“WHY ISN’T THE WHOLE WORLD DEVELOPED? LESSONS
FROM THE COTTON MILLS.”
-GREGORY CLARK
BY: PANKHURI GARG AND VASUDHA PODDAR
• Inability to absorb technology
• Lack of education
• Lack of managerial skills
• Lack of appropriate institutions
• Britain launches the modern factory
system.
• New textile technologies are simple.
• Every country enjoys a ready local
market for yarn and cloth.
COUNTRY
YEAR OF
ESTABLISHMENT OF
SPINNING FACTORY
BRITAIN
1771
FRANCE
1778
UNITED STATES
1791
RUSSIA
1793
SWITZERLAND
1794
BELGIUM
1799
INDIA
1817
• Even after having a cost disadvantage,
Britain’s high wage rate paid off in the form
of more efficient labors.
COUNTRY
WEEKLY WAGE RATE($)
NEW ENGLAND(N.E.-US)
8.8
BRITAIN
5
SWITZERLAND
3.7
FRANCE
3.7
JAPAN
0.8
INDIA
0.78
CHINA
0.54
• Britain enjoys an advantage of low capital cost.
COUNTRY
PLANT AND MACHINERY
$/SPINDLE
SWITZERLAND
24.8
JAPAN
24.57
INDIA
17.56
NEW ENGLAND (N.E.US)
17.43
FRANCE
16.54
CHINA
16.32
ENGLAND
12.72
• In 1911 40% of factory cotton spindles in the
world were in Britain.
• 22% were in US and Canada (only two
countries with higher wage cost than Britain).
• Britain accounted for 81% of net exports of
cotton yarn and cloth by 1911.
• Even though Britain suffered a 57% cost
disadvantage on account of wages, it served as a
boon to many countries either to train the
managers or to import technology.
Cost of cotton was an important source to
determine the overall manufacturing cost.
New Orleans (US) was the main source to
import cotton from.
New England enjoyed locational advantage
over Liverpool (Britain) to import cotton from
New Orleans.
French and German mills were located further
inland due to which they had to bare higher
costs (transportation).
India, China and Southern United States grew
their own cotton.
The dependence of Britain on US for the raw material
did not let Britain loose its dominance in the cotton
textile industry.
“China and India relied heavily on British
mechanics to erect their mills, since they
were underdeveloped.”
“Many countries including France, Spain,
Russia etc. obtained at least some of their
coal power from Britain.”
Clark’s assumption ignores
the possibility of economizing
by changing the proportions
of input in response to local
cost conditions.
The table in the following slide
shows a comparative study of
original manufacturing cost
and adjusted manufacturing
cost after taking into account
the running hours of the
machines in different
countries.
Country
Capital cost Manufactur Adjusted
per spindle ing cost
capital cost
($)
(England=1. per spindle
00)
($)
Adjusted
Hours per
manufactur year
ing cost
Switzerland
24.12
1.15
24.41
1.10
3250
Japan
23.95
0.73
13.36
0.62
6526
India
18.70
0.61
15.29
0.58
3744
New
England
18.60
1.59
17.62
1.57
3000
France
17.93
0.95
15.96
0.92
3300
China
17.76
0.53
11.93
0.48
5302
England
15.06
1.00
15.06
1.00
2775
Workers differed in the levels of experience.
Differences in worker efficiency- no. of spindles per worker.
Efficiency of workers = real wage rate.
The only countries to be able to compete with Britain were
India, China and Japan, the ones which in fact did not
compete.”
Worker efficiency depended on selection of machinery
types ( N. America-automatic looms-inflate the looms per
worker)
“Low-wage countries employed many more workers per
machine.”
Employing more labor is rational only if the cost is
saved. Low-wage countries were getting lower output
per worker than the countries with higher wages.
Running the machines for longer hours was the only
way out for low-wage countries to increase output.
Capital-labor substitution is irrelevant in explaining
the over manning of the low-wage countries since
Japan and China only increased their output by 10%.
Usage of low-quality inferior cotton- more labor.
In processes where cotton quality mattered, workers
did not spend much time repairing cotton yarn-value
of output reduced.
Even though France used superior grade cotton and
Germany similarly used better cotton quality inputs,
these countries employed many workers per machine.
The strength of the yarn has nothing to do with
manning levels. The evidence of which is that the
processes unaffected by cotton quality were also over
manned.
Lancashire and New England dominated the textile industry.
Lancashire-supplied machinery to all or most of the textile
industry.
The first Indian mills were completely British in design and
equipment.
Britain supplied managers and skilled workmen to India,
China, Russia, Mexico and Brazil.
One-third of Chinese industry- British management.
Germany and Switzerland were the ones where non-English
machinery were used but their managers were trained in
Lancashire.
French mills stood in comparison with the best of England.
Amt. of experience, amt. of general information,
nutritional level of workers- determines labor attitude to
work.
Basic constrained on the avg. experience of workers was the
growth rate of local cotton industries.
The amt. of experience, nutrition and general information
do not justify the over manning.
Southern U.S.- stock of equipment grew at the rate of 9.4%
- labor of Southern Hill Farmers (completely
inexperienced).
Even though French workers were experienced, still they
remained inefficient.
Faster growth - advantage of new and innovative
technology.
An avg. Indian adult male factory operative weighed 105.4
pounds whereas, a British adult male operative weighed
132.5 pounds.
Only a few tasks in the textile industry demanded literacy,
most demanded ability to perform.
“ Physical strength did not matter in most tasks.”
Local textile managers were not often free to choose the
manning levels.
Refusal of Indian workers to tend as many machines as
they could.
Mexican operatives were accustomed to run maximum 3
looms and it is impossible to persuade them to run larger
numbers.
Asiatic countries depended completely on Britain for
technology.
Britain, in spite of facing high labor cost and high
manufacturing cost, flourished as the leading cotton
textile industry.
The underdeveloped countries could not justify the
reason for over-manning their machines.
Efficiency and not the number of labor determined the
level of productivity.
Efficiency was dependent on the wage rate which was
low in poor countries as compared to Britain.
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