Local manufacturers, seeing the lightness and superior nature of cotton, started to create new cotton textile industries.
But they faced a serious problem: they could not compete with the Indian imports in terms of price or even quality (Parthasarathi 2011: 89).
The centre of the world’s cotton textile production was in India in the 18th century; by the mid-19th century, it had shifted to Europe (Parthasarathi 2011: 89).
How did this happen?
Parthasarathi (2011) examines this question, and the answer he privides (which as we will see below is incomplete) is as follows:
(1) technical knowledge on how to dye and print on cotton was obtained from the Middle East and India by Europeans: that is to say, Europe imitated and borrowed the technical knowledge (Parthasarathi 2011: 90–93).As far as I can see, all these points are true, but Parthasarathi seems to have missed further very important points about British protectionism.
(2) however, despite the technical knowledge of (1), domestically-made cotton textiles in Europe still could not compete in price or quality with Indian goods, either at home or in export markets (Parthasarathi 2011: 89, 96).
(3) if we take the case of Britain, whose cotton textile industry became dominant by the mid-19th century, we find that Britain industrialised in this sector by imposing massive protectionism and tariff barriers to Indian cotton goods, a follows:1685 – 10% import tariff on Indian goods;Some of these early acts of protection were imposed to protect the woollen, silk and linen textile producers of Britain, but their consequence was also to protect the cotton manufacturers, who in the 18th century mainly concentrated on the production of a new hybrid fustian cloth, a mixture of cotton and linen (Parthasarathi 2011: 93).
1690 – tariff doubled to 20%;
1701 – First Calico Act, legislation banning imports of dyed, painted or printed fabric;
1707 – British textiles manufacturers obtained further tariffs on Indian textiles;
1721 – Second Calico Act, which further banned imports of Indian textiles.
(4) With a protected home market, British manufacturers were able to develop and apply the following technologies to production:(1) Hargreaves’s spinning jenny (invented c. 1764; patented 1770), which was later made obsolete by 1800 by mules;Hargreaves’s spinning jenny greatly increased the quality of cotton goods and lowered costs (Parthasarathi 2011: 98), but it was Arkwright’s water frame that allowed the production of higher-quality all-cotton cloth (Parthasarathi 2011: 98).
(2) Arkwright’s spinning frame, which was later developed into the water frame (patented 1769);
(3) Crompton’s mule (1779).
Crompton’s mule allowed the spinning of all-cotton muslins as fine as those of India (Parthasarathi 2011: 98).
The idea that shortages in yarn were the main driver of these innovations is not supported by the evidence (Parthasarathi 2011: 98) which rather shows that the desire to match the quality of Indian cloths was the major factor (Parthasarathi 2011: 109).
(5) However, despite the 18th century technological developments by Kay, Hargreaves, and Arkwright, British cotton textiles could still not compete in price with Indian goods. In the 1780s, there was vehement demand for protection by cotton manufacturers (Parthasarathi 2011: 112), which the government readily supported.
As Parthasarathi notes, even with the invention and gradual use of Crompton’s mule in the 1780s, British textiles still could not compete with Indian calicoes (Alavi 1982: 56).
The British producers were protected with more tariffs, and by 1813 the import duty on Indian cotton goods stood at 85% (Alavi 1982: 56). As Alavi argues:
“It was the wall of protection that made possible the survival and growth of the British cotton textile industry in the face of Indian competition and facilitated large capital investments in the industry. Without it, the English industry would have found it impossible to get a foothold in the home market, let alone abroad.” (Alavi 1982: 56).From 1797–1819 British cotton textile manufacturers were still unable to compete. In 1815, the value of all Indian cotton goods coming into England was 1.3 million pounds (from 1741–1750, it had stood at 1.2 million points annually, at a time when domestic cotton textile competition was still largely non-existent). British producers asked for and obtained tariff increases on Indian cottons on 7 separate occasions in the years from 1797–1819.
Even with the technological innovations, by the beginning of the 19th century, Indian silk and cotton goods
“… could be sold in the British market at a price between 50% and 60% lower than those fabricated in England. It consequently became necessary to protect the latter by duties of 70% to 80% on their value.” (Das 1946: 313, quoting Mukerjee 1967).It was only the application of steam power in the period between 1815 to 1830 that allowed English textile goods to be competitive globally (Marks 2002: 100). The power loom, for instance, was initially limited by relying on water power, but by the beginning of the 19th century was able to use steam power (Moe 2007: 34).
The cost of British-made cotton cloth fell by 85%, but only from 1780 to 1850, and it was only in 1835 that steam power fuelled 75% of the British cotton industry (Moe 2007: 35).
British textile goods probably became internationally competitive by the mid-1820s (when tariffs were still in place). The British protectionism that lasted until the 1820s allowed British goods to become competitive.
It is estimated that by 1820, about 53% of Britain’s exports were cotton textile goods (Bairoch 1993: 85). These exports displaced India’s textile exports in world markets. Thus Britain itself had an “export-led” model of economic growth even in the early stages of the industrial revolution, by taking away the market share of India through technological innovation allowed by protectionism and tariffs.
Yet, according to classical free trade theory, India had the comparative advantage in production of cotton textiles even around 1810 when the British textile industry was developing. If real free trade had been implemented, the protective tariff would have been abolished and the market for British-made textiles at home would have collapsed.
Yet nobody can seriously deny that having a large productive textile industry was the foundation of Britain’s industrial revolution and in the long run good for the economy.
After the successful decades of tariff protection and shelter from competition, British goods succeeded in global markets at the expense of India’s exports. Bengal and the textile manufacturers were ruined and the resultant de-industrialization impoverished the previously prosperous towns.
Contemporary 19th-century British advocates of free trade actually noticed this state of affairs and criticised it. Robert Montgomery Martin (1801–1868) was a historian of Irish descent and wrote about twenty-six books on history and the British empire (including a History of the British Colonies). In 1844 he was Treasurer of Hong Kong. He appears to have been a free trader, though admittedly a member of the unconventional, proto-Keynesian “Birmingham School” of economists.
Robert Montgomery Martin was called upon to give evidence in 1840 during a British parliamentary inquiry about India:
“[Before a British Parliamentary Committee in 1840] Montgomery Martin stated that he . . . was convinced that an outrage had been committed ‘by reason of the outcry for free trade on the part of England without permitting India a free trade herself.’ After supplying statistical data of Indian textile exports to Great Britain, he pointed out that between 1815–1832 prohibitive duties ranging from 10 to 20, 30, 50, 100 and 1,000 per cent were levied on articles from India. ... ‘Had this not been the case,’ wrote Horace Wilson in his 1826 History of British India, ‘the mills of Paisley and Manchester would have been stopped in their outset, and could scarcely have been again set in motion, even by the power of steam. They were created by the sacrifice of Indian manufacture. Had India been independent, she could have retaliated, would have imposed prohibitive duties on British goods and thus have preserved her own productive industry from annihilation. This act of self-defence was not permitted her.’” (Clairmonte 1960: 86-87).Thus some British apostles of free trade noticed this double standard. They were appalled at the hypocrisy of British protectionism and the destruction of India’s prosperous cities built on textile exports.
But they of course failed to notice that the protectionism had been a major cause of Britain’s industrial revolution and that, without it, the UK would have been much poorer. In other words, the success of the cotton textile industry in the early industrial revolution in Britain was an example of infant industry protectionism, or modern import substitution industrialization (ISI).
The great Ricardian lie spun by modern free-trading cultists that free trade was always good for Britain and that British industrialisation was the result of free trade by comparative advantage stands exposed by historical reality.
Alavi, H. 1982. “India: The Transition to Colonial Capitalism,” in H. Alavi et al. (eds), Capitalism and Colonial Production, Croom Helm, London.
Bairoch, Paul. 1993. Economics and World History: Myths and Paradoxes. Harvester Wheatsheaf, New York and London.
Clairmonte, F. 1960. Economic Liberalism and Underdevelopment: Studies in the Disintegration of an Idea, Asia Publishing House, New York.
Das, T. 1946. Review of The Economic History of India: 1600–1800, American Historical Review 51.2 (January): 312–314.
Marks, R. 2002. The Origins of the Modern World: A Global and Ecological Narrative, Rowman & Littlefield, Lanham, MD.
Moe, E. 2007. Governance, Growth and Global Leadership: The Role of the State in Technological Progress, 1750–2000, Ashgate Publishing, Aldershot, UK.
Mukerjee, R. 1967. The Economic History of India: 1600–1800, Kitab Mahal, Allahabad.
Parthasarathi, Prasannan. 2011. Why Europe Grew Rich and Asia Did Not: Global Economic Divergence, 1600–1850. Cambridge University Press, Cambridge.
Wright, John. 1785. An Address to the Members of Both Houses of Parliament on the Late Tax laid on Fustian and Other Goods. W. Eyres, Warrington, UK.