The theory of economic growing trades with an economys long-run tendency or possible growing way of its gross domestic merchandise. Growth theoretical accounts explain the causes of growing through aggregative production maps. The two wide theoretical accounts discussed in the literature are the neo-classical growing theoretical accounts and the endogenous growing theoretical accounts. The chief causes of growing captured in these theoretical accounts are land, labor, capital and proficient advancement.

This essay focuses on the causes of economic growing during the nineteenth century and the importance of establishments in this procedure.

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Section II briefly discusses the two wide growing theoretical accounts, while Section III concentrates entirely on the chief causes of economic growing in the nineteenth century. Section IV evaluates the importance of establishments in the procedure of economic growing, with Section V eventually reasoning the essay.

II.Growth Models

The aggregative production map lies at the bosom of growing theoretical accounts. Aggregate production maps describe the relationship between the size of an economic system ‘s labour force and its capital stock with the degree of that state ‘s GDP. These maps measure the value of the aggregative capital stock and labour force. Normally natural resources such as land are assumed to be portion of capital. Aggregate production maps hence tell us how capital ( inclusive of natural resources ) and labour contribute to growing. Technical advancement is a residuary factor which is exogenously combined or endogenously incorporated in the aggregative production maps. Thus the chief causes of growing captured in growing theoretical accounts are land, labor, capital and proficient advancement.

Three types of exogenic dealingss are recognised under the neo-classical theoretical accounts in relation to the residuary proficient advancement ; ( I ) impersonal proficient advancement, ( two ) labour augmenting proficient advancement, and ( three ) capital augmenting proficient advancement. The basic premise underlying the neo-classical growing theoretical accounts is the premise of decreasing fringy returns to capital. The endogenous growing theoretical accounts seek to explicate how the endogenous technological alteration creates positive outwardnesss which offset any leaning to decreasing returns to capital accretion.

III.The Causes of economic growing in the nineteenth century

The chief causes of economic growing in the nineteenth century are explained by the undermentioned factors: ( I ) the spread of the industrial revolution, ( two ) proficient advancement in both industry and agribusiness, ( three ) proficient advancement in conveyance and communications, ( four ) capital accretion, ( V ) universe population growing, ( six ) supply of natural resources, ( seven ) growing of existent incomes, ( eight ) spread of economic freedom, and ( nine ) the growing of international trade.

The Industrial Revolution

The Industrial Revolution began about 1750 in Britain and was the period during which engineering and machines quickly modernised industrial production. Modern economic establishments like stock Markss, Bankss, insurance companies and corporations became of import. Industrial in-between category later emerged and became portion of institutional landscape of the British society. The chief causes of the industrial revolution were the enlargement of trade, engineering, dynamic enterprisers and concern leaders, the paternalistic function of the authorities and other factors like an efficient banking system and a flexible British societal system. The industrial revolution underpinned by new engineering and modernised industrial production required a assortment of resources and an spread outing market. Where resources were non adequately supplied internally, they were sought externally through trade. Again where the domestic market was little to absorb the entire production, external markets were besides used for the excess production. The spread of the industrial revolution to other states tremendously increased the chances for trade and growing between states. The diffusion of the industrial revolution was reasonably rapid in Western Europe and by 1850 it had penetrated into France and Belgium and half a century later it had reached Germany, U.S, Sweden, Russia and Japan1.

Technical Advancement in both Industry and Agriculture

Technical advancement and invention in industry in the nineteenth century created chances and menaces for trade. While proficient advancement in the signifier of new or cheaper goods favoured trade, the spread of engineering tended to be biased strongly against trade because the spread encouraged imitation in production and led to the permutation of domestically produced goods for goods antecedently imported. On balance, nevertheless, proficient advancement favoured trade and led to the enlargement of universe trade and subsequent growing in the nineteenth century. It besides changed the way and composing of trade between states. Before 1870, fabrics and cotton were the innovating industries but after 1870 proficient alteration shifted to the production of new merchandises like steel, machine tools, electrical technology merchandises and chemicals2. Besides supplying chances for trade in manufactured goods, modern industrial engineering besides created chances for trade in natural stuffs in the signifier of agricultural natural stuffs and minerals. In the instance of agribusiness, the undermentioned developments made important parts to the growing of agricultural end product in the nineteenth century: ( I ) the rapid growing of population increased demand for groceries and agricultural natural stuffs, ( two ) betterments in innovations and inventions produced better farm implements and machinery, ( three ) the usage of chemical fertilisers, ( four ) improved stock-breeding, ( V ) new methods of look intoing and handling works and animate being diseases, and ( six ) the rapid enlargement of plantation agribusiness after 1850.

Technical Progress in Transport and Communications

Improved transit and communications played a major function in the growing of the universe economic system in the nineteenth century. This was achieved through: ( I ) the publicity of the exchange of turning volume of goods, ( two ) the enlargement of markets, ( three ) the opening up of new beginnings of supply of many merchandises, ( four ) the chase of specialization and economic systems of graduated table, and ( V ) the support to a greater inter-regional flow of work forces and capital. Improved transit besides contributed well to the lifting productiveness that lay behind the growing of existent incomes in the universe economic system during the 19th century. The application of steam to land ( with its version to the railroad ) and sea conveyance ( with its version to steamship ) supplemented the bing agencies of conveyance to widen the scope of international trade good exchange and permitted heavy or bulky merchandises to come in into foreign trade. The betterments in transit were besides accompanied and supported by series of developments in the undermentioned related activities: ( I ) seaport betterments, ( two ) the edifice of docks and warehouses, ( three ) the debut of new machines and methods for the rapid handling of ladings, ( four ) the building of ship canals, particularly the Suez Canal in 1869. In footings of communications, the telegraph system was of huge importance for the growing of universe trade. Subsequently, the outgrowth of the telephone as an betterment on the telegraph system and the innovation of the radio set in 1896 contributed significantly in conveying the peoples of the universe closer together for trade and growing.

The Accumulation of Capital

The accretion of capital for increased production in the nineteenth century reflected in the followers: ( I ) the debut of new techniques that provided tools and equipment for a turning population, ( two ) the usage of more efficient traffic circle methods of production/ more mechanized methods of production to run into a quickly turning ingestion of natural stuffs and the demand to provide wider markets, ( three ) betterment in proficient advancement that led to uninterrupted addition in the stock of capital. For illustration, the rush in the rate of capital accretion in Britain between the mid-1830s and the mid-1870s was the consequence of heavy investing in domestic railroads, the coal, Fe and fabric industries, transportation and its ancillaries, such as docks and seaports plus significant investing overseas3. The composing of investing nevertheless changed in Britain after 1875 with more investing in residential edifice and in industry, commercialism and finance countervailing the worsening investing in railroads. The procedure of capital formation and the consequent alterations in the construction in other industrializing states were similar to those experienced by Britain. The growing in the universe stock of capital provided many chances for international trade by: ( I ) supplying a beginning of supply for developing states to import machinery and equipment for their industrialization, and ( two ) supplying profitable chances for imparting capital on a big graduated table.

The Growth of World Population

Economic growing in the nineteenth century was besides accompanied and aided by a rapid addition in population, which grew from merely over 900m in 1800 to about 1,600m in 19004. The quickly turning population had the undermentioned effects for universe trade: ( I ) increased demand for those trade goods already traded internationally, ( two ) higher agricultural monetary values making chances for trade through scarce and increased monetary values of land in the old industrialising parts, and ( three ) the growing of the autochthonal population aided by in-migration making more favorable conditions for the development of untapped natural resources in the new parts of primary production

The Supply of Natural Resources

There was a significant addition in the universe supply of natural resources during the 19th century. The addition was accounted for by ( I ) the cultivation of antecedently unworked land and the find and development of new beginnings of mineral supply in Europe, and ( two ) the opening up of the huge fertile and mineral rich continents of the Americas, Oceania, Asia and tropical Africa. The development of the resources of these virtually uninhabited parts was motivated by people ‘s willingness and ability to travel to the new lands, their economic handiness through the handiness of inexpensive and equal conveyance and the sufficiency of capital to clear and work the land and mine its mineral wealth. The development of natural resources was chiefly based on the application of labor, capital and entrepreneurship to these resources

The Growth of Real Incomes

Though the nineteenth century saw higher rates of population growing, there was a corresponding pronounced addition in productiveness emanating from the application of new production methods, better administration and improved conveyance. The net consequence was an addition in existent incomes and the consequent alterations in the construction of end product and the composing of foreign trade, besides partially accounted for by alterations in gustatory sensation and demand.

The Spread of Economic Freedom

The spread of economic freedom in footings of gradual liberalization of controls over flows of capital, labor and trade contributed to economic growing through the followers: ( I ) unrestricted capital flows allowed direct foreign investings, freely traded foreign securities in most stock exchanges, unhindered repatriation of net incomes and the absence of fright of arrogation of foreign investings, ( two ) the remotion of limitations on the motion of people encouraged international migration, and ( three ) free trade implied common benefit from trade for economic growing.

The Growth of International Trade

Foreign trade has been a major cause of the economic growing of states. In most states export trade was a powerful booster of domestic economic growing and development during the nineteenth century. In the old ages up to 1913, the growing in universe trade, as measured by the addition in the volume of exports of the universe ‘s prima industrial states, averaged 4 per cent per annum5.

An of import footing of international trade from the supply side is David Ricardo ‘s construct of comparative/cost advantage. The factor proportions theory based on this construct of comparative advantage argues that states tend to bring forth and export goods whose production is intensive in factors with which they are copiously endowed. Technological advancement besides leads to faster growing of existent per capita income under the technological spread high quality between states created by the find of new merchandises and new procedures of production. Harmonizing to this theory, trade originates entirely in the impermanent technological high quality gained by the state doing the industrial discovery. The technological spread trade may be prolonged by the fact that the innovating state may bask a curious advantage in reaping scale economic systems. Therefore another theory of international trade is based on economic systems of graduated table. This theory argues that economic systems of graduated table emanating from increasing returns to scale with imperfect competition lead to lower cost of production at higher degrees of end product.

Specialization in production along the lines of comparative advantage in the nineteenth century was brought approximately partially by mobility of capital ( and labour ) from state to state. Consequently the growing of trade and existent income in the universe economic system during this period which contributed to economic growing was determined partially by an international redistribution of capital and labor. During the century stoping in 1913 some ?9, – 10,000m were invested abroad and some 45 – 46m people moved overseas6. Thus the growing of international trade as a cause to economic growing was chiefly explained by international long-run capital motion, international migration and commercial policy in the nineteenth century. Foreign investing in the nineteenth century made some important parts to the growing of production in a figure of states because it provided a combination of capital with technological know-how and entrepreneurial ability that aided the economic growing of both adoption and loaning states. The out-migration of labor from Europe as enterprisers and workers that accompanied the escape of capital complemented and helped to do capital more productive in the new states. The causes of migration during the nineteenth century included the followers ; ( I ) freedom from political or spiritual rules, ( two ) socioeconomic factors – ( a ) population additions pressing on limited agencies of subsistence, ( B ) deficiency of employment chances for displaced rural labor, ( degree Celsius ) unprofitable European agribusiness, ( vitamin D ) debut of capitalist signifiers of agricultural production limited employment for rural labor, and ( three ) dearth in Ireland. The main parts of immigrants to industrial development in these states were the proviso of labour force and the enlargement of markets. These parts were indispensable to industrialization and big graduated table production and finally to economic growing. The commercial policy in the nineteenth century was a combination of free trade and protectionism. Although protectionism was widespread before 1850, and was revived once more after 1880, during the intervening period there was a general decrease of limitations on trade7. The acceptance of free trade by Britain was based on the account provided by the classical economic experts of Adam Smith, David Ricardo and John Stuart Mill. Harmonizing to their account, states should specialize in the production of those goods which they can do with comparatively sterling efficiency or comparative advantage and that every state stood to profit from international specialization and exchange. This classical philosophy of free trade exerted a powerful clasp of economic idea in the 19th century. The economic effects of free trade included ; ( I ) the usage of the most favoured state clause in the commercial pacts and understandings, ( two ) the coevals of the ambiance of freedom in which economic personal businesss were conducted. The instance for protectionism was ab initio advanced by Alexander Hamilton and Friedrich List. Their instance of protectionism was based on the baby industry statement. This statement stipulates that immature industries set up in industrializing states are unable to defy the competition from developed industrialized states and hence need protection temporarily in the signifier of duties in order to turn. The economic effects of protectionism included ; ( I ) initial part to the growing of United States and Germany, ( two ) alteration in the construction of industry – large industrial concerns came to rule fabrication in both the United States and Germany, ( three ) the riddance of domestic competition and the creative activity of monopoly markets free from competition by manufacturers in the United States and Germany, ( four ) the spill over of monopolistic activities into the international field in the signifier of trusts, and ( V ) the stimulation foreign investing in protectionist states.

IV.Importance of Institutions

The importance of establishments in the procedure of economic growing is explained by the formal and informal regulations played by assorted persons and administrations during the nineteenth century. The undermentioned establishments contributed significantly to economic growing in the 19th century under Industrial Revolution, technological advancement in both industry and agribusiness, proficient advancement in conveyance and communicating, capital accretion, universe population growing, supply of natural resources, spread of economic freedom and the growing of the international trade: ( I ) authoritiess, ( two ) trade brotherhoods, ( three ) capitalists – enterprisers and businesses/corporations, ( four ) fiscal establishments and recognition markets, ( V ) the working category, ( six ) wonts and established imposts, ( seven ) lawfully adhering regulations and ordinances, ( eight ) institutional foundations like licences, the grant of patent of monopoly, limitations and prohibition of competition, ( nine ) establishments of mercantile system, paternalism and limitations, ( ten ) societal construction of nobility and the parks, ( eleven ) philanthropic administrations, parishes ( assisted migration ) , ( twelve ) the establishment of belongings rights, legal rights and the regulation of jurisprudence, ( thirteen ) money as an establishment, and ( xiv ) market as an establishment with dimensions of market efficiency, trade policy, authorities intercession, capital flows and foreign investing ordinances, banking ordinances, protection of belongings rights, etc. Some of these establishments or institutional agreements affected growing negatively, but in entire their consequence on economic growing was positive.


This essay has explained the major causes of economic growing during the nineteenth century. It has argued that the chief initial cause of economic growing was the spread of the Industrial Revolution which started in Britain. The Industrial Revolution embodied technological advancement and invention which linked industry, agribusiness and conveyance and communications. In concurrence with the wonts of salvaging and capital accretion, the growing of universe population, the supply of natural resources, the growing of existent incomes, the spread of economic freedom and the growing of the international trade, the international economic system experienced important economic growing in the 19th century. Besides these major causes, the function of establishments was of paramount importance to economic growing in the nineteenth century because they provided the necessary regulations ( informal and formal ) that affected persons and administration during the procedure of production, exchange and distribution of goods.


Kenwood, A.G ; Lougheed, A.L, “ Growth of the International Economy 1820-2000: An Introductory Text ” Publisher ; Routledge ; 4th edition, August 17, 1999 ; pp 10

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