Without coal in the age of steam and dams in the age of electricity: an explanation for the failure of Portugal to industrialize before the Second World War

Abstract

We provide a natural resource explanation for the divergence of the Portuguese economy relative to other European countries before the Second World War. First, we demonstrate that a lack of domestic resources meant that Portugal experienced limited and unbalanced growth during the age of steam. Imports of coal were prohibitively expensive for inland areas. Coastal areas industrialized through steam but were constrained by limited demand from the interior. Second, we show that after the First World War, when other coal-poor countries turned to hydro-power, Portugal relied on coal-based thermal-power, creating a vicious circle of high-energy prices and labor-intensive industrialization.

Productivity, Mortality, and Technology in European and US Coal Mining, 1800–1913

“…2 It has been argued that coal could have been transported, as indeed it was to non-producing regions and countries. In spite of the uneven advance of coal across Europe over the nineteenth century (Kander et al 2013, p. 137;Henriques and Sharp 2020), national and international coal markets became more integrated, especially up to the turn of the century, reflecting a decline in transaction costs (Murray and Silvestre 2020).…”

“…As recently reviewed by Fernihough and O'Rourke (2014),Murray and Silvestre (2020),Henriques and Sharp (2020) andRanestad and Sharp (2020). See also, for example,Foreman-Peck (2006).3 See also, for example,Otojanov et al (2020).…”

Success through failure? Four centuries of searching for Danish coal

“…As the nineteenth century progressed, the use of steam power based on coal spread into most economic sectors, while a transportation revolution saw the spread of railroads and steamships (Kander et al 2017). This latter meant that eventually even coal-poor countries with cheap access by water to the coal mines in England, such as Denmark, could industrialize (Henriques and Sharp 2016), although countries where more areas were further from the coast, making access to coal expensive, saw more uneven industrialization (Henriques and Sharp 2020). What determines access to coal, however?…”