A few weeks ago, Prof. Sudha Shenoy visited the department of economics at GMU. A native of India, Sudha lives in Australia and has recently retired from teaching economic history at the University of Newcastle. She gave several talks ranging from the battle between Hayek and Keynes, the role of Austrian economics in historical analysis of capitalism, capital theory, and economic growth and development. Sudha is one of the teachers and representatives of the traditional Austrian school of economics (see here and here). She got into economics because she was inspired by her father who went to England during the inter-war period and took classes with F. A. Hayek at the London School of Economics.
There is no nonsense in her economics; it is solidly rooted in the Austrian tradition, especially capital theory. Here are two examples. First, she believes there was no Industrial Revolution in the late 18th and early 19th century. Second, echoing Mises, she is appalled by how bad most economists are when it comes to history. While this is probably the result of modern training in economics, it does not excuse our amateurish approach of the discipline.
As far as the Industrial Revolution is concerned, her basic view is that there never was any. To be more specific, the idea is that there never was any discontinuity in the development of Western economies. A revolution is a discontinuity; it is a clean break from a former state of affairs. The French and Russian Revolutions were clear, unpredictable changes that replaced one political system by another. According to Sudha, it would be far fetched to say that the Industrial Revolution replaced a state of affairs by another one in the space of a very short time. Instead, European economies, especially Britain, France, and Germany experienced gradual changes that were the results of growing markets, the deepening of the capital structure, and more freedom.
Sudha is not alone in claiming this. Mises for a start said the same in his work, especially in Human Action (see here):
The attribution of the phrase "the Industrial Revolution" to the reigns of the two last Hanoverian Georges was the outcome of deliberate attempts to melodramatize economic history in order to fit it into the Procrustean Marxian schemes. The transition from medieval methods of production to those of the free enterprise system was a long process that started centuries before 1760 and, even in England, was not finished in 1830.
Sudha carefully explained how economists trained in the Austrian tradition and who understand capital as an interwoven structure of complementary (to various degrees) capital goods, have better tools to understand industrial development. The British economy was already extremely complex in medieval times and this level of complexity never ceased to increase in spite of the political turmoil England went through. By the time we reached the Glorious Revolution in 1688, the economy was already phenomenally complex. What may have misled historians and economists is the fact that industrial development accelerated in the 18th century, but this was the result of centuries of capital accumulation. Or was it?
Some historians have written on the lack of substantial discontinuity. For instance, N F R Crafts’s British Growth during the Industrial Revolution, published in 1985, and Maxine Berg’s The Age of Manufacturers, published in 1994. However, the majority still subscribes to the idea of Industrial Revolution because major innovations took place at the end of the 18th and in the early 19th century (e.g. the steam engine and the telegraph). What is your view?