Distributional Coalitions, the Industrial Revolution, and the Origins of Economic Growth in Britain

Abstract

From the late 1600s to the mid 1800s, Britain was able to transform from a divided kingdom with a fragmented, often stagnant economy into a powerful and stable state that simultaneously saw an expansion in the power, wealth, and stability of the central government while encouraging an economic transformation that gradually allowed both industrial technology and liberal commerce to flourish and break out of its mercantilist straitjacket. We explain how rent‐seeking elites who might normally have opposed such sweeping transformations promoted institutional changes that, in the long run, expanded the economy and encouraged innovation even at the expense of class interests. In the short run, this meant that rent‐seeking in the 18th century was not so much reduced as redirected from local monopolies to state authorities and Parliament. But in the longer run, the process of professionalization made possible greater liberalism in general, even at the expense of general rent‐seeking itself. The position of Parliament as a meta‐institution for reforming and weakening rent‐creating restrictions as needed was pivotal to this process. Ideological changes—particularly the Scottish enlightenment—transformed the terms of the debate but could only be operationalized once interests were aligned so that gainers from industrialization could compensate or overcome traditional interests.