The 1870 Inflection Point in Transport and Trade: An In-Take from "Slouching Towards Utopia": An Economic History of the Long 20th Century
The metallurgy to cheaply make the rails and the engines of the railroad had made transport over land wherever the rails ran as cheap as travel up navigable watercourses or across the oceans had every been, and made it faster.
The mid-nineteenth century Massachusetts transcendentalist author and activist Henry David Thoreau’s response to the railroad was: “get off my lawn!”:
To make a railroad round the world.... Men have an indistinct notion that if they keep up this activity of joint stocks and spades long enough all will at length ride somewhere in next to no time and for nothing, but though a crowd rushes to the depot and the conductor shouts “All aboard!” when the smoke is blown away and the vapor condensed, it will be perceived that a few are riding, but the rest are run over—-and it will be called, and will be, “a melancholy accident”...
My ancestors had a very different view. The old rule-of-thumb before the railroad was that you simply could not transport agricultural goods more than 100 miles by land: by that time what the horses or oxen would have eaten was as much as they could pull. Either you find a navigable watercourse—and it had better be much closer than 100 miles—or you were stuck in bare self-sufficiency, unable to buy anything made outside your local township that could not be purchased with the (low-value) spinning and weaving labor of your womenfolk. For Thoreau the fact that it took him a day to walk or ride into Boston was a benefit—part of living deliberately. But that one would seek to live deliberately above all else is the point of view of a rich guy, or at least of a guy without a family to care for.
The railroad made a big difference for all those who did not live near navigable waterways. But the true revolution in transportation—the one that mattered for nearly everyone—came not in the 1830s with the railroad, but rather later, with the iron-hulled ocean-going coal-fired steamship.
1870 saw the Harland and Wolff shipyard of Belfast in northern Ireland launch the iron-hulled (rather than wooden-hulled) steam-powered (rather than wind-powered, but it did still have masts and sails) screw-propellered (rather than paddle-wheeled) passenger steamship R.M.S. Oceanic. 9 days from Liverpool to New York—a journey that in 1800 would have taken more like a month. The Oceanic’s crew of 150 supported 1,000 third-class passengers at a cost of £3—15 dollars—for a third-class passenger—the same share of average earnings as £2,100 or 3,300 dollars today, almost a business-class transatlantic airfare, the rough equivalent of a month and a half’s wages for an unskilled worker—and 150 first class passengers at £15 a head: the same share of average income then that 17,000 dollars would be today. Third class on the Oceanic cost half as much as passage a generation earlier during the Irish Potato Famine, and roughly a fourth as much as in 1800. After 1870 sending a member of a family across the ocean to work became a possibility open to all save the very poorest of European households.
The falling cost of transporting people marched alongside a falling cost of transporting goods: flour that cost 1.5 cents per pound more in London than in New York in 1840 cost only 0.5 cents per pound more after 1870 —a fall in the price of carrying the raw materials for a loaf of bread across the Atlantic from 30 minutes’ worth of unskilled labor time to ten minutes’ worth. After 1870 every commodity that was neither exceptionally fragile nor spoilable could be carried from port to port across oceans for less than it cost to move it within any country.
All this mattered for two reasons. First, it meant that everyplace in the world was, as long as there were docks and railroads, cheek-by-jowl to every other place. Everyone’s opportunities and constraints, not, as before, just the consumption patterns of the elite, depended on what was going on in every other piece of the world economy. This process has propelled itself forward from 1870 to our day, with an interruption between 1914-1945, to give us a world economy today where a lowly t-shirt and its materials will typically cross the Pacific Ocean twice and the Atlantic and Indian Oceans during its lifetime. That meant that the logic of comparative advantage could be deployed to its limit: wherever there was a difference across two countries in the value of textiles relative to ironmongery—or any other two non-spoilable goods—there was profit to be made and societal well-being to be enhanced by exporting the good that was relatively cheap in your country and importing the good that was relatively dear.
For this logic of comparative advantage, it did not matter where the difference in relative prices came from. A country hopeless in growing food but even more hopeless in making machine tools could make itself better off by exporting food and importing machine tools. A country that was best-in-class at making automobiles but even better, in relative terms, at making airplanes could make itself better off by exporting airplanes and importing cars. Whether one’s comparative advantage came from entrepreneurs who could innovate rapidly, a deeper community of engineering practice, a well-educated workforce, abundant natural resources, or just poverty that made your labor cheap, business could profit and society grow richer by expanding world trade. And once a comparative advantage was established it tended to stick for a long time. There was nothing about British-invented automated textile machinery that made it work better in Britain than elsewhere. Yet Britain’ cotton textile exports rose decade after decade from 1800 to 1910, peaking at 1.1 billion pounds a year in the years before World War I.
Second, if you could move goods you could also move and supply armies. Thus conquest, or at least invasion and devastation, became things that any European great power could undertake in nearly any corner of the world. And the European powers did. Before 1870 European imperialism was—with the very notable exception of the British Raj in India—largely a matter of ports and their hinterlands, plus settler expansion into the low-population (after the plagues and genocides, that is) Americas and Australasia. By 1914 only Morocco, Ethiopia, Iran, Afghanistan, Nepal, Thailand, Tibet, China, and Japan had escaped European (or, in the case of Taiwan and Korea, Japanese) conquest or “protectorate”—and Ethiopia fell to Mussolini’s Italy with its airplanes and poison gas shells in 1936.