Why is Switzerland so rich? The role of early electricity adoption (NR Online Session 2)

by Björn Brey (University of Nottingham)

This research is due to be presented in the second New Researcher Online Session: ‘Industry, Trade & Technology’


After its first commercial usage in 1879, Switzerland experienced a drastic increase in electricity production reflected in it having the highest per capita production in the world by 1900. During the same time period, Swiss GDP growth accelerated considerably compared with other industrialising countries (see Figure 1).


Figure 1: Real GDP per capita in 1990US$ across leading industrial countries from 1850-1970. 1879 reflects the first commercial usage of electricity in Switzerland.

Source: Maddison Project Database, version 2018


In line with this observation, the diffusion of general-purpose technologies (such as the steam engine, electricity and information technologies) is seen as a main driver of economic growth at the global level. But much less is known about the local effect of adopting these technologies. This raises the question to which extend the early adoption of electricity contributed to industrialisation and economic development in the short and long run?

My research, to be presented at the annual conference of the Economic History Society in Oxford in April 2020, answers these questions by analysing the impact of the early adoption of electricity across Switzerland on economic development through exploiting the quasi-random potential to generate electricity from waterpower.

My study finds that the adoption of electricity between 1880 and 1900 considerably increased the contemporaneous manufacturing employment share. This initial effect persists up to today with the average district observing a 1.5% higher manufacturing employment share in 2011 due to the adoption of electricity up to 1900.

This effect of early electricity adoption on employment shares in agriculture, manufacturing and services in the long run is depicted in Figure 2. Notably, the growth in manufacturing employment observed can be attributed in particular to chemical industries, which relied on access to electricity for newly developed production processes.

This effect on economic development is also observable in incomes across districts with a one standard deviation higher exposure to electricity between 1880 and 1900 leading to a 1949 Swiss Francs ($2004) higher yearly median income in 2010.


Figure 2: Estimated IV-coefficients on the effect of a one horsepower increase in electricity production 1880-1900 on the change in the employment share across sectors from 1880 to the respective year as well as the pre-trend period 1860-1880.



For the analysis, I newly digitised historic information on electricity production by waterpower plants across the whole of Switzerland and construct geocoded data on all potential waterpower plants that could be built as estimated by a plan of Swiss government engineers at the time.

These data are illustrated in Figure 3. Combining this information allows me to use the potential to produce electricity across districts to infer the causal impact of electricity adoption on economic development across Switzerland.


Figure 3: The map shows the exploited and potential waterpower in Switzerland in 1914. Blue-dots represent exploited waterpower, red-dots represent potential waterpower, both of existing natural sources and grey-dots represent existing and potential water-power plants that requires the building of an embankment dam. The sites are coded into 5 categories: 20-99HP, 100-999HP, 1000-4999HP, 5000-9999HP and above 10000HP.



These results provide new insight into how early access to electricity at the end of the nineteenth century helps to explain differences in economic development today. Interestingly, the long-run effect of electricity appears not to be explained by persistent differences in electricity consumption across Switzerland after the roll-out of the electricity grid in the 1920s, but rather due to increased investment into education that was complementary to the newly industries that had newly developed.






The Impact of the Central African Federation on Industrial Development in Northern Rhodesia, 1953-1963 (NR Online Session 2)

By Mostafa Abdelaal (University of Cambridge)

This research is due to be presented in the second New Researcher Online Session: ‘Industry, Trade & Technology’


Northern Rhodesia joined Southern Rhodesia and Nyasaland to form the Central African Federation (CAF), which lasted from 1953 to 1963 (Figure 1). During this period, two contrasting images were formed about the Federation’s economic prospects.   The first depicts the exploitation of the revenue surpluses of Northern Rhodesia in favour of Southern Rhodesia, (Figure 2). The second typifies Kitwe, one of the main mining-town in the Copperbelt in Northern Rhodesia, as the most rapidly developed town in terms of industrial and commercial sectors (Figure 3). My research examines whether the Federation stimulated or undermined manufacturing growth.


Figure 1: Map of the Central African Federation, 1953-1963

Source:  Papers relating to Central African Federation [1952-1958], British Library, EAP121/1/3/16, https://eap.bl.uk/archive-file/EAP121-1-3-16

This paper argues that, despite protests to the contrary, manufacturing in Northern Rhodesia grew rapidly under the Federal tariff and might be attributed to the natural protection for some industries against the high costs of transport goods from remote suppliers and to the Federal tariff against South Africa imports.


Figure 2.  Cartoon published by Central African Post mirroring one of the readers’ views on the Federation

Source: Papers relating to Central African Federation [1952-1958], British Library, EAP121/1/3/16, https://eap.bl.uk/archive-file/EAP121-1-3-16

Figure 3: Kitwe: A model of a mining town in the Copperbelt

Source: NZA, ZIMCO,  1/1/3/ 10, From Mr Gresh the Managing Director of the Northern Rhodesia Industrial Development Corporation Ltd., to the Managing Director of Marcheurop, Brussels, 5th July 1962.


My research offers new insights into the rapid growth of the market in Northern Rhodesia. Specifically, to what extent did local industry respond to the mining-led economic expansion in Northern Rhodesia.  The first census of industrial production occurred in 1947, which provides a benchmark against which to measure growth rates before and during the Federal tariff system. Industrial production in Northern and Southern Rhodesia grew from 3.3 percent to 6 percent, and from 12 percent to 16.3 percent, respectively, between 1954 and 1963.  The net value added of manufacturing in Northern Rhodesia grew from less than £1 million in 1947 to £6.40 million in 1955, then it reached £12.68 million in 1963. Southern Rhodesia witnessed a significant increase in the net value added of manufacturing, from £20 million in 1953 to £50.2 million in 1963.

The composition of manufacturing output before and during the Federation reveals that rapid growth in Northern Rhodesia’s production of food, drinks, textiles, and chemicals — which constituted the majority of domestically manufactured goods (Table 2).

Table 2

Net value added of manufacturing output in Northern Rhodesia (£ million, nominal)

Sector/Year 1947 1955 1963
Food, drink and tobacco 0.20 1.56 5.13
Textiles, clothing, footwear 0.019 0.14 0.43
Metal engineering and repairs 0.082 a 1.58
Non-metallic minerals a a 1.83
Wood industries 0.21 0.46b 0.85
Building materials 0.010 c c
Transport equipment a 1.36 1.43
Printing and publishing 0.11 0.36 0.64
Others d 0.071 2.53 0.80
Total 0.710 6.40 12.68
a) Included in ‘others’

b) excluding furniture

c) building materials excluded from manufacturing sector since 1953.

d) includes manufacture of tobacco, made-up textiles other than apparel, furniture, retreading of tyres, chemicals, non-metallic minerals, metal industries other than transport equipment and other, not elsewhere specified (n.e.s.) in 1955, leather and rubber products, chemicals, pottery and other (n.e.s.) in 1963.

Sources: TNA CO 798/24, Blue Books of Statistics, 1947; NAZ, Monthly Digest of Statistics, Central Statistics Office, Lusaka, December 1955, 1964; Young (1973).


My research suggests a more nuanced interpretation is required of the importance of Northern Rhodesia to the South. The Federation curbed Northern Rhodesia’s development of specific industries that existed in Southern Rhodesia, especially steel and textiles, thereby disrupting the optimum allocation resources to industrial production in the South.

However, Northern Rhodesia’s net value added of manufacturing output benefited from the application of Federal tariffs in certain consumer industries that grew rapidly, such as processed foods and drinks. Consequently, the Federation was beneficial to the growth of manufacturing in Northern Rhodesia (Zambia).



Mostafa Abdelaal


How to solve the eternal credit problem? (NR Online Session 1)

By Ruben Peeters (Utrecht University)

This research is due to be presented in the first New Researcher Online Session: ‘Finance, Currency & Crisis’.


The decreasing numbers of new covid-19 cases in the EU has allowed governments to plan for restarting public and economic life. The plans often place a lot of emphasis on ensuring funding for SMEs. This is important because, while SMEs make up the majority of firms and are drivers of innovation and growth, they often have insufficient access to credit and are the first to suffer during crises. How can we solve this problem and what can leaders learn from history?

When studying the history of SMEs, we find recurrent complaints about insufficient access to credit. The contemporary literature on SME financing does not pay a lot of attention to the continuous resurfacing of problems. But why do these problems keep recurring? Why can financial systems not simply solve them?

I argue that while these complaints are all seen as indicating “SME funding problems”, they in fact often signal different problems, each of which requires a specific solution. To prove this point I study the history of Dutch SMEs between 1900 and 1940. During this period small firms associated in lobby-groups and attempted to identify and remedy small firms funding problems.

Picture 1
Interior of perfumery “Maison Rimmel” with sales woman behind the counter, Amsterdam 1913.  Source: Spaarnestad Foto, SFA002000477.

Looking at the financial landscape in the Netherlands at the turn of the twentieth century, small firms had several options to obtain debt funding, depending on the size of the loan and the type of collateral that firms could offer. Credit was not provided by joint stock banks as is usually the case today, but rather specialized local institutions, each having a different target audience or segment. A small firm with collateral needing a medium-size short term loan could go to a credit union. A small firm in need of a small short-term loan but lacking collateral could consult a Help Bank which accepted guarantors to secure the loan. And most firms made do with private savings, retained earnings, and trade credit.

The first thing that associations did was to improve the available information about small firms and small firms’ bookkeeping capabilities. This made it easier for firms to give an overview of their financial situation and reduce screening costs for financial institutions. Secondly, associations set up banks geared towards SMEs (middenstandsbanks), who provided small to medium size, short term loans. These banks received government subsidies to serve as wide a group as possible.


Picture 2
Branch of the Middenstandsbank of Limburg
Source: Yearly Report of the Middenstandsbank of Limburg, 1920
(Dutch National Archive: 2.25.68/9184)

Despite these initiatives, crisis situations created new problems that the middenstandsbanks were incapable of solving. During the First World War, suppliers suddenly wanted to be paid cash. Many small firms got into trouble and needed credit to pay suppliers and the middenstandsbanks demanded collateral, which many small firms did not have. The government stepped in and guaranteed the losses on these loans.

A similar situation occurred during the Great Depression when firms needed credit to survive the crisis, but financial institutions did not provide this. By then the Dutch government had control over the middenstandsbanking-system and they set up a patchwork of credit guarantees, each with its own target segment in terms of size, sector, or use. This ensured that viable firms, no matter how small or informationally opaque, had access to credit and that in case those firms grew, they could easily graduate into a higher segment. This system remained in place until the early 1970s and contributed to the post-war economic boom by ensuring credit to small firms, even when monetary policy was restrictive.

The elephant in the room was the position of the government. I found that in every example, the Dutch government was instrumental in getting the initiative off the ground and running through subsidies. The costs of providing affordable credit to informationally small firms are simply too high. Unfortunately, subsidies without oversight created multiple problems and situations of abuse and excessive risk-taking. These negative experiences made the Dutch government increasingly opt for more direct intervention in credit markets, with the guarantee system as the pinnacle.

This historical case study provides some ideas on what governments can do to help SMEs weather the Great Lockdown:

  1. Take action
  2. Design specific programs with the situation of the target group in mind
  3. Mentor small firms and help them prosper
  4. Provide government guarantees on loans funded with private money (This keeps down strains on government budgets)
  5. Align interests between the government and lenders, to prevent excessive risk-taking

Italy seems to be leading the way.[1]



[1] https://som.yale.edu/blog/italy-expands-and-updates-its-credit-guarantee-programs

Ruben Peeters

Twitter: @RLMPeeters


The international role of sterling before the EU: Britain operated a captive market for sterling (NR Online Session 1)

By Maylis Avaro (Graduate Institute, Geneva & University Libre de Bruxelles)

This research is due to be presented in the first New Researcher Online Session: ‘Finance, Currency & Crisis’.


Pre-EU sterling was of a zombie international currency, maintained by British authorities through threats and controls on the Commonwealth countries.

Queen Elizabeth II and the Prime Ministers of the Commonwealth Nations, at Windsor Castle (1960 Commonwealth Prime Minister’s Conference) @wikicommons.

Post-Brexit Britain is looking for new partners to build new special relationships and replace EU single market. Eurosceptics from the Conservative party have urged the UK government to focus on the British Commonwealth[1]. But my research shows that pre-EU monetary relations between the UK and Commonwealth countries were built at the advantage of the British economy and investment in sterling assets inflict losses to Commonwealth central banks. Post-WWII international role  of sterling in the sterling area was artificially maintained by British authorities through capital controls, commercial threats and economic sanctions. Commonwealth countries fought to disentangle themselves from the UK economy and sterling. At the light of these new results, it seems difficult to make the sterling area rise from the ashes.


A zombie international currency

Sterling was the dominant international currency in the 19th century but lost it to the dollar over the course of the 20th century. Post-WWII, Western economies lost interest in sterling which remained mostly a regional currency, used in the sterling area – a network of countries tying their currencies to sterling, including most of Commonwealth, British Empire, and newly independent colonies.

The regionalization of sterling was immediate after the war, as reflected in its presence within central banks’ reserves portfolios displayed in Fig.1. In Western European central banks, sterling represented less than 20% of their reserves while sterling area countries kept more than 50% of their reserves in sterling throughout the fifties and sixties.

Figure 1: Shares of sterling in central banks’ reserves (gold + foreign exchange)
Reading: In 1955, sterling represented 89% of the official reserves of Overseas Sterling Area and 6% of the official reserves of Western Europe countries.
Source: see author’s working paper.


Countries who could access alternative foreign exchange reserves, such as Western Europe held only very limited amounts of sterling because the UK didn’t have the economic fundamentals of an issuer of international currency: its GDP per capita was growing slower than the rest of Europe, its share in world trade was going down, its central bank ran low reserves and it faced military defeats in its collapsing Empire.


The sterling area as a captive market

If sterling was a bad investment, why would Commonwealth and Middle East countries central banks keep most of their reserves in sterling? I argue that British authorities operated the sterling area countries as captive market for sterling. They artificially maintained holdings of sterling through capital controls, commercial threats and economic sanctions. Exiters of the sterling area, such as Egypt in 1947 or Iraq in 1959 faced a full freeze of their assets held in London, imposition of new tariffs or a limitation of access to the London capital market. Large sterling holders, such as Australia or Ireland tried to decrease their exposure to sterling by secretly converting some of their sterling reserves.

By preventing free convertibility out of sterling, British authorities could maintain an over-evaluation of sterling as the Bank of England ran very low reserves after the war. British policymakers described the sterling area as a bank with insufficient assets to meet its deposit liabilities. The area eventually collapsed after the 1967 sterling devaluation and Britain adhesion to EEC.

My study on the decline of sterling suggests that, at the time of Britain accession to the EEC, economic links with its former colonies had decreased dramatically, in spite of British efforts. Britain’s next ‘special relationship’ partners may not lie among them.



[1] “Theresa May to offer Commonwealth post-Brexit bonus” https://www.ft.com/content/2fbb7964-3e3c-11e8-b9f9-de94fa33a81e


Maylis Avaro


Twitter: @M_Avaro

Website: maylisavaro.info


New Researcher Online Sessions


A number of New Researchers who had been due to present their work at the 2020 EHS Annual Conference will soon be discussing their research in a series of online sessions.

Some of these New Researchers have also agreed to share some of their research in the form of blog posts and videos, which will be made available prior to each online session. All available materials will be linked below.

Please note that these online sessions are not a replacement for the EHS Annual Conference, and new researchers are made up of postgraduates and early career researchers.

Sessions will be held every Wednesday, between 15th July and 19th August.

These sessions will last no longer than 1 hour and 15 minutes, with time for questions and discussion at the end. Presenters are appearing from across the world, and times have been chosen to best accommodate this.

We welcome and encourage attendance from anyone interested in economic and social history. All sessions are available for members and non-members of the EHS.

The following sessions are available, all GMT+1 (current London time):

  • Finance, Currency & Crisis – 15th July @ 4:30pm
    • Ruben Peeters (Utrecht University) – ‘Solving the perennial small firm credit problem: The case of the Netherlands, 1900-1940’
    • Maylis Avaro (Graduate Institute, Geneva & University Libre de Bruxelles) – ‘Zombie International Currency: The Pound Sterling 1945-1973’
    • Ryan Smith (University of Glasgow) – ‘The Middle East and the 1982 debt crisis’
  • Industry, Trade & Technology – 22nd July @ 10am
    • Mostafa Abdelaal (University of Cambridge) – ‘Elusive promises: The impacts of the Central African Federation on industrial development in Northern Rhodesia, 1953-63’
    • Björn Brey (University of Nottingham) – ‘The long-run gains from the early adoption of electricity’
    • Alexander Urrego-Mesa (Universitat de Barcelona) – ‘Food Security, Trade and Violence: From the First to the Second Globalization in Colombia 1916-2016’
  • Human Capital & Development – 29th July @ 5pm
    • Kathryne Crossley (University of Oxford) – ‘Honest, sober and willing: Oxford college servants, 1850-1939’
    • Matthew Curtis (University of California, Davis) – ‘The quantity and quality of pre-industrial children: Evidence from Québécois twins’
  • Equality & Wages – 5th August @ 9am
    • Tamer Güven (Istanbul University) – ‘Wages in the Ottoman textile factories, 1848-99’
    • Theresa Neef (Freie Universität Berlin) – ‘The Long Way to Gender Equality: Gender Differences in Pay in Germany, 1913-2016’
    • Yuzuru Kumon (Bocconi University) – ‘The deep roots of inequality’
  • Government & Colonization – 12th August @ 3pm
    • Matthew Birchall (University of Cambridge) – ‘Settler capitalism: Company colonisation and the rage for speculation’
    • Luise Elsaesser (European University Institute) – ‘Coordinating decline: Governmental regulation of disappearing horse markets in Britain, 1873-1957’
  • Spending & Networks – 19th August @ 12pm
    • Xabier García Fuente (Universitat de Barcelona) – ‘The paradox of redistribution in time: Social spending in 54 countries, 1967-2018’
    • Andres Mesa (Università degli Studi di Teramo) – ‘The Diaspora of a Diaspora: The Cassana and Rivarolo family network in the Atlantic, 1450-1530’