On Breakingviews: If policymakers wish to escape the low-productivity trap, they should study the conditions that sparked the first period of sustained economic growth some three hundred years ago, writes chancellor_e
A barge on the Trent and Mersey Canal is seen in Marbury, Britain, October 26, 2022. REUTERS/Molly Darlington
The Industrial Revolution can be viewed as the world’s first successful energy transition. By the early 17th century, England was running out of domestic supplies of wood and demand for coal was growing. Canals, constructed to transport coal, massively lowered energy costs in the new manufacturing centres of Manchester and Birmingham. They also generated huge profits for their early financiers, such as Bridgewater.
All these developments were unplanned and unforeseen, as Adam Smith described in “The Wealth of Nations”, published in 1776. The great statesmen of the era, including Prime Ministers William Pitt the Younger and Lord Liverpool, understood their job was not to stand in the way of what Smith called the “invisible hand”.
The government’s main financial contribution was to provide sound money, backed by gold, and to promptly pay the interest due on its own debts. Relatively high real interest rates ensured capital was carefully invested. Saving in 18th-century England was both secure and well compensated.
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