Bossert Thomas J. - Promise of development : theories of change in Latin America

During the first half of the nineteenth century, the Industrial Revolution was essentially an English phenomenon. For this reason the structural evolution of the English economy provides the key to the radical changes which took place during this period in the world economy as a whole. The economists who witnessed the beginnings of these changes, and interpreted them from the English viewpoint, immediately realised that it was in Englands interests to become a vast factory, opening its doors to primary products from all over the world. In fact, industrial activity, violating the law of diminishing returns, stimulated qualitative changes without precedent in economic processes.

In economies in which technology had made little or no progressbased essentially on agricultural activityit was evident that there were limits to the degree to which the relative proportions of the productive factors employed could be altered. Beyond a certain point, the output obtained per unit of agricultural land necessarily tended to decrease, regardless of the amount of labour added, which meant that availability of land governed the use of the other factors. Industrial activity made it possible to break this barrier, since growth itself, by creating the possibility of further specialisation in labour and equipment (greater division of labour additional and more complex machinery), became the source of increased productivity, which meant increasing returns. In such circumstances, even if prices of imported agricultural products remained stable and were the same as those of home-produced goods, it would still be to the advantage of a country like England, where land was scarce, to be able to pay for them with industrial products. On the other hand, once England had established an important industrial nucleus and consolidated its advantage over other countries, it would not be difficult to demonstrate that, in terms of the principle of comparative advantage, considered from the static point of view, it would be in the interests of other countries to buy industrial products from England and pay for them with raw materials. However, despite the enormous advantages it represented for England (since it implied nothing less than the concentration in this country of those activities in which rapid technological progress was being made), this pattern of development met with resistance on the part of agricultural interests, and its acceptance was much slower than is generally supposed. Throughout the first half of the nineteenth century, English agriculture continued to enjoy effective protection through an adjustable tariff mechanism which permitted customs barriers to be automatically raised whenever world prices fell below a certain critical point. However, faced with the growing power of the industrial bourgeoisie, resistance gradually broke down and, between 1846 and 1849, England eliminated barriers to external trade without expecting other countries to follow suit.