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Ocean Freight Rates and Productivity, 1740–1913: The Primacy of Mechanical Invention Reaffirmed

Published online by Cambridge University Press:  03 March 2009

C. Knick Harley
C. Knick Harley
Affiliation:
University of Western Ontario, London, CanadaN6A 5C2
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Abstract

This article demonstrates that new industrial technology caused a revolutionary decline in nineteenth-century freight rates. This overturns Douglass North's well-known conclusion that organizational improvements were the dominant source of savings. While North's American freight rate series declines prior to the use of the metal steamship, British rates decline only modestly prior to 1850 and then rapidly as metal steamships come into use. Cotton freights dominate North's index and declined when cotton became more tightly packed for shipment. Metal ships and steam propulsion, however, caused a general decline in freight rates after 1850.

Type
Articles
Information
The Journal of Economic History , Volume 48 , Issue 4 , December 1988 , pp. 851 - 876
Copyright
Copyright © The Economic History Association 1988

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References

1 See, for example, McCloskey, D. N., “The Industrial Revolution 1780–1860: a Survey,” in Floud, Roderick and McCloskey, D. N., eds., The Economic History of Britain since 1700 (Cambridge, 1981), vol. I, pp. 114, 125. McCloskey uses North's results to indicate that ocean and coastal shipping had rates of productivity improvement that were among the most rapid in the economy.Google Scholar

2 The most important work in this reassessment is that of Crafts, N.F.R., summarized in his British Economic Growth during the Industrial Revolution (Oxford, 1985).Google Scholar

3 See North, Douglass C., “Ocean Freight Rates and Economic Development 1750–1913,” this Journal, 18 (12 1958), pp. 537–55;Google ScholarNorth, Douglass, “The Role of Transportation in the Economic Development of North America,” Les Grandes voies maritimes dans le monde, XV–XIX siècles (Paris, 1965), pp. 209–46;Google Scholar and Shepherd, James F. and Walton, Gary M., Shipping, maritime trade and the economic development of colonial North America (Cambridge, 1972), chap. 5,Google Scholar Appendices III and IV. North's most important article in this series is “Sources of Productivity Change in Qcean Shipping, 1600–1850,” Journal of Political Economy, 76 (09/10, 1968), pp. 953–70.Google Scholar

4 “Productivity Change in Ocean Shipping,” p. 946.Google Scholar

5 North's series is available on an annual basis only after 1815. I have extended the series back into the eighteenth century following McCloskey's assumption (“Industrial revolution,” p. 125) that the rate of increase in productivity implied between 1784 and 1815 must have been about I percent per year. Between 1741 and 1784 I have not used the rate of 0.45 percent per year in North, “Productivity,” but followed Shepherd and Walton (Shipping, p. 72) in assigning the growth in productivity to the century after 1680 at a rate of 0.8 percent per year. I have allowed for general price changes using the Gilboy/Schumpeter index;Google Scholar see Mitchell, B. R., with Deane, Phyllis, Abstract of British Historical Statistics (henceforth Mitchell, Historical Statistics) (Cambridge, 1962), pp. 468–69, and consider the 1784 price level to have been 0.7 relative to 1817–1821 and the 1740 price level to have been 0.56. North's immediate postwar freights are very volatile, so the graph plots the average of the years 1815 to 1820.Google Scholar

6 For a detailed discussion of the freight rate data used in constructing these new estimates, see Appendix.Google Scholar

7 It is obvious that these are not perfect quotations. An interesting literature on similar matters has developed recently in the Economic History Review. See Ville, Simon, “Total Factor Productivity in the English Shipping Industry: the North-East Coal Trade, 1750–1850,” 2nd ser., 39 (08 1986), pp. 355–70;Google ScholarHausman, William J., “The English Coastal Coal Trade, 1691–1910: How Rapid Was Productivity Growth?”2nd ser., 40 (11 1987), pp. 588–96;Google Scholar and Ville, Simon, “Defending Productivity Growth in the English Coal Trade during the Eighteenth and Nineteenth Centuries,” 2nd ser., 40 (11 1987), pp. 597–602. To some extent this literature is confused by its failure to recognize the shortcomings of North's series.Google Scholar

8 Isserlis, L., “Tramp Shipping Cargoes, and Freights,” Journal of the Royal Statistical Society, 1938.Google Scholar The series is reproduced in Mitchell, Historical Statistics, p. 224.Google Scholar

9 Parliamentary Papers, 1844, VIII, p. 218.Google Scholar

10 U.S. Bureau of the Census, Historical Statistics of the United States (Washington, 1960), p. 547.Google Scholar

11 Shepherd and Walton, Shipping, p. 238.Google Scholar

12 For a discussion of the packing of cotton, see Brown, Harry Bates, Cotton (New York, 1927), pp. 340–50;Google Scholar and Hammond, Harry, “The Handling and Uses of Cotton,” in U.S.D.A., The Cotton Plant, Office of Experiment Stations Bulletin, no. 33, 1896, pp. 360–65.Google Scholar

13 The Bills of Entry are currently in the Customs House, London. Not all years survive. The years chosen in the 1820s and 1830s are the earliest available. Most of the increased density of packing seems to have been accomplished by the late 1830s. Consequently only 1859 was sampled for the late antebellum period.Google Scholar

14 Hammond, Matthew B., The Cotton Industry (New York, 1897), Appendix I, provides information for U.S. cotton exports in both pounds and bales.Google Scholar Bales exported in 1827 is reported as 446,000, a typographical error carried over into Table 3A in Bruchey, Stuart W., Cotton and the Growth of the American Economy 1790–1860 (New York, 1967). The correct figure is 646,000.Google Scholar

15 See Appendix for details. I have recently discovered published series on cotton freights from New York and New Orleans in North, Douglass C., The Economic Growth of the United States, 1790–1860 (New York, 1966), p. 258, that I had somehow overlooked during many years of research on this topic. Fortunately, although the series are not identical to mine, they are very similar. The separately compiled series cumulatively reinforce the credibility of each.Google Scholar

16 Analysis of the effect of increasing westbound traffic on the Atlantic is more complicated than a simple counting, and detailed analysis beyond the scope of this article. The basic features are analyzed in Harley, C. Knick, “Aspects of the Economics of Shipping, 1850–1913,” in Fischer, Lewis R. and Panting, Gerald E., eds., Change and Adaptation in Maritime History: The North Atlantic Fleets in the Nineteenth Century (St. John's, Newfoundland, 1985) pp. 169–86,Google Scholar and Harley, “Coal Exports and British Shipping, 1850–1913,” Explorations in Economic History, forthcoming.Google Scholar

17 For the transshipment of southern exports, see Albion, Robert G., Square Riggers on Schedule: The New York Sailing Packets to England, France and the Cotton Ports (Princeton, 1938).Google Scholar

18 Among the most accessible of such accounts are those of the Ben Line at the University of Edinburgh, those of William Bates and Sons at the National Maritime Museum at Greenwich, and those in the Donaldson Records in the Strathclyde Regional Archives.Google Scholar

19 This rate of productivity advance is consistent with the results arrived at in Ville, “Total Factor Productivity,” using a quite different approach.Google Scholar

20 For an excellent discussion of the factors contributing to productivity advance during this period, see Ville, “Total Factor Productivity.”Google Scholar

21 For details, see Appendix.Google Scholar

22 The formal basis of this calculation corresponds to those underlying the more familiar Solow calculation of Hicks-neutral technological change, which is the term in parentheses on the right-hand side of equation 2. The zero-profit industry equilibrium condition in that case is used, often implicitly, to justify the utilization of income shares in place of the marginal products that emerge from the differential of the production function.Google Scholar

23 The major issues involve the relative weights of port time as opposed to time at sea and the relationship between outward and homeward freight rates. For a discussion of the latter issues, see fn. 16.Google Scholar

24 For a detailed discussion of these issues, see Harley, C. K., “The Shift from Sailing Ships to Steam Ships, 1850–1890,” in McCloskey, D. N., ed.,Essays on a Mature Economy: Britain after 1840 (London, 1972), pp. 215–34.Google Scholar

25 Feinstein, Charles M., National Income, Expenditure and Output of the United Kingdom, 1855–1965 (Cambridge, 1972), p. T132.Google Scholar

26 Details of these calculations are available in Harley, C. K., “Shipbuilding and Shipping in the Late Nineteenth Century,” pp. 302–12.Google Scholar

27 See Allen, Robert, “International Competition in Iron and Steel, 1850–1913,” this Journal, 39 (12 1979), pp. 911–38. Some additional information has been made available to me privately by Allen, but he is not, of course, responsible for my uses of it.Google Scholar

28 Several errors in North's calculations, in addition to the failure to recognize the special character of cotton cargoes, are discussed in the Appendix.Google Scholar