Geography Reference
In-Depth Information
6.3.2
The Emergence of Multinational Business
Unquestionably, the British economy was the first modern industrial
system. The British industrial revolution of the mid eighteenth century was
led mainly by mechanized textile production and the associated develop-
ment of machinery and chemicals industries. By the first decades of the
nineteenth century it was based primarily on the power of steam engines
and the mechanization opportunities that steam offered which radically
transformed the British economy. By the mid nineteenth century, Britain's
economy was the workshop of the world with British output across all
sectors accounting for approximately one third of global output (Cameron
1993). The raw materials required for this productive effort originated
primarily in the colonial parts of the British Empire such as the West
Indies, North America, and many parts of Africa. This resulted in a two-
way flow of trade between Britain and its colonies, with Britain importing
raw materials and exporting finished and semi-finished goods. The initial
development of this global trading system exhibited three key interrelated
but distinct features, without which the growth of this system would have
been impossible: rapid technological change, the development of sophisti-
cated forms of financial instruments, and the expansion of market areas.
The industrial revolution of the eighteenth century heralded an era of
significant technological progress in which production innovations arose
from both the employment of new forms of machinery and the increased
specialization of labour activities. Modern commentators frequently
discuss these features of economic growth from the rather narrow tech-
nical perspective of Adam Smith's observations of labour organization
within the firm. However, these developments were taking place within
a much larger context, which included the growth of input and output
market areas (North 1981). This growth was necessary to provide both the
input raw material required for the production process and an enlarged
market for British industry's increased output. However, the expansion
of these market areas itself also encouraged the development of more
sophisticated financial instruments, which provided the debt and insur-
ance capital required to facilitate colonial expansion by both individuals
and trading companies. Early in the internationalization of the British
economy, the London merchant banking sector had therefore played a key
role in the development of global markets.
Historically, as mentioned above, the UK economy performed also
a very particular role as the major link between the US economy and
those in Europe. Against a background of common linguistic, cultural,
and historical ties, the establishment of strong and stable economic ties
between Great Britain and the United States was brought about both
