The Transformation of the World (143 page)

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Authors: Jrgen Osterhammel Patrick Camiller

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Not every industrializing country makes the best use of its opportunities. In the twentieth century there are several examples of failed industrialization strategies that did not take account of local specificities. With regard to export economies, the question constantly arises on every continent as to whether the profits were used to invest in industrial processing—in other words, whether
productivity gains in export enclaves were transferred to nonexport sectors of the economy. One cannot speak of any kind of autonomous industrialization unless the industries in question mainly serve the internal market. This was rarely the case in Latin America before 1870. Later, at least in some countries, export earnings were distributed in society in such a way that domestic purchasing power increased. The spread of the railroad traditionally solved problems of clogging, and the adoption of electrical technologies removed energy bottlenecks. As in almost every other region of the world, the textile industry was present also in areas without a local supply of cotton or wool. Everyone needs clothing, and governments in the periphery that fought for protective tariffs did so primarily to keep out textile imports. Furthermore, the relatively high degree of urbanization in many parts of Latin America created a spatially concentrated market close to the location of textile factories.

In 1913, of all the Latin American republics, it was Argentina (where the textile industry played second fiddle) that had the highest level of industrialization, followed by Chile and Mexico. However, there was virtually no heavy industry in the region; the dominant sector was food and stimulants, followed by textiles. Although early industrialization reduced the level of imported consumer goods in comparison with machinery (including rail track and rolling stock), so that only the demand for luxuries had to be satisfied from Europe, a more complex industrial structure did not emerge anywhere. Even a large country like Brazil, which achieved high growth rates for a time, failed to escape the vicious circle of poverty and to stimulate industry by means of rising internal demand. And neither Brazil nor any other country progressed to industrial production capable of breaking into export markets. Nowhere did crafts or (widespread) proto-industry serve as a preparatory stage to autonomous industrialization, and in many of the smaller countries industrialization did not even begin.
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Why did the countries of Latin America not succeed in linking up with the industrial dynamic in Western Europe, North America, and Japan
before
the experiments with state-sponsored import substitution in the period between the two world wars? This remains an unanswered question.

China's Impeded Start

Our aim here is not to tour the world looking systematically for evidence of newly emerging industry. A few remarkable cases may suffice. Just as interesting as the counterfactual problem of the “great divergence” debate—why did India and China not undertake their own industrial revolution before 1800?—is the fact that they
did
begin to industrialize a little more than a hundred years later. In China, with its major tradition of premechanical craft production and its widespread proto-industrialization, no direct path led from older forms of technology and organization to modern factory production. Until 1895 foreigners were not permitted to establish industrial enterprises on Chinese soil, even in the treaty ports; the handful that nevertheless managed to get off the ground were of
little consequence. In this first phase of China's industrialization, the state took the levers of command. Beginning in 1862, several provincial governors—not the imperial court itself—embarked on a series of large-scale projects that all drew upon foreign technology and advisers: first arms factories and shipyards, then in 1878 a large coal mine in North China, a little later some cotton-spinning mills, and in 1889 the Hanyang ironworks in the province of Hubei. The chief motive for this policy was defensive; 70 percent of the capital was allocated to enterprises of military relevance. It would be too simplistic to write off all these early initiatives as failures. Most of them show that China was perfectly capable of adopting modern technology, and Hanyang, in the first few years after it started production in 1894, was actually the largest and most modern iron and steel plant in Asia. But it is true that the projects were uncoordinated, that none became a growth pole in even a regional industrialization strategy. Before the Sino-Japanese war of 1894–95, which ended in a resounding defeat, China had embarked on industrialization but not yet found its way to full-scale industrial transformation.
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After 1895, things became more complicated and more dynamic as companies from Britain, Japan, and elsewhere set up industrial enterprises in Shanghai, Tianjin, Hankou, and a few other large cities. With the state now largely inactive, Chinese entrepreneurs did not throw in the towel but began to compete with foreign interests in nearly every modern sector of the economy.
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Steamship transportation had been introduced quite early on, in the 1860s, first by the Chinese state, then by private firms. The silk industry too, one of the country's leading export sectors since the eighteenth century, moved quickly to appropriate the new coal and steam technology. But since Japanese competitors did the same and worked more methodically to raise the quality and output of goods for the world market, Japan won the battle for international customers in the second decade of the twentieth century. The core industry in China too—apart from South Manchuria, Japanese-ruled after 1905 and a fast-growing coal and steel center—was cotton spinning. By 1913, of all spindles operating in factories on Chinese soil, 60 percent were Chinese-owned, while 27 percent and 13 percent were in the hands of European and Japanese corporations, respectively. On the eve of the First World War, however, China's cotton textile industry was still underdeveloped: it had installed 866,000 spindles, against Japan's 2.4 million and India's 6.8 million (roughly as many as in France). Only a wartime boom raised this total to 3.6 million. Between 1912 and 1920, modern Chinese industry actually notched up one of the highest growth rates in the world, so that by the end of the decade some of the foundations had been laid for industrialization—relatively weak, but capable of being built upon.
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The internal chaos of the warlord period, the lack of vigorous developmentoriented governments, and Japan's imperialist aggression were the main reasons why China had to wait more than another half century for a nationwide “takeoff.” The most characteristic feature of its industrial history before the great
post-1980 upturn was not the cautious development that took place in the late imperial period with little or no state support but the braking in the 1920s of the process on which it had already embarked.

The argument that England's new mass production of cheap cotton material drove local spinners and weavers to the wall in China or India, seriously damaging the basis for autonomous industrialization, is not wrong but requires qualification. In China, despite a lack of tariff protection under the unequal treaty system, home weaving in the villages for local and regional demand stood up fairly well. And when cotton thread from new factories in the treaty ports (less so from abroad) increasingly supplanted hand milling in the early twentieth century, many weavers made the necessary switch and were able to continue functioning. In India the “flooding of Asian markets” thesis has long been discussed under the heading of “de-industrialization.” Its starting point is the observation that, in the seventeenth and eighteenth century, Indian handicrafts had been capable of producing all grades of cotton goods in large quantities, that these goods entered distant commercial circuits channeling them to many parts of Asia, Africa, and the New World, and that their high quality ensured abundant demand in Europe.
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The same was true, at lower levels of quantity and quality, for exports of Chinese cotton cloth. The fact that the printing was often done in Europe contributed to an interest there for cotton goods, and hence a demand for unprinted cloth that would later be met by the products of the mechanical mills at home. By 1840 or thereabouts, materials from Lancashire had driven Asian imports from the domestic market; English gentlemen no longer wore nankeens, the fine cloth trousers from the East. Such import substitution, economically viable because Britain enjoyed competitive advantages from its technology, thus marked the beginnings of Europe's industrialization.
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India's and China's loss of their export markets, similar to that experienced by the smaller Ottoman textile industry in the first half of the nineteenth century, had catastrophic effects in their cloth-producing regions. Qualitative evidence of mass destitution among Indian weavers is abundant, though its true extent remains unknown. As a recent survey of historiography concluded, “there has been very little serious historical investigation of the decline of cottons in India, especially in the major textile-manufacturing regions and in the first decades of the nineteenth century.”
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A clear regional differentiation seems to be helpful. Bengal was hit hard by the export crisis, whereas southern Indian weavers working for the home market were able to hold out much longer. Imported textiles never reached the standard of the finest Indian goods, so that luxury markets continued to be served by Indian producers. As in China, machine thread caught on in India to the extent that its lower price undercut even the most self-exploitative home spinning among rural families. At the same time, home weaving survived mainly because markets “segmented,” as economists say; there was no general competition between imported and Indian-produced materials.
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India and the Relativity of “Backwardness”

Unlike in China, foreign capital had hardly any stake in the Indian cotton industry during the post-1856 period when it was being built up in Bombay and elsewhere. The early founders were Indian textile dealers who branched out into production.
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The colonial state and British industry had no interest in such competition, nor were any insurmountable obstacles placed in their way. The fall in silver prices, which could not be checked by political means, entailed that the Indian rupee lost roughly a third of its value in the last quarter of the nineteenth century. This worked in favor of the Indian cotton mills, which were by no means technologically backward, even enabling them to beat back more expensive British thread in Asian markets. To look only at the trade between Europe and Asia is to miss the vitality of Asian producers on their home ground. Exports to China and Japan were the main factor in India's ninefold increase of its share of the world market for cotton thread—from 4 percent in 1877 to 36 percent in 1892.
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The modern sectors of Indian industry were not primarily the result of capital and technology imports under colonial auspices; rather, the general commercialization that began in India in the eighteenth century expanded markets, stored up mercantile wealth, and—despite an abundance of cheap labor—created new incentives for technological improvement.
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Historians are agreed that India's geographically concentrated industry played only a marginal role in the economy before the First World War. Nevertheless, it does not come out so badly from quantitative comparisons with Europe. Its total of 6.8 million spindles in 1913 was not worlds apart from the 8.9 million in the Tsarist Empire.
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In purely quantitative terms, the Indian cotton industry looked more than respectable, and unlike its counterparts in China or Japan it developed without any state support.

Whereas China's early iron and steel industry (much of which fell under Japanese control after the First World War) grew entirely out of official initiatives, Indian steel was at first a one man show under Jamshedji Tata (1839–1904), one of the great entrepreneurial figures of the nineteenth century, a contemporary of such steel tycoons as the American Andrew Carnegie (1835–1919) or the German August Thyssen (1842–1926). Tata had made his money in the textile industry, but a visit to American steel plants prompted him to turn to metallurgy and to look for a location close to the coal and iron deposits of East India. Here, at Jamshedpur, the great steelworks of the Tata family came into being after his death. Advertised as a patriotic venture to be realized without recourse to the London capital market, it attracted investment from several thousand private individuals. The founder himself, realizing that India needed to become technologically independent, had contributed the startup capital for the Indian Institute of Science. And the Tata works, right from the beginning in 1911, strove to achieve product quality at the highest international level. Government orders played an important role, and the World War would set the firm on the road to
success. However, the efforts of the Tata Iron and Steel Company were not sufficient to create a heavy industrial sector before 1914, any more than the state-run Hanyang Iron and Steel Works was able to do in China.

The case of India gives cause for reflection about general models in industrialization studies. “Backwardness” is a relative concept, and it is necessary to specify the entities to which it refers. At a certain point, even at the end of the nineteenth century, the socially and economically “backward” regions of Europe were certainly not ahead of the more dynamic ones of India or China; the yard-stick of economic success was the few large growth poles in Europe and North America. In India, as we have seen, it was private entrepreneurs (not state officials) whose decisions led to the presence of large-scale factory production in a number of sectors (the jute industry, dominated by British capital, is another worth mentioning) and to the formation of an industrial proletariat that learned to assert its interests. Industrialization, and many other processes included under the heading of modernization, was under way in urban areas. The question of whether India would have developed better without colonial rule—as nationalists and Marxists claim—will never be conclusively answered. Culturalist arguments, which see social structure (the “caste system”), mentalities, or religious orientations (“profit-unfriendly Hinduism”) as a basic obstacle to autonomous development and even to successful learning from abroad, used to be popular in Western sociology, but they have been under a cloud since India's high-tech advances in the late twentieth century.

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