International Aspects

It is impossible to understand the development of the British economy over the past two hundred years or more in isolation from its place in the world economy. Britain’s rapid and profitable industrialisation took the form of heavy concentration of resources on a limited range of industries exporting high proportions of total outputs.1 Because of Britain’s relatively narrow resource base, this concentration was accompanied by heavy reliance on overseas sources for many raw materials, and specialisation had induced the transfer of resources out of agriculture at a faster rate than experienced by more ‘balanced’ economies, leading to a high dependence on food imports. Throughout the nineteenth century Britain was the pivot of the international economy, and interdependence between Britain and the rest of the world reached its peak in the 1870-1914 era. The T/Y ratio (i.e. the ratio of foreign trade to national income),2 after growing steadily from about one-sixth at the beginning of the century, reached almost three-fifths by the 1870s, and fell little below this level up to 1914.3 The T/Y ratio declined markedly in the inter-war period, but even in the depressed trading conditions of the 1930s the T/Y ratio remained higher than in the 1840s. Moreover, Britain’s role in the world economy was by no means confined to commodity trade. She invested large sums abroad before 1914, varying in the range of 3–9 1/2 per cent of G.N.P. or 30–65 per cent of total capital formation, and (if we include Ireland) contributed a gross total of about 1 o million emigrants to countries outside Europe between 1870 and 1914.4