The British Empire and Industrialization

The British Empire and British industrialization were closely intertwined. The Empire provided raw materials, especially cotton, that fed the British textile industry; it provided markets for British manufactured goods; and it provided capital, in the form of profits from the colonial trade, for investment in British industry.

The Empire as a Source of Raw Materials

The most important role of the British Empire in British industrialization was as a source of raw materials. The new industrial economy required enormous quantities of raw materials, including cotton, wool, silk, sugar, tea, coffee, rubber, and various minerals, and the Empire provided much of this supply. The most important raw material was cotton. The British cotton industry, the largest single industry in the world in the early nineteenth century, depended on a steady supply of raw cotton, which came increasingly from the American South, India, and Egypt.

The Empire as a Market

The British Empire was also a major market for British manufactured goods. The colonies of the Empire, including India, Australia, Canada, and various parts of Africa and Southeast Asia, were major consumers of British textiles, machinery, and other manufactured goods.

The Empire as a Source of Capital

The British Empire was also an important source of capital for British industry. The profits from the colonial trade, including the triangular trade in enslaved people, sugar, and manufactured goods, provided a significant amount of capital that was invested in British industry.

Colonialism and British Industrialization

The relationship between the British Empire and Indian industry was particularly important. India had been a major industrial economy before British rule, with a sophisticated textile industry, a thriving metalworking industry, and a wide range of other manufactured goods. British rule, however, gradually destroyed Indian industry and reduced India to a supplier of raw materials and a market for British manufactured goods. The article on colonialism and British industrialization describes this process in more detail.

The East India Company

The East India Company was the British trading company that dominated British trade with Asia from the early seventeenth century to the mid-nineteenth century. The article on the East India Company describes the development of the Company in more detail.

The Long-Term Legacy of the British Empire and Industrialization

The British Empire and industrialization were closely linked, and the legacy of this relationship is still visible today. The global trade in raw materials and manufactured goods, the system of international finance, and the structure of the global economy are all in part a legacy of the British Industrial Revolution and the British Empire.

India: Deindustrialization or Industrial Revolution Blocked

The deindustrialization of the Indian subcontinent is one of the most-cited and most-disputed empirical claims in the field. Dadabhai Naoroji’s Poverty and Un-British Rule in India (1901) and the more sophisticated analysis of Rajni Kothari in the 1960s held that British free-trade policy and the importation of Lancashire cloth had destroyed an Indian textile industry that, by some accounts, was still employing 4 to 5 million spinners and weavers at the end of the eighteenth century. The numbers often cited come from the work of M. D. Morris in The Emergence of an Industrial Labor Force in India (1965), who estimated that Indian cotton-weaving output fell from perhaps 1.3 billion yards in 1800 to less than 200 million by the 1880s. The revisionist case, advanced by David Ludden in Peasant History in South India (1985) and by John McLane in Indian Nationalism and the Early Congress (1977), argued that the standard reading overstates the effect of imports and that the Indian textile industry was in slow decline before 1750, with a complex regional pattern of substitution and adaptation. The most influential recent work, Prasannan Parthasarathi’s Why Europe Grew Rich and Asia Did Not (2011), argues that the South Indian weavers, at least, were highly competitive with their British counterparts in the early nineteenth century, and that they were eventually defeated not by Lancashire’s productivity but by the British state’s ability to control the wool, cotton, and tariff regimes.

The Cotton Famine of 1861-1865

The American Civil War demonstrated how dependent the British industrial economy had become on the empire and its periphery. British cotton imports, which had averaged 240 million pounds per month in 1860, collapsed to fewer than 8 million by October 1862. The Lancashire mills ran short, and the great majority of the 450,000 millworkers in the county were put on short time or unemployed. The relief effort, organized by the Central Relief Committee under the mayor of Manchester, distributed £2.7 million in aid by 1865, and the British government was forced to consider, but did not implement, military intervention in the United States. The “cotton famine” also accelerated the development of new cotton sources in India, Egypt, and Brazil — by 1865, Indian cotton was supplying 33 percent of British imports, up from 12 percent in 1860 — and the longer-term consequence was the global diversification of the British cotton supply. The episode is also central to Sven Beckert’s Empire of Cotton (2014), which argues that cotton was the central commodity of nineteenth-century industrial capitalism and that the system of forced labor, slavery, and colonial compulsion that supplied it is the key to the Industrial Revolution’s long-term growth.

Sugar, Slavery, and the Triangular Trade

The “triangular trade” in sugar, enslaved people, and manufactured goods is the most-cited example of the empire’s contribution to British capital accumulation. Eric Williams’ Capitalism and Slavery (1944) argued that the profits of the British slave trade and the West Indian sugar plantations were central to the financing of the Industrial Revolution. Williams’s specific claims about the share of British capital so derived have been heavily modified by later work — the slave-trade and West Indian profits made up perhaps 5 percent of British investment in 1770, and the figure was much lower by 1830 — but the broader argument about the contribution of slave-grown tropical produce to British industrial capital has survived. Joseph Inikori in Africans and the Industrial Revolution in England (2002) argued that the Atlantic slave economy raised British savings by 28 to 50 percent between 1750 and 1800, a figure that has been challenged by David Richardson and Stanley Engerman in the Cambridge World History of Slavery. The historiographical debate matters because it shapes how we understand the relationship between European economic growth and the coercion of enslaved labor in the Americas.

The Scramble for Africa and the 1870s Depression

The New Imperialism of the 1880s and 1890s is closely tied to the Great Depression of 1873-1896, the longest in modern economic history. H. J. Habakkuk and M. J. Wiener in English Landed Society in the Nineteenth Century (1951) emphasized the export of capital from Britain to the Empire as a response to the saturated home market, a thesis that Bernard Semmel’s The Rise of Free Trade Imperialism (1970) extended. The Berlin Conference of 1884-1885, which partitioned most of sub-Saharan Africa among the European powers, was a direct consequence of the new imperial economy; by 1900, the British Empire covered roughly a quarter of the world’s land surface and a quarter of its population, and the export of British capital, much of it to India, Africa, Latin America, and the white Dominions, averaged perhaps 5 percent of national income per year. The claim that the empire was a net burden on British capital, advanced by D. K. Fieldhouse and others, has not displaced the older view; the consensus is that the empire was a moderate positive for British growth, and a major one for the colonies.

The East India Company: A Chartered Company as Industrial Catalyst

The East India Company (EIC) was a chartered joint-stock company with its own army, currency, and legal system, and it operated the Indian subcontinent’s economy on behalf of London shareholders from 1757, the year of Robert Clive’s victory at Plassey, to 1858, when the Government of India Act established direct Crown rule. The EIC’s role in British industrialization is more ambiguous than the older imperial histories allowed. The Company’s Chinese trade, especially in tea, was the most important single source of revenue, and the opium it sold in China to pay for tea was a major reason for the Opium Wars of 1839-1842 and 1856-1860. The destruction of the Indian textile industry is now thought to have been more gradual and less complete than Naoroji claimed, and the Company’s role in building Indian railways, telegraph, and irrigation works after 1853 established the basic infrastructure of the colonial economy, including the “commanding heights” of Indian industry that survived into the post-colonial period. The EIC’s mixed record, in short, is a useful corrective to simple stories about empire and industry, and it has been the subject of a recent historical reassessment in Philip Stern’s The Company-State (2011) and William Dalrymple’s The Anarchy (2019).

The Debate over Imperial Preference and the Late Victorian Free Trade

The British commitment to free trade was the political expression of the industrial revolution, and the slow erosion of that commitment in the late 19th century was the political expression of the late-Victorian crisis. The Anti-Corn Law League of Richard Cobden and John Bright had argued that free trade would unite the British and the foreign working class in a common interest in cheap bread, and the repeal of the Corn Laws in 1846 was the high point of the Victorian free-trade consensus. The 1880s and 1890s saw the erosion of that consensus: the agricultural depression of 1873-1896, the rise of German and American industrial competition, and the scramble for Africa all weakened the free-trade position. The Fair Trade League, founded in 1881, advocated a return to protective tariffs, and the Tariff Reform League, founded by Joseph Chamberlain in 1903, advocated a system of “imperial preference” — tariffs on foreign goods, with lower rates for goods from the British Empire. The 1906 general election, fought largely on the tariff issue, was a victory for the free-trade Liberals under Henry Campbell-Bannerman, and free trade remained the policy of the British state until the 1932 Import Duties Act. The debate over imperial preference is the subject of Bernard Semmel’s The Rise of Free Trade Imperialism (1970) and of Andrew Gamble’s Britain in Decline (1985).

The Atlantic Slave Trade and British Industrial Capital

The transatlantic slave trade and the slave economies of the Americas were central to the British economy in the 18th and early 19th centuries. Liverpool, Bristol, and London were the principal British slave-trading ports, and the 1807 abolition of the British slave trade and the 1833 abolition of slavery in the British Empire were major political events. The financial importance of the slave trade to British industrialization has been a long-running historical debate. Eric Williams’ Capitalism and Slavery (1944) argued that the profits of the British slave trade and the West Indian sugar plantations were central to the financing of the Industrial Revolution. The subsequent literature has been more cautious: Stanley Engerman’s 1972 estimate of the slave-trade profits, published in The Journal of Economic History, suggested that the trade’s contribution to British capital formation was perhaps 5 percent in 1770, and much less by 1830. The more recent work, including Kenneth Pomeranz’s The Great Divergence (2000) and Sven Beckert’s Empire of Cotton (2014), has argued that the slave-grown tropical products — sugar, cotton, tobacco, coffee — were more important than the slave trade itself, and that the British industrial economy was heavily dependent on the products of the slave system. The historiographical debate matters because it shapes how we understand the relationship between European economic growth and the coercion of enslaved labor in the Americas, and it has been a major focus of the new “history of capitalism” since the 2000s.

The Australia Question and the New Imperialism

The 1870s depression of 1873-1896, the longest in modern economic history, was a major stimulus to the new imperialism of the 1880s and 1890s. The principal actors were the European powers — Britain, France, Germany, Belgium, Italy, and Portugal — and the principal targets were the territories of Africa, Southeast Asia, and the Pacific. The British share of the new imperial territories was particularly large: by 1900, the British Empire covered 11.7 million square miles and contained 372 million people, about a quarter of the world’s land area and a quarter of its population. The principal British colonies were India (the “Jewel in the Crown”), Australia, Canada, New Zealand, South Africa, Nigeria, Egypt, and the Sudan. The 1902 Balfour Commission on the natural resources, trade, and legislation of the colonies recommended a system of “imperial preference” — tariffs on foreign goods, with lower rates for goods from the colonies — but the recommendation was not implemented until the 1932 Ottawa Conference. The Commonwealth of Nations, established by the Statute of Westminster in 1931, was the political expression of the new imperialism. The history of the new imperialism is the subject of D. K. Fieldhouse’s The Colonial Empires (1966) and of John Darwin’s The Empire Project (2009), which place the British case in the context of the other European empires.

The End of the British Empire and Its Economic Legacy

The British Empire, which had been the largest and most powerful in the world in 1900, began its long decline after the First World War. The 1922 Irish Free State was the first major act of decolonization, and the 1947 independence of India and the 1948 independence of Burma and Ceylon were the most important. The Suez Crisis of 1956 marked the final end of British imperial pretensions, and the 1960s wave of decolonization — in which more than 30 African, Asian, and Caribbean territories gained independence — produced the Commonwealth of Nations in its modern form. The economic legacy of the empire is mixed: on the one hand, the British investment in the colonies — particularly in India, Egypt, Nigeria, and the Caribbean — produced the basic infrastructure of the modern post-colonial economies; on the other hand, the imperial preference system, the unequal terms of trade, and the extraction of colonial surpluses have been criticized as obstacles to post-colonial economic development. The debate about the legacy of empire is the subject of John Darwin’s The Empire Project (2009) and of L. J. Butler’s Britain and Empire (2007), which together provide a balanced view of the costs and benefits of the British imperial system. The current debates about globalization, free trade, and economic development are, in many ways, continuations of the debates that began with the British Empire and the British Industrial Revolution.

Key Dates in British Imperial History

A short chronology of the principal dates in the history of the British Empire:

1600 — East India Company chartered
1757 — Battle of Plassey; British ascendancy in India
1807 — British slave trade abolished
1813 — East India Company’s monopoly on Indian trade ended
1833 — Slavery abolished in the British Empire
1846 — Corn Laws repealed; free trade established
1857 — Indian Mutiny
1858 — British Crown assumes direct rule of India
1869 — Suez Canal opens
1884-1885 — Berlin Conference; partition of Africa
1900 — British Empire covers 11.7 million square miles, 372 million people
1919 — Versailles Treaty
1922 — Irish Free State established
1947 — India and Pakistan gain independence
1956 — Suez Crisis
1997 — Hong Kong returned to China

In this section

Colonialism and British Industrialization The impact of British colonialism on the Industrial Revolution, including the destruction of the Indian textile industry, the growth of the cotton trade, and the global economic system created by the British Empire. The East India Company The story of the East India Company, the British trading company that conquered India, dominated the Asian trade, and helped to finance the Industrial Revolution.