ETH, STP

BSTP: Sailships to steamships and Limited Liability.

The move from sail ships to steamships was driven beyond the technological developments by mail delivery (communication) and transportation of people. Sail ships remained a useful resource in heavy cargo with no time limits on delivery and only phased out with increased efficiency of steamships. The opening of global trade looked the world into steamships. The British empire used the technology to dominate global trade and maintain its leading position.

Adam Smith is a good read on the topic and somewhat founded the field of political economy. His main books where fighting protectionist tendencies in the British government.

The arise of new technology usually drives incumbent technologies to improve. Sail ships technology improved vastly and sail ships became very fast. Hybrids where developed to counteract the rise, but eventually steamships took over completely.

Steamships were not driven by military interested, but by commercial (cargo and people) and government interests (mail). Only when steamships were well established a military race ensued between German and British Empire. The commercial competition between those powers culminated in the Blue Riband Competition to have the fastest steamship to the US.

Another important transition was the disengagement between ship ownership and cargo transportation, allowing the creation of line services that operate independent of the cargo. Also, insurance for transport changed a lot in the consequence. Companies had to weigh the risk between sail ships and steamships. New institutions associated with increasing trade were also created.

Limited Liability

The general idea is that a person creating a company does not need to supply the capital to create the company. An external supplier can provide the capital and must take on the liability but only up to the investment. Therefore those companies had limited liability. Before any investor/owner was liable no matter how small his investment and the personal belongings could be taken as collateral. As a consequence risk-taking was encouraged. Limited liability emerged in the US as the US had less capital and needed to encourage capital from Britain to invest in the US.

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