Today’s Economic History: 1870 as the Inflection Point in Trade and Transport

Mid-nineteenth century Massachusetts transcendentalist author and activist Henry David Thoreau’s response to the coming of the railroad was: “get off my lawn!”:

To make a railroad round the world…. Men have an indistinct notion that if they keep up this activity of joint stocks and spades long enough all will at length ride somewhere in next to no time and for nothing, but though a crowd rushes to the depot and the conductor shouts “All aboard!” when the smoke is blown away and the vapor condensed, it will be perceived that a few are riding, but the rest are run over–and it will be called, and will be, “a melancholy accident”…

Indeed, the very first day of operation of the Liverpool and Manchester Railroad, September 15, 1830, George Stephenson’s locomotive, The Rocket, killed the Right Honorable William Huskisson, former President of the Board of Trade–that is, he had been Britain’s Secretary of Commerce (in addition to Secretary of State for War and the Colonies, and Leader of the House of Commons).

The old rule-of-thumb before the railroad was that you simply could not transport agricultural goods more than 100 miles by land. Over that distance the horses or the oxen would have eaten as much as they could have pulled. Either find a navigable watercourse—and it had better be much closer than 100 miles—or find yourself stuck in self-sufficiency for anything other than small and light preciosities, without the ability to buy much made outside your local township that could not be purchased with the (low-value) spinning and weaving labor of your or your neighbors’ womenfolk. For Thoreau on Walden Pond, living deliberately, the fact that it took him a day to walk or ride into Boston was a benefit—part of living deliberately. But that is a (relatively) rich guy’s point of view.

The coming of steam coupled with the metallurgy to cheaply make the rails and the engines of the railroad made a difference. It made transport over land wherever the rails ran as cheap as travel up navigable watercourses or across the oceans had ever been. It made it much faster as well. This was a big difference for people who wanted to move about. The was a big difference for spoilable or time-sensitive goods. This was not much of a difference for durable staples over routes that had been and still could be travelled by water. And since most people had for good reason settled near the water routes, the railroad was a very welcome boost, but not that much more. For the rise of Mexico City—with no water routes to the coasts and thus the world economy—the railroad was a game-change. But for the rise of New York City the game-change was not the Iron Horse but rather the Erie Canal.

The true revolution in transportation? The one that mattered for everyone? That came not in the 1830s with the railroad. That came later: it was the iron-hulled ocean-going coal-fired steamship.

It was the year 1870 thatsaw the Harland and Wolff shipyard of Belfast in northern Ireland launch the iron-hulled (rather than wooden-hulled), steam-powered (rather than wind-powered, but it did still have masts and sails), screw-propellered (rather than paddle-wheeled), passenger steamship the R.M.S. Oceanic. It took 9 days from Liverpool to New York, a journey that in 1800 would have taken more like a month. Its crew of 150 supported 1,000 third-class passengers at a cost of £3–$15–for a third-class passenger. Third class on the Oceanic cost half as much as passage a generation earlier during the Irish Potato Famine had. It coast roughly a fourth as much as in 1800.

£3 in 1870 was the same share of an average person’s earnings then as £2,100 or $3,300 today. Think of it as the equivalent of a business-class transatlantic airfare. Think of it as the rough equivalent of a month and a half’s wages for an unskilled worker. Consider that wage levels in North America or Argentina or Australia or–for white male workers–South Africa or Kenya around 1870 were roughly double those of northwest Europe. The math was clear. If you could find a niche, hold a steady job, and stay out of the bars after the voyage, you could make back your expense in less than a season. Thus after 1870 sending a member of a family across the ocean to work became a possibility open to all save the very poorest of European households. This held for more than Europe: China and India began their own large-scale steamship diasporas in short order.

Moreover, the Oceanic also carried 150 first class passengers at £15 a head. It carried them in sufficient luxury and with sufficient cosseting as to qualify (if you were not prone to sea-sickness) as a vacation. That is the same share of average income then that $17,000 would be today. Thus the rich could and did make global travel a regular part of their normal lives rather than an arduous duty and trial. Railroad baron and heir William Kissam Vanderbilt and suffragette Alva Erskine Smith could take their daughter Consuelo to England to meet and (unhappily) marry Charles Spencer-Churchill, ninth Duke of Marlborough. Speculator Leonard Jerome and Clara Hall could take their daughter Jeanette to England to meet and (happily?) marry Charles’s uncle, Lord Randolph Henry Spencer-Churchill. Randolph and Jeanette appear to have anticipated things, for seven months after their marriage was born Winston S. Churchill, Prime Minister of Great Britain 1940-1945 and 1951-1955—and even the dockyard cranes along the Thames River bowed as his coffin passed by in January 1965.

The falling cost of transporting people marched alongside a falling cost of transporting goods. Flour that cost 1.5 cents per pound more in London than in New York in 1840 cost only 0.5 cents per pound more after 1870 . This was a fall in the price of carrying the raw materials for a loaf of bread across the Atlantic. What had cost the equivalent of 30 minutes’ worth of unskilled labor time in 1840 cost less than ten minutes’ worth come 1870. After 1870 every commodity that was neither exceptionally fragile nor spoilable could be carried from port to port across oceans for less than it cost to move it within any country.

All this mattered for two reasons.

First, it meant that everyplace in the world was, as long as there were connecting harbors, docks, and railroads, cheek-by-jowl to every other place, economically. Everyone’s economic opportunities and constraints depended on what was going on across the globe. This had not been true before. Before just the consumption patterns of the elite depended on what was going on in other countries and on other continents.

Second, wherever you could cheaply move goods in mass you could move other things. Most particularly, you could also move and supply armies. Thus conquest—or at least invasion and devastation—became things that nearly any European power could undertake in nearly any corner of the world.

February 19, 2015

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