by Sven Beckert
After World War I taxes on employers also surged, demonstrating that the administrative, judicial, and military capacity of the state, so vital for industrial capitalism, came at a rising cost. Indeed, the tensions that led to war in the first place had emerged from the tightening connections between national capital, nation-states, and national territories. The competition between increasingly powerful states rested on the mobilization of their citizens into mass armies and the marshaling of taxes to fund those armies and produce war materials. Under such pressures to extract money and people, states were forced to legitimize themselves democratically.
For European and North American capitalists, this dependence on powerful states—the principal source of their strength—was now also their single greatest weakness, because these states in effect enabled working-class power on the shop floor and in politics. From the perspective of capitalists, indeed, the state was Janus-faced. It enabled the emergence of industrial capitalism, including the mobilization of labor in the global countryside, but it also “trapped” capitalists, as workers would use access to national politics to better their working conditions and wages. As a result, social conflicts that had once been primarily global (as when the mobilization of slaves in Saint-Domingue affected the interests of cotton manufacturers in Britain), or local (as when Indian peasants refused to labor on British cotton plantations), now increasingly became national.
Rising production costs in the core areas of the Industrial Revolution in Britain, continental Europe, and North America, along with unrelenting price competition, in turn dimmed the once blazing profitability of cotton manufacturing. From 1890, northern manufacturers in the United States complained about falling profits. One author reports that dividend payments in German cotton spinning corporations hovered between just 4 and 6 percent between 1900 and 1911, a far cry from the profits that British entrepreneurs had depended on a century earlier. In the Oldham and Rochdale spinning industry, the very heart of Lancashire, average return on capital was low: 3.85 percent from 1886 to 1892, 3.92 percent from 1893 to 1903, rising to 7.89 percent from 1904 to 1910. British cotton capitalists, spoiled by decades of enormous profits, experienced during the 1920s a “rapid fall in spinning company profits.”21
In some parts of the world, manufacturers responded to rising wages by investing in improved production techniques. New spinning machines and looms allowed for greater output per worker, and in Germany, for example, productivity in spinning more than tripled between 1865 and 1913, and in weaving increased by a factor of six. Such productivity advances meant that wages formed a diminishing portion of total production costs. In German spinning, the share of wages fell from 78 percent of total costs in 1800 to 39 percent in 1913, and in weaving, less dramatically, from 77 to 57 percent.
But in the face of manufacturers’ inability to manipulate the price of other inputs, especially raw cotton, wage costs continued to remain important, and thus had a significant impact on profitability. After all, as of 1910, Chinese wages were just 10.8 percent of those in Great Britain and 6.1 percent of those prevalent in the United States, while Chinese workers also labored nearly twice as many hours as their New England counterparts—5,302 hours versus 3,000 hours. Such low-wage competition was found in even more places and it mattered. By the 1920s, for example, competition from Czech and Russian producers proved to be a threat to the German cotton industry. In the long run, cotton manufacturing became a “race to the bottom.”22
Manufacturers tried to respond to such pressures by using their access to ever more powerful governments to insulate their respective national industries from global competition. Germany’s cotton industry depended on an intricate tariff regime catering to the very specific needs of very specific sectors of its cotton industry. As manufacturers organized (in 1870, for example, the Verein Süddeutscher Baumwollindustrieller was founded), they successfully lobbied the state to support their interests, with the Deutsche Volkswirthschaftliche Correspondenz arguing that tariff protections were the only means by which the German industry could survive the pressures of imports—a benefit not available to Indian, Chinese, or Egyptian manufacturers. Such tariff protections were important elsewhere too. Italy effectively protected its home market with tariffs on cotton goods passed in 1878 and 1888. In France, at the behest of its cotton manufacturers, increasingly protectionist tariffs had fueled cotton industry profits since the 1880s, especially since 1892 with the passing of the Méline Tariff.23 The United States also saw the strengthening of its protectionist regime in the last half of the nineteenth century. In 1861, the Morrill Tariff increased duties on imported cotton goods, and while the Tariff Act of 1883 lowered tariffs on cheaper cottons (qualities that American manufacturers could easily produce), it increased them on higher qualities, a trend that continued with the Tariff Act of 1890.
Imperial markets also became ever more important as the new imperialism that had arisen out of the ashes of the nineteenth-century “second slavery” now paid dividends—for some. It paid, for a while, for Catalan manufacturers, who gained in the 1880s more protected access to the remaining Spanish colonies, including a monopoly in the Cuban market. It supported the interests of Russian cotton industrialists in gaining access to the Central Asian territories. It protected British manufacturers from Indian competition. Even in the United States, following the demands of cotton manufacturers such as Edward Atkinson, the government aggressively helped manufacturers gain access to markets abroad, especially in Latin America, the destination of half of U.S. cotton exports.24
Despite the frantic efforts of European and New England cotton manufacturers to secure their exalted position within the global empire of cotton, rising labor costs were a powerful countervailing force. The result of the opportunities and constraints created by the nationalization of both labor and capital, rising labor costs opened up new possibilities for manufacturing in those parts of the world in which labor was cheaper and less constrained by state regulations.
As a result, the global South welcomed back home the world’s cotton industry in the twentieth century, reversing a century-long departure. At first that move was hardly perceptible, and as late as 1900 was not much more than a flicker on the horizon, but by the 1920s it was the object of widespread debate—a debate, especially in Great Britain and New England, with alarmist undertones.25 To take but one example, the Times of London reported in 1927 on
the worst spell of bad trade [Lancashire’s industry] has encountered since the appalling cotton famine of the sixties, which was caused by the American Civil War…. The chief factor in this alarming decline has been the falling off of the great markets of the Far East—India, China, &c…. Whereas in 1913 the Far East absorbed 61.6 per cent of our total exports of piece goods, the percentage had fallen in 1925 to 41.8…. Both in India and in China there has been a very large increase in home production, and in both countries the rapidly expanding Japanese industry—which has so far been working on the two-shift basis with a 120-hour week, as opposed to Lancashire’s maximum of 48—has tended to displace imports from Great Britain.26
At about the same time, the governor of Massachusetts, James Michael Curley, forecasted accurately the complete destruction of the New England cotton industry in the absence of massive federal intervention. As local industry representatives concocted in 1935 a “Buy American-Made Goods” campaign to undercut the threat of Japanese imports, Curley met with cotton manufacturers presenting plans to slash wages in Massachusetts in an effort to narrow the gaping wage differential between the American North and South. Despite such protests, the North Atlantic moment in cottons was over, its vaunted productivity and state sponsors no match for the precipitous wage differentials and the burgeoning nation-states of the global South.27
The move of cotton manufacturing into the global South began, as had so many of the industry’s disruptions, in the United States. Unlike Europe, its working class was never nationalized to the same degree. Labor markets in the United States were
highly segmented, with huge differences in wages in its own national territory. As a result of the peculiar settlement between the expropriated slave owners and industrial capitalism after the Civil War, the United States had a global South within its own territory. And the United States also had its own class of global South capitalists who had, just like their Indian counterparts, accumulated wealth in the trade of raw cotton, ready to move some of it into manufacturing enterprises. The exceptional combination of extensive territory and limited political, economic, and social integration between North and South was the envy of European capitalists—and the first harbinger of the global fate of European cotton manufactures as well.28
The empire strikes back: Mahatma Gandhi visits Lancashire, chatting with British cotton workers, 1931.
By 1910, the cotton manufacturing industry of the U.S. South was the world’s third largest, after that of Great Britain and the northern states of the Union. This was an amazing departure. At the end of the Civil War there had been hardly any significant cotton manufacturing in the states of the former Confederacy, and as late as 1879 there were seventeen times as many spindles in the North than in the South. Then, however, growth rates in the South skyrocketed—during the 1880s, to an annual 17.6 percent, during the 1890s to 19.1 percent, and to 14.3 percent during the 1900s. To be sure, the cotton industry in the northern states of the Union continued to grow as well, but it did so at a distinctly slower rate of around 4 percent per year. By the 1920s, the northern industry, for the first time, actually shrunk, and by 1925 the U.S. South had more spindles than the North. By 1965, the ratio was 24 to 1, a radical reversal of fortunes.29
The massive relocation into the southern United States had begun, decades earlier, at the Atlanta International Cotton Exposition of 1881. There, cotton machinery was sold to the “Exposition Cotton Mills,” which became in fact a functioning mill. Endowed with huge supplies of cheap labor and supportive local and regional governments, budding local manufacturers opened additional mills in short order. Lax labor laws, low taxes, low wages, and the absence of trade unions made the South alluring to cotton manufacturers, a region of the United States, according to an industry publication, “where the labor agitator is not such a power, and where the manufacturers are not constantly harassed by new and nagging restrictions.” As a result, the period from 1922 to 1933 saw the closing of some ninety-three Massachusetts cotton mills; in the six years after 1922 alone, Massachusetts would come to shed some 40 percent of its total textile workforce. In Fall River, in the decade after 1920, half of the city’s mills disappeared.30
It was not the proximity to cotton fields that explains this sudden expansion of cotton manufacturing in the U.S. South. Indeed, the slightly lower costs in accessing cotton were offset by the cost of shipping finished goods to northern markets. The secret of success was plentiful and cheap labor. The destruction of slavery and the attendant transformation of the countryside had created a large and malleable pool of low-wage workers for the cotton factories, at first mostly white rural workers, who had once been tenant farmers, and later African American workers, most of them former sharecroppers. As one contemporary observed, southern cotton growers left the farms “like rats leaving a sinking ship.” As a result, a 1922 study by the Massachusetts Department of Labor and Industries revealed that whereas the average hourly wage of a Massachusetts mill worker was 41 cents, the going rate was 29 cents in North Carolina, 24 cents in Georgia, 23 cents in South Carolina, and a mere 21 cents in Alabama.31
The low wages paid to these workers were even lower because cotton mills could draw on a large number of very young and very cheap workers—a direct result of the low level of national integration of the American working class. In 1905, 23 percent of all workers in southern cotton mills were younger than sixteen, compared to only 6 percent in the northern states. Thanks to the absence of national standards, people also worked longer hours in the South—sixty-four hours per week, even seventy-five hours, was not uncommon. In fact, cotton industrialists’ influence over southern state governments—and the disenfranchisement of large segments of the local working class that began during the 1880s—allowed for much laxer labor laws than in other states of the Union, a defining characteristic of emerging cotton industries throughout the global South. Cotton industrialization, moreover, had strong backing from state governments, whose legislators and governors were vulnerable to the enormous influence and power of organized industrialists.32
Aware of their own rising costs and declining profits, cotton capitalists in Europe also sought to relocate to places with lower wage costs. But none were able to follow directly the U.S. model, because no other industrial country contained within itself such uneven regional conditions or the legacy of slavery. Still, there were some tentative British investments, such as in India. Other British firms invested in manufacturing in the Ottoman Empire, especially around Izmir and Istanbul, and in Portugal and Russia. In China, foreign-owned mills became important, especially Japanese investments, but also a few operated by English and German investors. In Egypt, British entrepreneurs created in 1894 the Egyptian Cotton Manufacturing Company, followed in 1899 by the Alexandria Anglo-Egyptian Spinning and Weaving Company and then, a year later, the Cairo Egyptian Cotton Mills Limited. French investments became important in the Mexican cotton industry. In Brazil during the first decades of the twentieth century, British, Belgian, and Dutch entrepreneurs opened mills. German textile manufacturers as well invested in low-wage regions. One of the major outlets for German cotton capital was Poland, especially the area around Lodz that the chamber of commerce of the Saxon city of Leipzig called an “offshoot of our German, especially Saxon, textile industry.” This “Manchester of the East” experienced a huge boom between 1870 and 1914, seeing the emergence of gigantic factories, such as Carl Scheibler’s mill, with seventy-five hundred workers on its payroll.33
The global South, North Carolina, early twentieth century: “One of the spinners in Whitnel Cotton Mill. She was 51 inches high. Has been in the mill one year. Sometimes works at night…. When asked how old she was, she hesitated, then said, ‘I don’t remember.’ ” (illustration credit 13.4)
Cotton industrialists in the former core manufacturing areas of Europe and North America staggered, and then fell, under the combined weight of the twin pressures of mobilized workers and democratic states. They also, as capitalists, felt the pull of new investment opportunities in new industries. Owners of capital in the global South, conversely, awoke to the profit potential of industrial capitalism, and realized the opportunity in their own backyards, their low-cost labor. These entrepreneurs often found themselves surrounded by workers experienced in textile production, had access to modern textile technology, and were master manipulators of their home markets, having often sold imported cotton wares for decades. Like the entrepreneurs of Ahmedabad, they understood that to be profitable, industrial capitalism needed strong states to build infrastructures, protect markets, enforce property rights, and maintain an advantageous labor market. They encountered in their state-building projects more and more activists who, with the rise of national independence movements, appreciated the power latent in a vibrant industrial economy. The model of industrial capitalism so successfully forged in Europe and North America during the first decades of the nineteenth century now took wing in the global South—tantalizing the imagination of capitalists and state builders, and reshaping the geography of the global economy.34
Searching for cheap labor: German industrialist Carl Scheibler invests in the Lodz cotton industry, late nineteenth century. (illustration credit 13.5)
Ideas about industrial capitalism, inspired by the British example, had reached the far corners of the world already by the early nineteenth century. During the cotton revolutions of Germany, Egypt, the United States, and Mexico, forethinking statesmen and capitalists in each country, including Friedrich List, Muhammad Ali, Tench Coxe, and Esteban de Antuñano, had engaged in these discussions and drawn politi
cal conclusions from them. By the late nineteenth century, others beyond Europe took note as well. Faced by the pressures from imported cotton wares on domestic handicraft industries and desiring to build an industrial economy, Brazilian, Japanese, Chinese, and other statesmen and capitalists searched for ways to replace imports with domestic production, this time mixing a unique blend of state-building and capital accumulation efforts.
The debate on how to withstand European imperialism and how to take advantage of the new ways toward profit by building manufacturing capacity spread around the world. As early as 1862, Chenk Kuan-ying, a Chinese merchant, had published Sheng-shih wei-yen (Warnings to a Seemingly Prosperous Age), advocating industrialization. Thirty-five years later, entrepreneur Zhang Jian followed in his footsteps. Concerned with huge imports of cotton yarn and cloth, and especially with the stipulations of the 1895 Treaty of Shimonoseki that allowed for the establishment of foreign-owned cotton mills, he advocated domestic industrialization, and, following words with deeds, built a spinning factory in his native district of Nantong. “People,” he argued, “all say that foreign nations maintain themselves through commerce. This is a superficial view. They do not know that the foreign nations’ riches and strength is industry…. Therefore we must concentrate with single purpose to promote industry…. Factories should be set up to produce items of foreign goods which have the greatest sale in China.”35
