Piracy and smuggling helped spark Britain's Industrial Revolution

Why did the Industrial Revolution begin in Britain and not elsewhere? Was it because Britain was an empire with resource-rich colonies? The economic liberalism of the British? Or factors “at home” like institutions, property rights, private property and abundance of coal mines in the North?

All of these factors contributed some extent. But if we think of other places or times with similar underlying features, such as Florence during the 16th century or Holland during the 17th century, we can see that the Industrial Revolution did not develop for these reasons alone. So, there must be more to the story, something that - together with the other factors - produced the Industrial Revolution.

A crucial, underappreciated factor was American demand from the Spanish territories and the associated piracy and smuggling in that part of the world. Without smuggling, the Industrial Revolution may never have happened.

Despite their historical reputation, most pirates did not live off hunting and pillaging ships. Pirates were largely dependent on attacking ports and settlements and facilitating illegal trade. Piracy was very profitable during the 16th and 17th centuries. But, once the British colonies flourished, piracy started being prosecuted more systematically. Traditional piracy declined by the end of the 17th century, leading the pirates to refocus their efforts on the booming smuggling industry. This lead to the Golden age of smuggling.

After the Treaty of Utrecht (1713), Britain was issued an Asiento licence by the Spanish Crown, allowing them to trade with Spanish territories through the South Sea Company - with 4,800 slaves annually for 30 years, and one cargo ship per year. Jamaica was the principal base for operations. This English company was quite profitable, even more so when it was done illegally. It was thought to control as much as one-third of the contraband in the Americas.

Precisely measuring the amount of smuggling is impossible - but historians have estimated that illegal trade by the South Sea Company reached at least 5.5 million pounds between 1730 and 1739. Additionally, there are the unknown figures of what was smuggled by third parties (directly or indirectly related to the South Sea Company), which would increase the total numbers. This is an extraordinarily high amount of money: 5.5 million pounds in 1713 is equivalent of 150 billion pounds today. So we can see the huge impact on the Spanish/American economy as a direct consequence of the contraband of a company like the SSC.

But let’s also consider the economic impact for Great Britain.

What happened when the SSC lost its right to trade in the Spanish territories? Well… the smuggling continued. The area between the Campeche Bay and Costa Rica became a home for illicit trade. It was in the region of Mosquito: 50 to 60 vessels annually sailed from Jamaica towards Belize and during 1762, the year when La Habana was occupied by the British, 96 merchant ships docked there instead of the 3 as was usual. Additionally, the Río de la Plata and the route of Buenos Aires were identified as an ideal way to introduce English manufactures, that would easily reach Peru and Chile.

So while Spain based the commerce between the peninsula and the American provinces in a monopoly system that benefited the monarchy, Sevilla and Cádiz but not much more, Great Britain looked to satisfy the American demand through legal trade, but also more profitably through smuggling.

Between 1740 and 1760, we already find the beginnings of the Industrial Revolution. But in the same time frame, there were other contributing factors:

  • The Seven Years War (1756-1763), that meant Great Britain annexed Canada from France, and the decline of the French presence in the Caribbean.

  • The opening of four free British ports in Jamaica in 1765.

  • The American War of Independence (1776-1783), which meant for GB the loss of the colonies.

  • The publication of An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith in 1776 and the spread of economic liberalism.

Taking into account this context, if the Industrial Revolution was already ongoing when commerce started being “liberalized” with America opening ports, and when the colonies took their independence, then it doesn’t appear that the Industrial Revolution was caused by economic liberalism alone (even if, for sure, the ideas contributed to its acceleration). Nor is it accurate to say that the Industrial Revolution was caused by the circumstances of the colonies in the north.

So, then, why did the Industrial Revolution happen in Great Britain? Of course, contributing factors as already mentioned as well as money from America used to invest in industries/machinery are to be taken into account. But, above all, it was because Great Britain was the nation that answered most effectively to the existing American demand.

Great Britain detected the growing unmet demand and responded, and it was through regular smuggling that the demand could be fulfilled. This commercial opportunity, provided by the market and the smuggling, led Britain to develop production capabilities and capacity that was essential for the Industrial Revolution.

Dr Lorena Carrasco is at the Universidad Francisco Marroquín (UFM) in Guatemala. She has a PhD in Medieval History and is a member of London Royal Historical Society and Asociación Española de Amigos de los Castillos.