[67] or the Middle Ages.[68] Numerous factors have been suggested, including education, technological changes[69] (see Scientific Revolution in Europe), "modern" government, "modern" work attitudes, ecology, and culture.[70]The Age of Enlightenment not only meant a larger educated population but also more modern views on work. However, most historians contest the assertion that Europe and China were roughly equal because modern estimates of per capita income on Western Europe in the late 18th century are of roughly 1,500 dollars in purchasing power parity (and Britain had a per capita income of nearly 2,000 dollars[71]) whereas China, by comparison, had only 450 dollars. Some historians such as David Landes[72] and Max Weber credit the different belief systems in China and Europe with dictating where the revolution occurred. The religion and beliefs of Europe were largely products of Judaeo-Christianity, and Greek thought. Conversely, Chinese society was founded on men like Confucius, Mencius, Han Feizi (Legalism), Lao Tzu (Taoism), and Buddha (Buddhism). Whereas the Europeans believed that the universe was governed by rational and eternal laws, the East believed that the universe was in constant flux and, for Buddhists and Taoists, not capable of being rationally understood.[citation
needed]

Other factors include the considerable distance of China's coal deposits, though large, from its cities as

well as the then unnavigable yellow river that connects these deposits to the sea.[73] Regarding India, the Marxist historian Rajani Palme Dutt said: "The capital to finance the Industrial Revolution in India instead went into financing the Industrial Revolution in England."[74] In contrast to China, India was split up into many competing kingdoms, with the three major ones being the Marathas, Sikhs and the Mughals. In addition, the economy was highly dependent on two sectorsagriculture of subsistence and cotton, and there appears to have been little technical innovation. It is believed that the vast amounts of wealth were largely stored away in palace treasuries by totalitarian monarchs prior to the British take over. Absolutist dynasties in China, India, and the Middle East failed to encourage manufacturing and exports, and expressed little interest in the well-being of their subjects.[75]

[edit]Causes

for occurrence in Britain

As the Industrial Revolution developed British manufactured output surged ahead of other economies

The debate about the start of the Industrial Revolution also concerns the massive lead that Great Britain had over other countries. Some have stressed the importance of natural or financial resources that Britain received from its many overseas colonies or that profits from the Britishslave trade between Africa and the Caribbean helped fuel industrial investment. It has been pointed out, however, that slave trade and West Indian plantations provided only 5% of the British national income during the years of the Industrial Revolution.
[76]

Even though slavery accounted for minimal economic profits in Britain during the Industrial Revolution,

Caribbean-based demand accounted for 12% of England's industrial output.[77] Alternatively, the greater liberalisation of trade from a large merchant base may have allowed Britain to produce and use emerging scientific and technological developments more effectively than countries with stronger monarchies, particularly China and Russia. Britain emerged from theNapoleonic Wars as the only European nation not ravaged by financial plunder and economic collapse, and possessing the only merchant fleet of any useful size (European merchant fleets having been destroyed during the war by the Royal Navy[78]). Britain's extensive exporting cottage industries also ensured markets were already available for many early forms of manufactured goods. The conflict resulted in most British warfare being conducted overseas, reducing the devastating effects of territorial conquest that affected much of Europe. This was further aided by Britain's geographical positionan island separated from the rest of mainland Europe. Another theory is that Britain was able to succeed in the Industrial Revolution due to the availability of key resources it possessed. It had a dense population for its small geographical size. Enclosure of common land and the related agricultural revolution made a supply of this labour readily available. There was also a local coincidence of natural resources in the North of England, the English Midlands,South Wales and the Scottish Lowlands. Local supplies of coal, iron, lead, copper, tin, limestone and water power, resulted in excellent conditions for the development and expansion of industry. Also, the damp, mild weather conditions of the North West of England provided ideal conditions for the spinning of cotton, providing a natural starting point for the birth of the textiles industry.

The stable political situation in Britain from around 1688, and British society's greater receptiveness to change (compared with other European countries) can also be said to be factors favouring the Industrial Revolution. In large part due to the Enclosure movement, the peasantry was destroyed as a significant source of resistance to industrialisation, and the landed upper classes developed commercial interests that made them pioneers in removing obstacles to the growth of capitalism.[79] (This point is also made in Hilaire Belloc's The Servile State.) Britain's population grew 280% 1550-1820, while the rest of Western Europe grew 50-80%. 70% of European urbanisation happened in Britain 1750-1800. By 1800, only the Netherlands was more urbanised than Britain. This was only possible because coal, coke, imported cotton, brick and slate had replaced wood, charcoal, flax, peat and thatch. The latter compete with land grown to feed people while mined materials do not. Yet more land would be freed when chemical fertilisers replaced manure and horse's work was mechanised. A workhorse needs 3 to 5 acres (1.21 to 2.02 ha) for fodder while even early steam engines produced 4 times more mechanical energy. In 1700 5/6 of coal mined worldwide was in Britain while the Netherlands had none; so despite having Europe's best transport, most urbanised, well paid, literate people and lowest taxes, it failed to industrialise. In the 18th century it was the only European country whose cities and population shrank. Without coal, Britain would have run out of suitable river sites for mills by the 1830s.[80]

[edit]Protestant work ethic

Main article: Protestant work ethic Another theory is that the British advance was due to the presence of an entrepreneurial class which believed in progress, technology and hard work.[81] The existence of this class is often linked to the Protestant work ethic (see Max Weber) and the particular status of the Baptists and the dissenting Protestant sects, such as the Quakers and Presbyterians that had flourished with the English Civil War. Reinforcement of confidence in the rule of law, which followed establishment of the prototype of constitutional monarchy in Britain in the Glorious Revolution of 1688, and the emergence of a stable financial market there based on the management of the national debt by the Bank of England, contributed to the capacity for, and interest in, private financial investment in industrial ventures. Dissenters found themselves barred or discouraged from almost all public offices, as well as education at England's only two universities at the time (although dissenters were still free to study at Scotland's four universities). When the restoration of the monarchy took place and membership in the official Anglican Church became mandatory due to the Test Act, they thereupon became active in banking, manufacturing and education. The Unitarians, in particular, were very involved in education, by running Dissenting Academies, where, in contrast to the universities of Oxford and Cambridge and schools such as Eton and Harrow, much attention was given to mathematics and the sciencesareas of scholarship vital to the development of manufacturing technologies.

Historians sometimes consider this social factor to be extremely important, along with the nature of the national economies involved. While members of these sects were excluded from certain circles of the government, they were considered fellow Protestants, to a limited extent, by many in the middle class, such as traditional financiers or other businessmen. Given this relative tolerance and the supply of capital, the natural outlet for the more enterprising members of these sects would be to seek new opportunities in the technologies created in the wake of the scientific revolution of the 17th century. This theory doesn't explain how the second country to be industrialised-Belgium, was Catholic.

[edit]Name

history

The earliest use of the term "Industrial Revolution" yet located seems to be a letter of 6 July 1799 by French envoy Louis-Guillaume Otto, announcing that the process had started in his country.[82] In his 1976 book Keywords: A Vocabulary of Culture and Society, Raymond Williams states in the entry for "Industry": "The idea of a new social order based on major industrial change was clear inSouthey and Owen, between 1811 and 1818, and was implicit as early as Blake in the early 1790s and Wordsworth at the turn of the century." The term Industrial Revolution applied to technological change was becoming more common by the late 1830s, as in Louis-Auguste Blanqui description in 1837 of la rvolution industrielle. Friedrich Engels in The Condition of the Working Class in England in 1844 spoke of "an industrial revolution, a revolution which at the same time changed the whole of civil society". Credit for popularising the term may be given to Arnold Toynbee, whose lectures given in 1881 gave a detailed account of it.[83]

List of social entrepreneurs

From Wikipedia, the free encyclopedia

A social entrepreneur is an entrepreneur who works to increase social capital, often by founding humanitarian organizations.

[edit]Historical

examples of leading social entrepreneurs

Susan B. Anthony (U.S.) - Fought for women's rights in the United States, including the right to control property, and helped spearhead adoption of the 19th amendment.

Vinoba Bhave (India) - Founder and leader of the Land Gift Movement, he caused the redistribution of more than 7,000,000 acres (28,000 km) of land to aid India's untouchables and landless.Mahatma Gandhi described him as his mentor.

David Brower (U.S.) - Environmentalist and conservationist, he served as the Sierra Club's first executive director and built it into a worldwide network for environmental issues. He also foundedFriends of the Earth, the League of Conservation Voters and The Earth Island Institute.

Akhtar Hameed Khan (Pakistan) - Founder of grassroots movement for rural communities Comilla Model, and low-cost sanitation programmes (Orangi Pilot Project) for squatter settlements.

Maria Montessori (Italy) - Developed the Montessori approach to early childhood education.

John Muir (U.S.) - Naturalist and conservationist, he established the National Park System and helped found The Sierra Club.

Florence Nightingale (UK) - Founder of modern nursing, she established the first school for nurses and fought to improve hospital conditions.

Frederick Law Olmsted (U.S.) - Creator of major urban parks, including Rock Creek Park in Washington DC, Central Park in NYC, and Mount Royal Park in Montreal, he is generally considered to have developed the profession of landscape architecture in America.

Gifford Pinchot (U.S.) - Champion of the forest as a multiple use environment, he helped found the Yale School of Forestry and created the U.S. Forest Service, serving as its first chief.

Friedrich Wilhelm Raiffeisen (Germany) - Pioneer of the rural bond of association as a substitute for collateral in microfinance, and a principal founder of the credit union and cooperative bank sectors that now form a major segment of the European banking system.

Margaret Sanger (U.S.) - Founder of the Planned Parenthood Federation of America, she led the movement for family planning efforts around the world.

John Woolman (U.S.) - Led U.S. Quakers to voluntarily emancipate all their slaves between 1758 and 1800, his work also influenced the British Society of Friends, a major force behind the British decision to ban slaveholding. Quakers, of course, became a major force in the U.S. abolitionist movement as well as a key part of the infrastructure of the Underground Railroad.

[edit]Present

day social entrepreneurs

Ibrahim Abouleish (Egypt) - Founder of SEKEM, a biodynamic agricltural corporation, alternative medicine, and educational center located outside of Cairo.

Ela Bhatt (India) - Founder of the Self-Employed Women's Association (SEWA) and the SEWA Cooperative Bank in Gujarat.

Bill Drayton (U.S.) - Founded Ashoka, Youth Venture, and Get America Working!

Marian Wright Edelman (U.S.) - Founder and president of the Children's Defense Fund (CDF) and advocate for disadvantaged Americans and children.

Dr. Abraham M. George (India) - Founder of The George Foundation (TGF). Pamela Hartigan (U.S.) - Founding partner of Volans Ventures and founding managing director of the Schwab Foundation

Alan Khazei (U.S.) - Co-Founder of City Year, a leading national service program.

Dr. Verghese Kurien (India) - Founder of the AMUL Dairy Project. Mack McCarter (U.S.) - Founder of Community Renewal International, which focuses on connecting at-risk communities to resources, healthcare, and education.

Jamie Oliver (U.K.) - TV chef who campaigned to improve children's diet at school. He also trained disadvantaged young people to become chefs. He created a restaurant - a social enterprise - calledFifteen which employed these newly trained youngsters. Fifteen is now a global chain of four restaurants.

Bunker Roy (India) - Founder of Barefoot College, which promotes rural development through innovative education programs.

Sri Sri Ravi Shankar (India) - Founded Art of Living Foundation and International Association for Human Values.

Muhammad Yunus (Bangladesh) - Founder of microcredit and the Grameen Bank. He was awarded the 2006 Nobel Peace Prize.

Dr Willie Smits (Borneo, Indonesia) - Founder of the Borneo Orangutan Survival Foundation, Founder and Chairperson of the Masarang Foundation

Categories: Lists of people by occupation | Social economy

New features Log in / create account

Article Discussion Read Edit View history

Top of Form

Bottom of Form

Main page Contents Featured content Current events Random article

Interaction About Wikipedia Community portal Recent changes Contact Wikipedia Donate to Wikipedia Help Toolbox Print/export
This page was last modified on 22 August 2010 at 14:32. Text is available under the Creative Commons Attribution-ShareAlike License; additional terms may apply. See Terms of Use for details. Wikipedia is a registered trademark of the Wikimedia Foundation, Inc., a non-profit organization.

Contact us Privacy policy About Wikipedia Disclaimers

[edit]See

also

Business and economics portal

General

Other

Capitalism in the nineteenth century Deindustrialisation Dual revolution Dialectics of progress Ecological impact of colonial Americans before 1877 Economic history of the United Kingdom Electrification Information revolution Pre-industrial society Protestant work ethic Papermaking Paper Scientific Revolution

[edit]References [edit]Bibliography

Industrial growth in the Muslim World Industrial Revolution in China Science and invention in Birmingham Technological and industrial history of the United States

An Introduction to the Industrial History of England, 1920, retrieved 2009-0726

Ashton, Thomas S. (1948), online edition The Industrial Revolution (17601830), Oxford University Press, retrieved 2009-07-26

Berlanstein, Lenard R., ed. (1992), online edition The Industrial Revolution and work in nineteenth-century Europe, London and New York: Routledge, retrieved 2009-07-26

Clapham, J. H. (1926), online edition An Economic History of Modern Britain: The Early Railway Age, 1820-1850, Cambridge University Press, retrieved 2009-07-26

Clark, Gregory (2007), A Farewell to Alms: A Brief Economic History of the World, Princeton University Press

Daunton, M. J. (1995), online edition Progress and Poverty: An Economic and Social History of Britain, 1700-1850, Oxford University Press, retrieved 200907-26

Dunham, Arthur Louis (1955), online edition The Industrial Revolution in France, 1815-1848, New York: Exposition Press, retrieved 2009-07-26

Gatrell, PETER (2004). "Farm to factory: a reinterpretation of the Soviet industrial revolution". The Economic History Review 57: 794. doi:10.1111/j.1468-0289.2004.00295_21.x.

Jacob, Margaret C. (1997), Scientific Culture and the Making of the Industrial West, Oxford, UK: Oxford University Press

Kisch, Herbert (1989), online edition From Domestic Manufacture to Industrial Revolution The Case of the Rhineland Textile Districts, Oxford University Press, retrieved 2009-07-26

Lucas, Robert E., Jr. (2002), Lectures on Economic Growth, Cambridge: Harvard University Press

Maddison, Angus (2003), The World Economy: Historical Statistics, Paris: Development Centre, OECD

Mantoux, Paul (First English translation 1928, revised 1961), online edition The Industrial Revolution in the Eighteenth Century, retrieved 2009-0726

McCloskey, Deirdre (2004). "Review of The Cambridge Economic History of Britain (edited by Roderick Floud and Paul Johnson)". Times Higher Education Supplement 15 (January).

McLaughlin Green, Constance (1939), online edition Holyoke, Massachusetts: A Case History of the Industrial Revolution in America, New Haven, CT: Yale University Press, retrieved 2009-07-26

Mokyr, Joel (1999), online edition The British Industrial Revolution: An Economic Perspective, retrieved 2009-07-26

More, Charles (2000), online edition Understanding the Industrial Revolution, London: Routledge, retrieved 2009-04-17

Pollard, Sidney (1981), online edition Peaceful Conquest: The Industrialization of Europe, 1760-1970, Oxford University Press, retrieved 2009-07-26

Roe, Joseph Wickham (1916), English and American Tool Builders, New Haven, Connecticut, USA: Yale University Press, LCCN 16-011753. Reprinted by McGraw-Hill, New York and London, 1926 (LCCN 27-024075); and by Lindsay Publications, Inc., Bradley, IL, USA (ISBN 978-0-917914-73-7).

Smelser, Neil J. (1959), online edition Social Change in the Industrial Revolution: An Application of Theory to the British Cotton Industry, University of Chicago Press, retrieved 2009-07-26

Stearns, Peter N. (1998), online version The Industrial Revolution in World History, Westview Press, retrieved 2009-07-26

Smil, Vaclav (1994), online edition Energy in World History, Westview Press, retrieved 2009-07-26

Snooks, G.D. (2000), Was the Industrial Revolution Necessary?, London & New York: Routledge

Szostak, Rick (1991), online edition The Role of Transportation in the Industrial Revolution: A Comparison of England and France, Montral: McGillQueen's University Press, retrieved 2009-07-26

Toynbee, Arnold (1884), Lectures on the Industrial Revolution of the Eighteenth Century in England (paperback edition 2004 ed.), Whitefish, Montana: Kessinger Publishing, retrieved 2009-07-26

Uglow, Jenny (2002), The Lunar Men: The Friends who made the Future 1730-1810, London: Faber and Faber

Usher, Abbott Payson (1920), online edition An Introduction to the Industrial History of England, University of Michigan, pp. 529, retrieved 2009-07-26

Chambliss, William J. (editor), Problems of Industrial Society, Reading, Massachusetts : Addison-Wesley Publishing Co, December 1973. ISBN 9780201009583

[edit]Notes

1. ^ Watt steam engine image: located in the lobby of into the Superior
Technical School of Industrial Engineers of a the UPM (Madrid)

2. ^ Maddison, Angus (2003). The World Economy: Historical Statistics. Paris:

Development Centre, OECD. pp. 25662, Tables 8a and 8c..

3. ^ Lucas, Robert E., Jr. (2002). Lectures on Economic Growth. Cambridge:

Harvard University Press. pp. 10910. ISBN 9780674016019.

4. ^ Beck B., Roger (1999). World History: Patterns of Interaction. Evanston,

Illinois: McDougal Littell.

5. ^ Business and Economics. Leading Issues in Economic Development,

Oxford University Press US. ISBN 0-19-511589-9 Read it

6. ^ Russell Brown, Lester. Eco-Economy, James & James / Earthscan. ISBN

1-85383-904-3 Read it

7. ^ Eric Hobsbawm, The Age of Revolution: Europe 17891848, Weidenfeld &

Nicolson Ltd. ISBN 0-349-10484-0

8. ^ Joseph E Inikori. Africans and the Industrial Revolution in England,

Cambridge University Press. ISBN 0-521-01079-9 Read it

9. ^ Berg, Maxine; Hudson, Pat (1992). "Rehabilitating the Industrial

Revolution". The Economic History Review (The Economic History Review, Vol. 45, No. 1) 45 (1): 24. doi:10.2307/2598327.

10. ^ Rehabilitating the Industrial Revolution by Julie Lorenzen, Central Michigan

University. Retrieved November 2006.

11. ^ Robert Lucas, Jr. (2003). "The Industrial Revolution". Federal Reserve
Bank of Minneapolis. Retrieved 2007-11-14. "it is fairly clear that up to 1800 or maybe 1750, no society had experienced sustained growth in per capita income. (Eighteenth century population growth also averaged one-third of 1 percent, the same as production growth.) That is, up to about two centuries ago, per capita incomes in all societies were stagnated at around $400 to $800 per year."

12. ^ Lucas, Robert (2003). "The Industrial Revolution Past and Future".
"[consider] annual growth rates of 2.4 percent for the first 60 years of the 20th century, of 1 percent for the entire 19th century, of one-third of 1 percent for the 18th century"

13. ^ McCloskey, Deidre (2004). "Review of The Cambridge Economic History of

Modern Britain (edited by Roderick Floud and Paul Johnson), Times Higher Education Supplement, 15 January 2004".

14. ^ The Industrial Revolution Innovations 15. ^ Encyclopdia Britannica (2008) "Building construction: the reintroduction of
modern concrete"

16. ^ The Lunar Society at Moreabout, the website of the Birmingham Jewellery
Quarter guide, Bob Miles.

17. ^ Hulse, David H: The Early Development of the Steam Engine; TEE
Publishing, Leamington Spa, U.K., 1999 ISBN 1 85761 107 1

18. ^ L.T.C. Rolt and J. S. Allen, The Steam engine of Thomas

Newcomen (Landmark, Ashbourne, 1997), 44.

19. ^ Rolt and Allen, 145 20. ^ Clow, Archibald; Clow, Nan L. (June 1952), Chemical Revolution, Ayer Co,
pp. 6590, ISBN 0-8369-1909-2

21. ^ Properties of Concrete Published lecture notes from University of Memphis

Department of Civil Engineering. Retrieved 2007-10-17.

22. ^ R.M. Hartwell, The Industrial Revolution and Economic Growth, Methuen
and Co., 1971, page 339-341 ISBN 0-416-19500-8

23. ^ a b Mabel C. Buer, Health, Wealth and Population in the Early Days of the
Industrial Revolution, London: George Routledge & Sons, 1926, page 30 ISBN 0-415-38218-1

24. ^ "Demographic Transition and Industrial Revolution: A Macroeconomic

Investigation" (PDF). 2007. Retrieved 2007-11-05. "The decrease [in mortality] beginning in the second half of the 18th century was due mainly to declining adult mortality. Sustained decline of the mortality rates for the age groups 5-10, 10-15, and 15-25 began in the mid 19th century, while that for the age group 0-5 began three decades later". Although the survival rates for

infants and children were static over this period, the birth rate & overall life expectancy increased. Thus the population grew, but the average Briton was about as old in 1850 as in 1750 (see figures 5 & 6, page 28). Population size statistics from mortality.org put the mean age at about 26.

25. ^ "Child Labor and the Division of Labor in the Early English Cotton Mills".
Douglas A. Galbi. Centre for History and Economics, King's College, Cambridge CB2 1ST.

26. ^ The Life of the Industrial Worker in Nineteenth-Century England, Laura Del
Col, West Virginia University.

27. ^ "Testimony Gathered by Ashley's Mines Commission". 2008. Retrieved

2008-03-22.

28. ^ "The Life of the Industrial Worker in Nineteenth-Century England". 2008.

Retrieved 2008-03-22.

29. ^ "Photographs of Lewis Hine: Documentation of Child Labor". The U.S.

National Archives and Records Administration.

30. ^ "The Industrial Revolution". The Web Institute for Teachers. 31. ^ General Strike 1842 From chartists.net. Retrieved 13 November 2006. 32. ^ a b Woodward, D. (1981) Wage rates and living standards in pre-industrial
England Past & Present 1981 91(1):28-46

33. ^ Crafts, N (1994). "Trends in Real Wages in Britain, 17501913". Explorations in Economic History 31: 176. doi:10.1006/exeh.1994.1007.

34. ^ Industrial Revolution and the Standard of Living From www.econlib.org,

downloaded 17 July 2006.

35. ^ R.M. Hartwell, The Rising Standard of Living in England, 1800-1850,

Economic History Review, 1963, page 398 ISBN 0-631-18071-0

36. ^ "The UK population: past, present and future" (PDF). Statistics.gov.uk 37. ^ "A portrait of Britain in 2031". The Independent. October 24, 2007. 38. ^ BBC - History - Victorian Medicine - From Fluke to Theory. Published:
2002-02-01.

39. ^ "Modernization - Population Change". Encyclopdia Britannica.

40. ^ "Human Population: Urbanization". Population Reference Bureau. 41. ^ "Human Population: Population Growth: Question and Answer". Population
Reference Bureau.

42. ^ Manchester (England, United Kingdom). Encyclopdia Britannica. 43. ^ "Diseases in industrial cities in the Industrial Revolution".
Historylearningsite.co.uk.

44. ^ "Tuberculosis in Europe and North America, 18001922". The Harvard

University Library, Open Collections Program: Contagion.

45. ^ Chris Evans, Gran Rydn, The Industrial Revolution in Iron; The impact of
British Coal Technology in Ninenteenth-Century Europe Published by Ashgate Publishing, Ltd., Farnham2005, pp. 37-38 ISBN 075463390X.

46. ^ a word from Walloon origin 47. ^ Muriel Beven and Isabelle Devos, 'Breaking stereotypes', in M.Beyen and
I.Devos (editors), 'Recent work in Belgian Historical Demography', in Revue belge d'histoire contemporaine, XXXI, 2001, 3-4, pages 347-359 [1]

48. ^ Philippe Raxhon, Le sicle des forges ou la Wallonie dans le creuset belge
(1794-1914), in B.Demoulin and JL Kupper (editors), Histoire de la Wallonie, Privat, Toulouse, 2004, pages 233-276, p. 246ISBN 2-7089-4779-6

49. ^ [European Route of Industrial Heritage http://en.erih.net/index.php?

pageId=114]

50. ^ Michel De Coster, Les enjeux des conflits linguistiques, L'Harmattan, Paris,
2007, ISBN 978-2-296-0339-8 , pages 122-123

51. ^ Muriel Beven and Isabelle Devos, Breaking stereotypes, art. cit., pages
315-316

52. ^ Jean Marczewski, Y a-t-il eu un "take-off" en France ? , 1961, dans

les Cahiers de l'ISEA

53. ^ Bagnall, William R. The Textile Industries of the United States: Including
Sketches and Notices of Cotton, Woolen, Silk, and Linen Manufacturers in the Colonial Period. Vol. I. The Riverside Press, 1893.

54. ^ "Made In Beverly-A History of Beverly Industry", by Daniel J. Hoisington. A

publication of the Beverly Historic District Commission. 1989.

55. ^ Encyclopdia Britannica (1998): Samuel Slater 56. ^ Marshall McLuhan (1964) Understanding Media, p.13 [2] 57. ^ Karl Marx: Communist as Religious EschatologistPDF (3.68 MB) 58. ^ "BBC Plague in Tudor and Stuart Britain". bbc.co.uk. Retrieved 2008-1103.

59. ^ The Origins of the Industrial Revolution in England 60. ^ "Scientific Revolution". Microsoft Encarta Online Encyclopedia
2009. Archived 2009-10-31.

61. ^ Hudson, Pat. The Industrial Revolution, Oxford University Press US. ISBN
0-7131-6531-6

62. ^ Fullerton, Ronald A. (January 1988). "How Modern Is Modern Marketing?

Marketing's Evolution and the Myth of the "Production Era"". The Journal of Marketing (New York City, NY: American Marketing Association) 52 (1): 108 125. doi:10.2307/1251689.

63. ^ "Technics & Civilization". Lewis Mumford. Retrieved 2009-01-08. 64. ^ Deane, Phyllis. The First Industrial Revolution, Cambridge University
Press. ISBN 0-521-29609-9 Read it

65. ^ Eric Schiff, Industrialisation without national patents: the Netherlands,

1869-1912; Switzerland, 1850-1907, Princeton University Press, 1971.

66. ^ Michele Boldrin and David K. Levine, Against Intellectual

Monopoly, Chapter 1, final online version January 2, 2008PDF (55 KB), page 15. Cambridge University Press, 2008. ISBN 9780521879286

67. ^ Why No Industrial Revolution in Ancient Greece? J. Bradford DeLong,

Professor of Economics, University of California at Berkeley, 20 September 2002. Retrieved January 2007.

68. ^ The Origins of the Industrial Revolution in England | The History Guide,
Steven Kreis, 11 October 2006 Accessed January 2007

69. ^ Jackson J. Spielvogel (2009). "Western Civilization: Since 1500". p.607. 70. ^ The Industrial Revolution Causes

71. ^ Cobb-Douglas in pre-modern Europe1 Simulating early modern

growthPDF (254 KB) Jan Luiten van Zanden, International Institute of Social History/University of Utrecht. May 2005. Retrieved January 2007.

72. ^ Landes, David (1999). The Wealth and Poverty of Nations. London:
Abacus. pp. 389. ISBN 0349111669.

73. ^ How Earth Made Us: Fire by Professor Iain Stewart 74. ^ South Asian History -Pages from the history of the Indian subcontinent:
British rule and the legacy of colonisation. Rajni-Palme Dutt India Today (Indian Edition published 1947). Retrieved January 2007.

75. ^ Monarchies 10002000. By W. M. SPELLMAN. London: Reaktion Books,

2001.. Journal of World History.

76. ^ Was slavery the engine of economic growth? Digital History 77. ^ The Industrial Revolution by Pat Hudson, pg. 198 78. ^ The Royal Navy itself may have contributed to Britain's industrial growth.
Among the first complex industrial manufacturing processes to arise in Britain were those that produced material for British warships. For instance, the average warship of the period used roughly 1000 pulley fittings. With a fleet as large as the Royal Navy, and with these fittings needing to be replaced ever 4 to 5 years, this created a great demand which encouraged industrial expansion. The industrial manufacture of rope can also be see as a similar factor.

79. ^ Barrington Moore, Jr., Social Origins of Dictatorship and Democracy: Lord
and Peasant in the Making of the Modern World, pp. 29-30, Boston, Beacon Press, 1966.

80. ^ E A Wrigley, Continuity chance and change. 81. ^ Foster, Charles (2004). Capital and Innovation: How Britain Became the
First Industrial Nation. Northwich: Arley Hall Press. ISBN 0951838245. Argues that capital accumulation and wealth concentration in an entrepreneurial culture following the commercial revolution made the industrial revolution possible, for example.

82. ^ Crouzet, Franois (1996). "France". in Teich, Mikul; Porter, Roy. The
industrial revolution in national context: Europe and the USA. Cambridge University Press. p. 45. ISBN 9780521409407.

83. ^ Hudson, Pat (1992). The Industrial Revolution. London: Edward Arnold.
p. 11. ISBN 9780713165319.

[edit]External

links

Wikimedia Commons has media related to: Industrial revolution

Industrial Revolution at the Open Directory Project Internet Modern History Sourcebook: Industrial Revolution "The Day the World Took Off" Six part video series from the University of Cambridge tracing the question "Why did the Industrial Revolution begin when and where it did."

BBC History Home Page: Industrial Revolution National Museum of Science and Industry website: machines and personalities

Industrial Revolution and the Standard of Living by Clark Nardinelli the debate over whether standards of living rose or fell.

Factory Workers in the Industrial Revolution Revolutionary Players website The Industrial Revolution --Articles, Video, Pictures, and Facts

vde

[hide]

The Industrial Revolution

Coal, Coal mining, Coke, Cotton, Industry, Invention, Iron, Machinery, Manufacturing, Metallurgy, Sociology, Steam power, Steel, Technology,

The mes Peop le/ grou ps Place s

Richard Arkwright, Thomas Boulsover, Matthew Boulton, James Brindley, Isambard Kingdom Brunel, Edmund Cartwright, Henry Cort, Thomas by III, Francis Egerton, 3rd Duke of Bridgewater, William Fairbairn, James Hargreaves, Thomas Highs, Eaton Hodgkinson, Benjamin Huntsman, frame), John Kay (flying shuttle), John Kay (spinning frame), Francis Cabot Lowell, Lunar Society, Thomas Newcomen, Robert Owen, Lewis Pa obert Stephenson, Thomas Telford, Richard Trevithick, James Watt, John Wilkinson, John Wyatt

Abbeydale Industrial Hamlet, Bridgewater Canal, Broseley, Coalbrookdale, Cromford, Derwent Valley Mills, Ironbridge, New Lanark, Portsmou

Inve ntion / techn ology Socia l impa ct Refe rence

Blast furnace, Canal, Cotton mill, Crucible steel, Dressing frame, Factory, Flying shuttle, Newcomen steam engine, Power loom, Railway, Reverb Rocket, Water frame, Watt steam engine

Bourgeoisie, Child labour, History of the Co-operative Movement, Cottage industry, Factory Acts, Industrial unrest, Luddite, Proletariat, Rochdal

History of technology, History of the British canal system, Industrial archaeology, List of United Kingdom-related topics, Timeline of clothing an am power

Categories: History of technology | Industrial Revolution | Sociocultural evolution | Theories of history

New features Log in / create account

Article Discussion Read Edit View history

Top of Form

Bottom of Form

Main page Contents Featured content Current events Random article

Interaction About Wikipedia Community portal Recent changes Contact Wikipedia Donate to Wikipedia Help Toolbox Print/export Languages Afrikaans Alemannisch

Aragons Azrbaycanca Bn-lm-g

() Bosanski Catal esky Cymraeg Dansk Deutsch Eesti Espaol Esperanto Estremeu Euskara

Fiji Hindi Franais Frysk Gidhlig Galego

Hrvatski Bahasa Indonesia slenska Italiano

Basa Jawa

Kiswahili Kurd - Latina Latvieu Lietuvi Magyar

Bahasa Melayu Mirands

Nederlands

Norsk (bokml) Norsk (nynorsk)

Occitan

Plattdtsch Polski Portugus Qaraqalpaqsha Romn Sicilianu Simple English Slovenina Slovenina / Srpski Srpskohrvatski / Suomi Svenska Tagalog

Trke

Ting Vit Vro Winaray

emaitka
This page was last modified on 3 September 2010 at 19:51. Text is available under the Creative Commons Attribution-ShareAlike License; additional terms may apply. See Terms of Use for details. Wikipedia is a registered trademark of the Wikimedia Foundation, Inc., a non-profit organization.

Contact us Privacy policy About Wikipedia Disclaimers