Canals's Impact On The British Economy

Turnbull argues that while Canals did not necessarily alter the market structure for coal, they did materially affect other aspects of the coal industry. Additionally, the development of canals and other infrastructure systems leading up to the industrial revolution serve as an important lesson on the importance of infrastructure development on the economy in Britain. Canals had a significant impact on the structure and efficiency of the British economy. First, canals affected the structure of the British economy by restructuring the economies of the areas where canals went through. The restructuring occurred over two long-phases – initially in a regionally concentrated manner as canals were formed by local companies in local regions and …show more content…
Production became more efficient because the assembly and processing of raw goods was moved to more efficient sites near canals. Previously, manufacturing was constrained to sites near rivers, oceans or other water ways. The old process largely favored the manufacturer near the coast and caused the value chain of the manufacturing process to be inefficient as geography transportation was a huge constraint. The structural shift of manufacturing sites to more favorable manufacturing sites is significant because it minimizes transfer and labor costs. Turnbull notes that “the movement of such low-value raw materials and comparative intermediate goods is expensive, so a substantial cheapening will impart a powerful downward cost multiplier at successive stages of production and widen the choice of sites at which production may be located.” This structural change is important because by reinforcing the flexibility in the location of production sites and it allowed the supply of labor to become more mobile. All of the aforementioned factors were important to Britain leading up to the Industrial Revolution because the ties of location, which had previously bound the economy geographically, had broken down. This resulted in operational efficiencies, greater volumes of trade, and localized economies of …show more content…
The development of canals ultimately led to cheaper transportation costs for coal, which in turn led to higher levels of output. Allen was able to confirm that coal prices were much lower in Britain (more specifically outside of London) compared to other cities in Europe by examining a time series of grams of silver per million of BTUs. Higher levels of output were achieved by the reallocation of production in favor of better placed, more efficient coal pits. In essence, the British coal industry, as a result of canals, faced heavy internal competition, which resulted in pits with less favorable locations to be shut down and allowed pits near canals to thrive. This was advantageous for inland coal pits that were now the lowest cost producers when compared to their coastal counterparts. The final implication of canals on the coal industry can be taken from one of Allen’s main point in chapter 4. His main point was that the British cheap coal economy was able to sustain the high wage economy. The British were able to pay higher wages (compared to countries like France) yet remain internationally competitive because of their cheap energy. While Allen does not directly attribute canals to being the driver of this cheap energy economy, research from Turnbull can be used in conjunction with Allen’s argument to show the importance of how canals aided in creating cheaper