Labour repression & the Indo-Japanese divergence

There used to be more research and debate on the negative effects of labour resistance on economic development, but that topic has been crowded out by the intense focus on inequality of recent years. There now prevails a quiet presumption that labour movements have made only positive and large contributions to the historical rise in living standards.

So I illustrate the relevance of labour relations to economic development through the contrasting fortunes of India’s and Japan’s cotton textile industries in the interwar period, with some glimpses of Lancashire, the USA, interwar Shanghai, etc.

TL;DR version: At the beginning of the 20th century, the Indian and the Japanese textile industries had similar levels of wages and productivity, and both were exporting to global markets. But by the 1930s, Japan had surpassed the UK to become the world’s dominant exporter of textiles; while the Indian industry withdrew behind the tariff protection of the British Raj. Technology, human capital, and industrial policy were minor determinants of this divergence, or at least they mattered conditional on labour relations.

Indian textile mills were obstructed by militant workers who defended employment levels, resisted productivity-enhancing measures, and demanded high wages relative to effort. But Japanese mills suppressed strikes and busted unions; extracted from workers much greater effort for a given increase in wages; and imposed technical & organisational changes at will. The bargaining position of workers was much weaker in Japan than in India, because Japan had a true “surplus labour” economy with a large number of workers ‘released’ from agriculture into industry. But late colonial India was rather ‘Gerschenkronian’, where employers’ options were more limited by a relatively inelastic supply of labour.

The state also mattered. The British Raj did little to restrain on behalf of Indian capitalists the exercise of monopoly power by Indian workers. Britain had neither the incentive, nor the stomach, nor the legitimacy to do much about it. But a key element of the industrial policy of the pre-war Japanese state was repression of the labour movement.

Note: By “labour repression” I do not mean coercing workers, or suppressing wage levels, but actions which restrain the effects of worker combinations.

Nor am I saying unions are bad! I’ve written before that unions in Germany are great.

Also, I do not claim this post has any relevance for today’s developed countries. It’s mainly about labour-intensive manufacturing in historical industrialisation or in today’s developing countries.

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Posted in cotton, cotton textiles, India, Japan, labour, Lancashire, New England textiles, strikes | Tagged , , , , , | 16 Comments

Labour relations & textiles: addenda

This post contains related topics and disjointed observations as addenda to “Labour repression & the Indo-Japanese divergence” in cotton textiles.

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Posted in Uncategorized | Tagged , , , | 2 Comments

Economic History Papers, Articles & Blogs

As a companion to my Economic History books page, which stresses economic history by region or country, I have created a new Economic History Papers page. It collects surveys, papers, and blogs which cover topics in global economic history and comparative historical development. But it’s a work in progress! So there are gaps.

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More frivolously assembled lists of books

Kind of sort of a follow-up to the previous book list.
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The 25 most stimulating economic history books since 2000

Inspired by Vincent Geloso, here is a list of the 25 books in economic history published since 2000 which I have found most stimulating or provocative. Not the best, nor the most ‘correct’, nor the most balanced, but those things which influenced, stimulated, or provoked my own personal thinking.

Some of these also appear on my bigger Economic History Books page, which is intended to be a list of survey & reference books for the economic history of particular regions or countries.

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The Calico Acts: Was British cotton made possible by infant industry protection from Indian competition?

Many “global historians” argue that the British cotton industry was the product of (unintentional) infant industry protection from Indian competition in the 18th century. The various Calico Acts created an import-substitution industry by banning Indian cloths and reserving the home market for British producers. This supposedly gave them the freedom to invent and adopt the machines that led to the Industrial Revolution.

To the best of my knowledge, economic historians have never seriously examined this issue, perhaps because the necessary data are lacking or remain unearthed. Nonetheless there are sound historical reasons for doubting the presumption that “protection allowed British goods to become competitive”.

Warning: This is a tedious post which gets into some detail about the British textile industry in the 18th century. A must-skip, if you ask me. Which is why I provide this handy summary:

  1. The Calico Act of 1721 (which was intended to protect the wool and silk industries) actually banned most varieties of pure-cotton cloths in general, not just Indian.
  2. Before the era of mechanisation, British ‘cotton’ was overwhelmingly cotton-linen, a limitation of British technology (in the economic sense).
  3. Mainstream economic theory supplies many justifications for interventionist trade policy to promote innovation. But the standard rationales simply do not apply to constant returns-to-scale activities such as handicraft cottage industry.
  4. Lancashire would have survived competition with Indian cloths in an unprotected home market.
  5. British machine-spun yarn never faced any direct foreign competitor, since Britain barely imported cotton yarn in the 18th century. The domestic output of yarn was affected by foreign competition only to the extent that it was turned into printed cloth.
  6. But there were many other products besides British imitations of Indian cloth which used cotton yarn as a major input, and their role in the mechanisation of yarn production is overshadowed by a selective, Whiggish genealogy which overemphasises the calico branch.
  7. IF, as so many argue, competition in the export markets was an important stimulus to inventions in cotton, then the home market could have served just as well and the only reason overseas became so important is that British firms were denied a home market for all-cotton cloths by the Calico Acts!
  8. Therefore, it’s entirely plausible — not demonstrated — that the Calico Acts functioned as a Luddite policy which delayed the mechanisation of textile production by decades.

This post elaborates on the above points, covering the period up to 1774, when the Calico Act was repealed.

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Posted in cotton, cotton textiles, import substitution industrialization, industrial policy, Industrial Revolution, Infant industry argument, protectionism, trade & development | Tagged , , , , , , | 15 Comments

The Napoleonic blockade & the infant industry argument: caveats, limitations, reservations

Some caveats and reservations about the Napoleonic blockade paper on the infant industry argument that’s making waves. My caveat: protection persisted for decades after the blockade and may have helped keep the French cotton industry backward relative to Britain.

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Posted in cotton, cotton textiles, France, import substitution industrialization, industrial policy, Industrial Revolution, Infant industry argument, protectionism, trade & development | Tagged , , , , , , | 16 Comments

The Bairoch hypothesis (or the “tariff-growth paradox” of the late 19th century)

{ Note: This post describes and summarises a literature on 19th century growth & trade. I do not necessarily endorse its findings. This post is intended as largely descriptive. }

There is a vast cross-country literature which finds a positive correlation between economic growth and various measures of openness to international trade in the post-1945 period. Despite intense methodological bickering amongst researchers, nonetheless maybe 50 studies (maybe more?), using a variety of methods and approaches, come to the same conclusion: trade openness was associated with growth after 1945. (This amazing critical survey lists most of those studies.)

This huge body of research does have some quite compelling critics, the most prominent being Rodríguez & Rodrik (2000). This widely cited paper argues — amongst many other things — that there is no necessary relationship between trade and growth, either way. It depends on the global context as well as domestic economic conditions. I think that view is correct. Continue reading

Posted in economic growth, industrial policy, Infant industry argument, protectionism, trade & development | Tagged , , , , , | 15 Comments

Tariff Protection of British cotton 1774-1820s

British Tariff Protection after 1774: Competition, Innovation, & Misallocation, plus a note on Weaving

This is an addendum to a post about the Calico Acts, which had prohibited within Britain the consumption of cotton cloths both foreign and domestic. But even after their repeal in 1774, Indian cloths entering the British market continued to face stiff import duties, ranging from 27-59% ad valorem in 1803 to 71-85% in 1813.

Although the Calico Acts are frequently discussed by Western scholars, the protection of the British cotton industry that continued until the 1820s is something only Indian scholars bother to mention.

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Posted in cotton, cotton textiles, industrial policy, Industrial Revolution, Infant industry argument, international trade, protectionism, trade & development | 2 Comments

Random thoughts on critiques of Allen’s theory of the Industrial Revolution

{ This post is mostly stringing together my scattered tweets over the past couple of weeks. I’ve had numerous discussions on this subject with Vincent Geloso, Judy Stephenson, Ben Schneider, Benjamin Guilbert, Anton Howes, and Mark Koyama. But yesterday Geloso sent me the paper he’s working on for Alsatian wages and that kick-started further thoughts I shared with Geloso privately, and then with the others on Twitter. You can follow the most recent discussion below this tweet, although it’s very difficult to keep track of the many different threads. I’m generally a sceptic of Allen’s theory, but in this post it seems I ended up critiqueing the critiques as much as Allen himself. } Continue reading

Posted in Industrial Revolution, Robert Allen | Tagged , , , , , | 29 Comments