In his book, “A Farewell to Alms” (2007) Gregory Clark questions the view that the industrial revolution that occurred in England around 1800 can be attributed to institutional change. He argues that formal institutions only “play at best a minor direct role” in the story of the Industrial Revolution.
Clark suggests that if the World Bank were to assess the institutions in England in 1300 it would find them to be much better than the institutions of all modern high income countries, including modern England (p 148). In medieval England individuals already enjoyed a high level of security for their persons and property, tax rates were low, and markets for goods, services, capital and land were generally free.
Another piece of evidence that Clark produces in support of his contention that institutions played a minor role is the failure of countries such as India to experience high rates of economic growth during the colonial era, despite being governed under basically the same institutions as Britain.
Clark argues that cultural change offers a better explanation for the location and timing of the industrial revolution. He has assembled an impressive array of evidence to support his view that the extraordinary fecundity of the rich in England in the centuries prior to the industrial revolution resulted in the embedding of bourgeois values into the culture. The poor produced fewer children because they tended to postpone marriage until they had the means to support a family. Methods of population control used in other parts of the world during that period did not have the same bias toward survival of the wealthy.
The mechanism of cultural change that Clark puts forward provides a plausible explanation of why the industrial revolution did not occur sooner than it did, but it seems to me that he still has a problem in explaining why it occurred when and where it did. In order to explain this we need to be able to explain why productivity-increasing innovations occurred when they did (particularly in the English textile industry) and why England had a government that was inclined to allow these changes to occur despite the disruption of existing modes of production and the lifestyles of many people.
I think it might make sense to construct a theory along the lines that specialization was necessary for innovations of the kind involved in the industrial revolution. In order to obtain the benefits of specialization it was necessary for influential groups in the society to have some understanding of the benefits obtainable from international trade (for example, exporting textiles and importing food). They also needed sufficient understanding of the benefits of free markets to allow disruptive innovations to take place. For this to occur, ideas favouring free markets - such as those of Adam Smith in Wealth of Nations - would need to be highly influential.
An obvious objection to this theory is that the necessary free markets, property rights etc were already established well before the time of Adam Smith. Yet, if that is so then how is it possible to explain the strength of the Luddites (machine-breakers) in opposing innovation. Gregory Clark provides a table in his book documenting the fate of major innovators in the textiles sector: three of the six innovators listed had property destroyed or were forced to flee by machine-breakers (p 235). At the time it was claimed that these disturbances had no parallel in history since the time of Charles the First.
The government took the threat to order posed by the Luddites seriously and passed legislation to tighten security arrangements. A less enlightened government might have chosen an alternative course to respond to social unrest, namely preventing discouraging socially-disruptive innovations – and thus delayed the industrial revolution.