London Calling

A Defense of the Pseudo-Allen-Wrigley-Howes Theory of Urban-Agrarian Change

This essay follows on extensive public and private discussions with Pseudoerasmus and Anton Howes on the nature and causes of change in early England. I offer support for the theories of Robert Allen and E. A. Wrigley—recently propounded by Pseudo on Twitter and Anton on Age of Invention—that exogenous increases in urban development prior to the Industrial Revolution were the motor of agrarian productivity growth. This account is also complementary to Anton’s essays on the role of urban demand in promoting specialization in agriculture and recapitulates evidence on a set of subjects to be covered in greater detail in forthcoming works by both authors.

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The key fact of early modern British history is the mass movement of the country’s population off of the farm and into the city. From 1500 to 1760, the proportion of Englishmen living in rural areas fell from three-quarters to a third, turning the country from an agrarian backwater into a European commercial power. The urban share of the population, meanwhile, swelled from a measly 3.6 percent in 1500 to 13.8 percent in 1700 and approached a quarter one century later. Since urban death rates exceeded birth rates before the demographic transition, this exceptional growth was driven by migrants, and London was their center of gravity. From a riverside town of 50,000 inhabitants in 1500, the capital had become a commercial metropolis in 1700, home to 575,000 merchants, manufacturers, and myriad others. In the eighteenth century, surging industrial towns like Birmingham and Manchester broke London’s monopoly, but the overall pattern was unmistakable: Britain was urbanizing, and fast.

One unique feature of British structural transformation was how early it happened. Most countries urbanize and industrialize simultaneously; Britain’s cities, however, started growing long before the advent of the factory system. In 1841, the agricultural share of the population was 25 percent lower than was normal for a nineteenth-century economy at the same income level. Agrarian societies are agrarian for a reason: relatively unproductive agriculture means that most of the population needs to farm, and that the food surplus remains too small to support a large town population. Only the Low Countries, northern Italy, and Britain managed to buck that trend before the nineteenth century. By 1700, Britain and the Netherlands led the world in land and labor productivity, and though the Dutch were first in Europe for urbanization, the British were catching up. Both countries had started to solve what Theodore Schultz called the “food problem”: feeding a larger proportion of the population with a smaller agricultural sector, “releasing” labor for work in mercantile and manufacturing activities. Farming can be commercialized, but industrial capitalism and modern economic growth require that ever-larger population shares be employed in sectors with higher potential for technology-fuelled productivity. This entails increasing output per worker dramatically, especially if—as in Britain—cultivators are to be reduced to a minority. There are two ways to improve that ratio: more output or fewer workers. Karl Marx, kicking off the “transition to capitalism” debate, opted for the latter method. In Chapter 27 of Capital, he details the long process by which first feudal serfs and then free family farmers were apparently compelled to cede their holdings to the famed “tripartite structure” of large landowners, tenant farmers, and proletarian wage-workers. The post-Reformation seizure of Church land, the seventeenth-century sale of state property, and the enclosure of commons allowed “agrarian capitalists” to expropriate the peasant cultivator and reorganize the stolen fields on rational, commercial principles. The increased efficiency of the farms and the sudden availability of excess labor, he argued, was then a fillip to industrialization, supplying the burgeoning towns and cities with cheap food and manpower.

The spoliation of the church’s property, the fraudulent alienation of the State domains, the robbery of the common lands, the usurpation of feudal and clan property, and its transformation into modern private property under circumstances of reckless terrorism, were just so many idyllic methods of primitive accumulation. They conquered the field for capitalistic agriculture, made the soil part and parcel of capital, and created for the town industries the necessary supply of a “free” and outlawed proletariat. (Marx 1867, Chapter 27).

Marx’s interpretation birthed a long-lasting historiographical tradition—with both socialist and Tory strains—fixated on the decisive role of agrarian change in the transformation of England: Agrarian Fundamentalism. As we’ve recently discussed, British economic historians for nearly a century cited the role of the Agricultural Revolution in provoking the Industrial Revolution, from Arnold Toynbee to Phyllis Deane. Estonian economist Ragnar Nurske wrote in 1953 that the “industrial revolution would not have been possible without the agricultural revolution that preceded it.” Peter Mathias (1983) emphatically declared that “[t]he break-up of the peasantry was the price England paid for the increased supplies of corn and meat to feed her growing population.” Even W. W. Rostow, an ardent anti-communist, deemed higher farm productivity an essential precondition for “take-off” into sustained economic growth. Douglas Gollin, Stephen L. Parente, and Richard Rogerson (2007) sum up a recent formulation from the growth literature: “improvements in agricultural productivity can hasten the start of industrialization and, hence, have large effects on a country's real income.” The thread binding together the “labor push” school is the notion that efficiency enhancements on farms allow workers to be diverted to higher-value-added activities in urban manufacturing and services. Since, under Engel’s Law, demand for food is income-inelastic, increased output per worker in agriculture entails proportionately greater demand for non-agricultural products. Applied to British history, the exponents of “labor push” theories suggest that the enclosure of the open fields led to amalgamation, private property, and innovation, which in turn supplied the labor force and food for London, Birmingham, and Manchester.

For economic historians Nicholas Crafts and C. Knick Harley (2002, 2004), the shift from small-scale peasant to consolidated capitalist farming in England explains the country’s industrialization, through the release of labor and the consequent transformation of the employment structure. Following Cohen and Weitzmann (1975), who built a “Marxian” model of enclosure based on the assumption that medieval farms were tradition-bound and non-profit-maximizing, they assume that family farms paid average instead of marginal product wages. As a result, agriculture tended to contain vast quantities of redundant labor that could be ejected without lowering output. Enclosure, therefore, would step into the gap by converting peasant plots into capitalist farms that hired and fired based on workers’ marginal products, reducing employment and increasing rents. By redeploying labor to industrial jobs with higher marginal products, land reform would then raise TFP, investment, and GDP. Indeed, Crafts (1987) argued that “the ‘triumph’ of the British economy in the late eighteenth and early nineteenth centuries lay in employing a lot of people in industry and relatively few in agriculture rather than achieving outstanding productivity levels or growth rates in industry taken as a whole.” Simulations by Crafts and Harley show a stark 31 percent reduction in 1841 industrial output and a 22 percent decline in GDP in the counterfactual absence of capitalist farming.

But the simple fact of agrarian change does not necessarily imply that the transformative force came from within agriculture. Farmers respond to commercial incentives, and no greater source existed in partially-open pre-industrial economies than the burgeoning cities themselves. “Labor pull”-type hypotheses emphasize the role of urban areas in authoring the agricultural improvements required to sustain their growth. Perhaps the most famous such is that of Arthur Lewis (1953). He described the original “dual-sector” model, divided between modern capitalist industry and subsistence agriculture. Higher wages in manufacturing, resulting from capital accumulation, attract surplus labor from traditional farming, leading to urbanization. Migration—an elastic supply of cheap labor—allows industrialists to make profits, which are then reinvested in order to sustain the process of structural transformation. Gary D. Hansen and Edward C. Prescott (2002) have elaborated a framework with similar characteristics, in which technological change in manufacturing drives the movement of resources into the modern sector, which lacks a fixed factor of production—like land—to diminish marginal product in the face of population growth. Lewis’s model relies on the existence of surplus labor in agriculture, meaning that the population could be fed by fewer farmers, but this need not be the case; Robert Allen (2003) has cited the additional role of urban demand for food, labor, and raw materials in restructuring agrarian practices. The common thread for the “labor pull” hypotheses is the action of the independent force of urban dynamism in provoking technical and organizational improvements in the countryside. Labor is “released,” without the attraction of high expected incomes, transaction costs will tend to inhibit movement out of the countryside.

Were British peasants pushed or pulled? Were they driven off the farm and into the factory, or did the superior living standards offered in cities lead them to down tools and migrate? The answer is important, because it has implications for the motive force—agrarian capitalism or commercial and industrial growth—in economic development. Of course, any “which came first” question worth its salt should be answered “both.” There was technical change in agriculture that created redundancies, and the high wages on offer in British towns really did draw in emigrants from the countryside. E. A. Wrigley, for example, describes a “positive feedback between urban growth and agricultural advance” whereby urban growth promoted agricultural expansion, which was in turn saved from diminishing returns by improved yields, organization, and land use. After lengthy discussions on this head with Pseudoerasmus and Anton Howes, however, I’ve been convinced that the force of the towns oustripped the influence of autonomous development in the countryside.

If the move to capitalist agriculture was the driving force behind the growth of urban and rural industry, then we should have expected that the wholesale move toward commercial farming and private property resulting from the enclosure movement of the eighteenth century substantially increased efficiency. But enclosed farms were little more productive than their peasant-cultivated open-field counterparts, and both types of rural structure experienced substantial growth. Studies of supposedly “bad” institutions, like Mediterranean sharecropping and the Spanish Mesta, have revealed that the adverse effects were surprisingly mild. Moreover, if agriculture was “releasing” labor in the Marxist Agrarian Fundamentalist sense, one would expect to see a decline in absolute farm employment. But the agricultural labor force actually expanded until the eighteenth century, during which it then remained constant. Female and child employment—rendered redundant by the increase in farm sizes—did decline, but there is little evidence to suggest that they left their villages. The lucky ones found jobs in rural handicraft industry, and the remainder faced structural unemployment, which was becoming an endemic problem in southern England by 1800. There, urban wages substantially exceeded rural wages even controlling for higher costs of living and the lower quality of life in cities, pointing to the existence of widespread surplus (zero marginal product) labor. “By the early nineteenth century,” Allen writes, “the agricultural revolution was producing paupers-not proletarians.” Williamson (1987) shows that such “labor market failures” persisted until 1831, when the urban-rural wage gap was 33 percent. This implied a deadweight loss of only 3.3 percent of GDP, pointing to an inconsequential role for labor release from 1780 to 1831—during which time the gap was smaller. This situation was not unique. Reynolds (2000) posits that agricultural employment took up only half the time available to each early modern rural household, the rest—in large part during slack seasons—being allotted to domestic production. And a study by Karakacili (2004) found “overwhelming” evidence that even at the height of the Middle Ages, with cultivation more intensive than at any other period in British history, additional surplus labor could have been deployed.

Instead, the impetus for urban and proto-industrial growth came from outside agriculture. Allen designated the “New Draperies”—East Anglian woolens exported from London—and the British colonial empire as the prime movers behind rural transformation. As evidence, he points to the time series wage gap between rural and urban workers over the early modern period. Higher earnings in one sector generally imply faster growth, which increases the demand for workers and pushes up their incomes. Differences between town and country wages were “modest” during the fifteenth century, but the gap (especially in London) widened during the sixteenth and seventeenth—coincident with the aforementioned leap in the city’s population. Since British urban incomes were high by international standards (while rural incomes were closer to standard), the disparity between the two occurred not because “enclosures flooded rural labour markets with dispossessed farmers who drove down wages, but rather because the expansion of the metropolis increased demand and pulled up wages.” By the late eighteenth century, the industrial cities of the North had joined in, their factories exerting a magnetic pull on the peasantry.

Relative prices offer strong evidence for the centrality of urban change. Productivity growth in city-based industry should increase the demand for agricultural goods, making them relatively expensive by comparison with manufactured products. Jacob Weisdorf (2006) computed the terms of trade—the price ratio between farm and industrial products—facing British farmers from 1500 to 1800. He documented a steady rise from 1500 to 1650 (by 100 percent), a century of stagnation, and then another doubling during the second half of the eighteenth century. The long-term relative increase in agricultural prices relative to manufactures coincided with the dramatic fall in the rural share of the population, as Weisdorf expected. During London’s sixteenth- and seventeenth-century expansion, farm products experienced the most rapid inflation in the country, and a similar price surge accompanied the upswing in population growth of 1750 to 1800. A more recent study by Alvarez-Cuadrado and Poschke (2011)—suggested by Pseudoerasmus—found that, in a sample of twelve industrial countries dating back to the early nineteenth century, the agricultural terms of trade rose everywhere but the United Kingdom (where increases had occurred earlier) until 1920. The relative price of food was always lowest when the rural share of the population was greatest, and vice versa. Pull factors tended to predominate in countries early in their structural transformations and before tractors and augmented crop yields could substantially improve labor productivity via technology.

Prices were also the mechanism by which cities and rural industry developed the countryside. The expansion of woolen textiles, colonial commerce, and other service and manufacturing occupations raised urban wages, attracting workers from agriculture. Increased demand for food, both from rising incomes and a larger non-agricultural share of the population, then put upward pressure on food prices. This in turn increased the opportunity cost of household production and led farmers to increase their food output, as now-cheaper manufactures could be purchased inexpensively from the cities. Industrial productivity sped the process by lowering the prices obtainable from domestic spinning and weaving, further encouraging specialization in agriculture among the remaining rural population. Voth (2000) documented that the 19 percent decrease in farm employment from 1760 to 1800 was accompanied by a striking 45 percent increase in the number of hours per person spent working in agriculture. Land use data fits this overall pattern. Pseudoerasmus has pointed out that from 1522-1700, the rate of rural labor productivity growth crept upward at .13 percent per annum, while the sown acreage expanded by 70 percent from 1500-1750. Intensive use (and some increase) of the cultivated area, not technical or organizational improvement, was agriculture’s primary response to city growth.

The macro-evidence also confirms this view. Allen (2003) ran a simulated model of the English economy from 1500 to 1800 and found that the enclosure movement made almost no difference to urbanization, agricultural productivity, or real wages during that period. Peasant farmers were capable of following commercial incentives throughout the early modern period, whether via crop choice, labor inputs, or engrossment. Urbanization did have a substantial positive effect on farm efficiency, however, as did the levels of proto-industry and wages. The most significant factors contributing to increasing British town growth, in turn, were productivity in the “New Draperies” and the existence of the empire, the latter of which drove half the increase in city size. These effects, moreover, corresponded to similar forces operating in the leading nations in Western Europe, especially the Netherlands. The overall picture, then, is of agricultural development as a “response” to city growth. The “challenges” of maintaining a “high wage urban economy” forced farmers to increase output and save on labor, tasks accomplished by increasing farm size and enclosing arable open fields for pasture. “Without seventeenth-century success [in woolen exports],” Allen wrote, “wages, agricultural productivity, and city size would all have been lower in 1800.” As Anton Howes has evocatively explained, demand from London revolutionized cultivation and land use choices across the country, from Essex poultry to Cheshire cheese. Broadberry et al (2011) write that “[d]uring the early modern period the powerful pull of metropolitan market demand encouraged more and more farmers to specialise according to comparative advantage” in arable or pastoral cultivation. Urban demand for meat and dairy produce led to the permanent conversion to grass of heavy soils in the east and south-west midlands, where cereal farming was costly. Some technical and organizational improvements probably did occur for truly autonomous reasons, such as the introduction of new crops and cropping choices. But given the pull exerted by British cities on rural labor and output, these developments appear to have been directed from without.

The exciting discussion over the causes of change is far from complete, and I hope that this article adds a dash of color to the emerging picture, painted by Pseudo and Howes, of urban-dominated interactions between city and country in early modern Britain.