Voices
When did ‘the world economy’ start? There is, as you can imagine with all academic topics, a robust debate on when globalization began. One school of thought is that the key moment was 1492 or within the century thereafter, which connected the Americas with the rest of the planet, started the Columbian Exchange, and made the world as we know it.
Others argue that globalization did not begin until after the 1820s when trade and other flows – especially migration – affected the everyday lives of ordinary people like never before. The key driver of change in the 19th century was the development of new steam-based modes of transport.
I teach my students that ‘the world economy’ began all the way back in the 4th millennium BCE, when humans learned how to tame horses and use them for transport. The travel time from Budapest, at one end of the steppe, to Beijing at the other end shrank as a result of this extraordinary technological leap forward – from at least a year on foot to under three months on horseback.
It is, of course, far more fruitful to think of each of these seismic shifts in the world economy not as “the” beginning but instead a new phase in the development of the world economy over time. Note that in each case, though, transport is at the heart of a monumental change in human well-being.
Kevin O’Rourke and Jeffrey Williamson, among others, argue that – in terms of effects on how we live our lives – nothing compares to what happened in the 19th century. From the 1820s to the 1910s, a wave of globalization started that was only slowly and tentatively rebuilt after the Second World War.
Steam was at the heart of this transition – both steam-shipping and railroads. Indeed, it is arguably the case that overland transport in the early 19th century was not that dissimilar to overland transport 30 or 35 centuries earlier. It facilitated economic integration across land that completely reshaped economic structures.
What impact did rail have on the Irish economy? And what does that mean for how we think about economic development on this island over the rest of this century? In a new working paper with Alan Fernihough, of Queens University Belfast, we attempt to quantify the economic effects of rail on Ireland during the 19th century.
The flow of people
Ireland represents a reasonably unique setting in which to study the impact of rail. There have been a number of studies in recent years, quantifying the effects of rail on the internal economic development of economies as diverse as the US, India, and Prussia. In most cases, they find significant economic effects. At a time of deepening globalization, rail reshaped these large economies.
In Ireland’s case, though, the most visible facet of globalization at this time was not industrialization – as it was in Britain – but rather emigration, the flow of people – rather than goods – across borders. To what extent was rail connected to, or indeed responsible for, Ireland’s deindustrialization and mass migration during the late 19th century?
To do this, we digitized data on all train lines and stations, both spatially (their location) and their opening (and closure) dates. By combining this information with data on the prior transport network, in particular waterways (such as canals) and roads, it is possible to examine how long it took to get from one part of the country to another.
The literature that studies the economic impact of rail is increasingly using what is known as a ‘market access’ approach. So, instead of categorising Census districts as zeros if they did not get access to rail and 1s if they did, the exercise is instead to calculate how easy it is to get from each district to every other district in the country, at each point in time.
Where rail dramatically reduces the travel time (or cost) between a district and another heavily populated district, this is an improvement in market access. Summing that up across all other districts gives a measure of how well connected each of the 3,400 districts in the country was in 1841 – before the rail network had begun in earnest – and each decade thereafter until 1901, when the rail network was effectively at its peak.
This is effectively where the research has evolved in recent years. But in Ireland’s case, it’s insufficient to stop there. Rail did more than just connect Irish districts to themselves – what you call ‘domestic market access’. It also connected Irish districts to the rest of the world, in particular through Ireland’s main ports.
This ‘international market access’ was true not just for goods, in particular the beef, butter, and other agricultural goods that Ireland specialized in in the later 19th century, but also for people. In truth, Ireland’s main export in these decades was not agricultural produce but people – as the Great Famine had created unprecedented networks in a range of growing cities and thus connected Irish people to urban labour markets around the world.
So we repeated the exercise but this time focusing not on access to all other districts but in particular to Ireland’s main ports, through which the vast majority of the country’s goods and people left in these decades. This is shown in the pair of maps below. While the overall patterns are similar, there are important differences between changes in domestic market access and access to international ports.
In particular, the strongest gains in domestic market access were to be found on the lines going from Dublin to Galway and from Dublin to Limerick and Cork, with further gains in the northeast. But improvements in port access were greatest in the southwest, in particular in Clare and Limerick.
Doing this second step was key to resolving an early mystery in the project: on average, access to rail looks like it had no impact on average, positive or negative, on a district’s population. But splitting the impact of rail into its two components – domestic and international market access – revealed two competing forces at work.
Two opposing forces
In these types of studies, where you are trying establish causal effects, not just correlations, a variety of methods and robustness checks are typically used to make sure the wrong conclusion is not drawn. But in our preferred specification, a 10 per cent improvement in market access brought about a 3 per cent increase in population – while a 10 per cent improvement in port access led to a 14 per cent fall in population.
As domestic market access improved a lot more than access to ports, the overall effects cancelled each other out: while market access was pushing Ireland’s population up 15 per cent, access to ports was pushing it down by 16% meaning that a study that didn’t distinguish between the two would not be able to reject the hypothesis of rail having no effect on Irish population – even as it was having a huge effect elsewhere.
We examine not just changes in population – which fell in this period – but also changes in land values, which were measured regularly from the mid-19th century, and which rose. The same opposing effects occur: a 10 per cent increase in market access pushes up land values by 3.5 per cent but the port access pulls land values down by almost 10 per cent. Here, the net effect is positive, as market access improvements explain almost 60 per cent of the overall increase in land values, while port access offsets just 40 percentage points of that effect.
Just because in net terms, rail did not provide the same dramatic boost to Ireland’s economy that it did in other countries does not mean that all counties had a zero effect on average. To do this, we look at counties – a level between the very small Census districts and the country as a whole. We find a clear pattern, where counties that had a larger domestic effect than port effect were those with much less emigration. At one end of the spectrum are places like Carlow and Down, which saw very little emigration, while at the other end were counties such as Clare and Kerry, where port access drowned out domestic market access and emigration rates were highest between the Great Famine and the Great War.
The same pattern can be seen in agricultural statistics. In the first half of the 19th century, Ireland had benefited from the Corn Laws, a set of tariffs at the UK level that gave it preferential access to the growing consumer markets of Britain. Ireland specialised in making oats (and oatmeal) as well as wheat (and flour) before the Famine – but did so on a foundation of potatoes, which were used to feed many humans and animals involved in making tillage goods.
After the Famine, the potato was clearly no longer a reliable foundation for the economy and, together with changes in the relative price of food items, much of Ireland switched to another source of export revenues, a less labour-intensive one – pastoral goods, in particular beef and butter (as well as live animals).
The final graph in this piece shows the link between rail and this transition within the agricultural sector. Places that rail connected more to other parts of Ireland, rather than to other parts of the world, saw far less of a switch from tillage farming to pastoral farming. But again, places like Limerick, Clare, and Kerry – which had the greatest boost in access to international ports – saw the biggest impact.
Rail’s role today
One last element of the analysis – and the one that hints at how this all relates to today – is looking at things not by district or county and not at the national level but at a provincial level. The effects in Ulster were different from those in the three other provinces. So while port access pushed down population growth in Leinster, Connacht, and Munster, it had the opposite effect in Ulster. This is consistent with Ulster being the most industrialized part of the country – in other words, in Ulster, the impact of rail was similar to in Britain, Prussia, the USA and elsewhere, because its main economic activity was labour-intensive industry, not land-intensive agriculture.
What does all this mean for the Irish economy in the 21st century? Its 19th-century predecessor learned the hard way that internal mobility is not the only factor that matters when considering the impact of transport investments.
Ireland in the 21st century is a very open economy from a labour market perspective – maybe not uniquely so in the high-income world but certainly in the top handful of economies that rely on people being able to move in and out easily.
That mobility works in Ireland’s favour, on average. When times were bad, Ireland was able to keep wages up and prevent unemployment from swamping the government finances, by shipping people overseas – earlier to the USA and then later predominantly to Britain.
But over time that became less of a release valve and more like the core economic activity of the country – at the expense of building any internal economic mass. Between the 1840s and the 1980s, Ireland typically lost five per cent of its population over the course of a decade, making it the only country on Earth with a smaller population now than two centuries ago.
Since the 1990s, though, Ireland has switched from a people-exporter to a people-importer, as it found a new business model – acting as a gateway for global firms to the European market. This means new clusters have emerged, in activities like pharmaceuticals, medical devices, financial services, and most recently online services.
In other words, Ireland in the 21st century is less like Ireland in the 19th century and more like the rest of the world – with an economy where clustering and agglomeration matter. Of course, rail now is just one of many means of transporting – but, for internal transport, it brings far less congestion than its main counterpart, road transport. The push for new rail services in the 21st century makes sense given that.
But ultimately the far greater mobility of skill means that there is no guarantee that if you build it, they will come. As the case of nineteenth-century Ireland shows us, rail is an enabler when the underlying fundamentals for population growth are there – but it is no guarantee of growth.
Further reading:
The rail theory of everything – part two: What’s stopping us from fixing housing for good
