Glasgow: The rise and fall of a start-up hub

If I was writing for Virgin 150 years ago, I would have said that without question the world’s best start-up hub was the Scottish city of Glasgow...

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In the 18th and 19th centuries, it became enormously, stupendously rich - an industrial and economic centre of such might that, by the turn of the 20th century, Glasgow was producing half the tonnage of Britain’s ships and a quarter of all locomotives in the world. It was regarded as the best-governed city in Europe and popular histories compared it to the great imperial cities of Venice and Rome. It was the ‘Second City of the British Empire’.

It all happened quite organically and without planning – an entrepreneurial people reacting to their circumstance.

The city’s location in the west of Scotland meant that it lay in the path of the trade winds and at least 100 nautical miles closer to America’s east coast than other British ports – 200 miles closer than London. In the days before fossil fuels the journey to Virginia was as much as two weeks shorter than the same journey from other ports in Britain and Europe.

Meanwhile, when England was at war with France – as it was repeatedly between 1688 and 1815 – ships travelling to Glasgow were less vulnerable than those travelling to ports further south.

Glasgow’s merchants exploited these advantages and, by the early 18th century, the city had begun to assert itself as a trading hub. Manufactured goods were carried from Europe to North America and the Caribbean, where they were traded for tobacco, cotton and sugar.

Bigger, better ships were built. Practices were improved. Trading posts were built to ensure that cargo was gathered and stored for collection, so that ships wouldn’t swing idly at anchor. By the 1760s Glasgow had a 50% share of the tobacco trade – as much as the rest of Britain’s ports combined.

The English simply sold American tobacco in Europe at a profit, but the Glaswegians began extending credit to American farmers against future production (a bit like a crop future today). The Virginia farmers could then use this credit to buy European goods, which the Glaswegians were only too happy to supply. This brought about the rise of many of the great Scottish financial institutions.

However, debts incurred by the tobacco farmers – which included future presidents George Washington and Thomas Jefferson - grew, and were among the biggest grievances when the American War of Independence came in 1775. That war destroyed the tobacco trade for the Glaswegians. Money that was owed to them was never repaid. Plantations were lost. But the Glaswegians were entrepreneurial and they adapted. They moved onto other businesses, particularly cotton.

The formidable entrepreneurial spirit of Glasgow

The Clyde was dredged and deepened in the latter 19th century and shipbuilding would become a major industry on the river. The final stretch of the Monkland Canal was opened in 1795, giving access to the iron-ore and coal mines of Lanarkshire. By the 19th century, Glasgow was producing and exporting textiles, chemicals, engineered goods and steel.

But then there was another blow. One of the most amazingly disruptive techs ever developed would destroy the advantages that the trade winds had given Glasgow - fossil-fuelled shipping. Again, the people adapted.

By the turn of the 20th century, it had become a world centre of industry and heavy engineering. Between 1870 and 1914, it’s estimated to have produced as much as one-fifth of the world’s ships. Among the 25,000 it produced were some of the greatest ever built: the Cutty Sark, the Queen Mary, HMS Hood, the Lusitania, the Glenlee tall ship and even the iconic Mississippi paddle steamer, the Delta Queen.

It’s not just its economy that was colossal, but the city’s contribution to mankind. 

Many great inventors either hailed from Glasgow or moved there to study or work - James Watt, for example, whose improvements to the steam engine were fundamental to the Industrial Revolution; William Murdoch, the Scot who lit the world, who invented gas lighting, a new kind of steam cannon and waterproof paint; Charles MacIntosh gave us the raincoat. There are many more. There is no doubting that Glaswegians are a formidable people.

So to 2014 – what does the city now have to offer?

Of course, life was hard in the 18th and 19th centuries. Most of the luxuries we take for granted today – running water, electricity, cars, computers - simply didn’t exist back then. There wasn’t the same abundance we enjoy today – so conditions were much harder. But it was a place of opportunity. People knew that they could come to Glasgow and, through hard work, innovation and risk-taking, better their lot – and the futures of their children.

Glasgow is still ranked as one of Europe’s top 20 financial centres. It is home to many leading Scottish businesses. But, on a relative basis, it is nothing like the force it once was. The heavy industry, the manufacturing, the exporting, the great invention – these have all gone, put out of business by the more competitive east. Service industries have grown to replace them. It’s the same story as the rest of industrial Britain, only a heightened version.

And the city has grave social problems. Nearly 30% of its working-age population is unemployed. The east end, once home to Europe's largest steelworks, has been called the benefits capital of the UK.  It has the highest incidences of homicide and heroin abuse in the country. It is Britain's fattest city: and its men have Britain's lowest life expectancy.

What went wrong? The peak Glasgow’s fortunes relative to rest of the world came somewhere between 1910 and 1914 when, as historian AJP Taylor famously wrote, a man could "pass through life and hardly notice the existence of the state, beyond the post office and the policeman". But that was about to change.

Glasgow's decline began just as a huge shift taking place: that of state involvement in our lives. It began with the social reforms of the Liberal Government of 1906-14, the so-called 'People's Budget, which saw the introduction of income tax and national insurance - the birth of government (as opposed to mutual and local) welfare. Then came the most awful state intervention of all, the First World War.

We came off the independent money system that was the gold standard and government began to print our money instead. Since then, the role the state has played in our lives has not stopped growing.  It has spent more and more, provided more and more services, more subsidy, more education, more health care, more infrastructure, more accommodation, more benefits, more regulations – and, yes, more wars.

The more it has provided, the worse Glasgow has fared. Is this a coincidence?

Dominic Frisby is the author of Life After The State. His next book Bitcoin – the Future of Money? – will be out soon.

This is a guest blog and may not represent the views of Virgin.com. Please see virgin.com/terms for more details. Thumbnail and background image from gettyimages.

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