Abstract
This chapter examines the assumption that there is a relationship between innovations and economic crises , with a particular focus on the economic crisis that began in 1873 and continued until 1879 in the USA and until 1893 in Europe . The following question is examined: Is there a relationship between innovations and the economic crisis of 1873–1893? The purpose of the chapter is to determine which innovations triggered the social mechanisms that led to the economic crisis in 1873.
The findings that emerge are that the following innovations fed through social mechanisms that led to the crisis : Railway construction (economic, technological innovation ); new credit facilities (economic and financial product innovations); the electric telegraph (economic product innovation ); the steam engine (economic product innovation); the unification of Germany (institutional, political innovation ); and free trade , a political idea that emerged as the dominant economic model in the 1850s and 1860s (institutional, cultural innovation).
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Notes
- 1.
Landes (2003: 1).
- 2.
Landes (2003: 6).
- 3.
Taylor (1951).
- 4.
Hoffmann 1970 (first published in 1955).
- 5.
In 1973, Wassily Leontief received the Nobel Prize in economics for developing input-output theory.
- 6.
The criticism of Hoffmann’s analysis is that the data used for input-output analyses is poor. Hoffmann in the preface to the latest edition has complemented the data with a fifty-page preface.
- 7.
Hobsbawn (1968: 103–104).
- 8.
Hobsbawn (1968: 105).
- 9.
Hobsbawn (1968: 105).
- 10.
Hobsbawn (1968: 107).
- 11.
Hobsbawn (1968: 108).
- 12.
Johannessen (2014a) (IJIM - forthcoming). Prospect theory is used to explain the relationship between innovation and economic crises .
- 13.
Hobsbawn (1968: 88).
- 14.
Hobsbawn (1968: 88).
- 15.
Landes (2003: 90–100).
- 16.
Hobsbawn (1968: 89).
- 17.
For Europe see Landes (2003: 90–100; For USA see Hoffmann 1970: 3–9).
- 18.
Hobsbawn (1968: 88) places the second phase of the industrial revolution in the period 1840–1895.
- 19.
Landes (2003: 108).
- 20.
Various forms of alkali were used. Before the development of the chemical industry forests were cut down so that soda could be extracted from the ashes of the burnt wood. This bottleneck in production was removed due to processes used in the chemical industry in the late 1860s, although the expertise stems from around 1823 (Landes 2003: 110).
- 21.
Landes (2003: 114).
- 22.
Landes (2003: 116).
- 23.
Landes (2003: 117–119).
- 24.
Landes (2003: 122).
- 25.
Landes (2003: 122).
- 26.
Landes (2003: 122–123).
- 27.
Hobsbawn (1968: 90).
- 28.
Hobsbawn (1968: 92), second footnote.
- 29.
For an elaboration of these three innovations in steel production , see Hobsbawn (1968: 95).
- 30.
Hobsbawn (1968: 95).
- 31.
Hobsbawn (1968: 96).
- 32.
Hobsbawn (1968: 144).
- 33.
Hobsbawn (1968: 97).
- 34.
Hobsbawn (1968: 100).
- 35.
Hobsbawn (1968: 199).
- 36.
Hobsbawn (1968: 93).
- 37.
Landes (2003: 125–127).
- 38.
Landes (2003: 129).
- 39.
Hobsbawn (1968: 93).
- 40.
Hoffmann (1970: 13; 18–19 tables).
- 41.
Hoffmann (1970: 4).
- 42.
Hobsbawn (1968: 88).
- 43.
Landes (2003: 193).
- 44.
Landes (2003: 196). There was a great deal of innovations from this period that were not used until later periods. These are discussed in relation to the crisis in the 1920s.
- 45.
Landes (2003: 196)
- 46.
North (1993, 1994, 1997).
- 47.
Landes (2003: 198).
- 48.
Some of the laws that promoted internal trade in Europe were those that removed restrictions on the waterways of Europe, such as the Rhine, Danube, Elbe, as well as canals, and the straits of the Baltic Sea. A single currency system within the various European countries also made trade easier. Reduction of tariffs in Europe also promoted trade (Landes 2003: 200)
- 49.
Landes (2003: 200).
- 50.
Landes (2003: 231).
- 51.
Landes (2003: 233).
- 52.
Hoffmann (1970: 67).
- 53.
Hoffmann (1970: 47–48).
- 54.
Hoffmann (1970: 67).
- 55.
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Johannessen, JA. (2017). The Long Depression: 1873–1893. In: Innovations Lead to Economic Crises. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-41793-6_5
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DOI: https://doi.org/10.1007/978-3-319-41793-6_5
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