Great essay. The origins of the English textiles industry are quite interesting and historically relevant.
One additional point that could be made is that the impact of government policy on the English textile industry goes much further back than Defoe. The industry went through 4 phases. Each was heavily influenced by government policy:
1 Raw wool exports
2 Wool cloth exports (so-called Old Draperies)
3 New Draperies
4 Cotton textile exports
In the 13th and 14th Century raw wool made up 90% of England’s export revenues. In 1275 the Crown started taxing raw wool exports for the first time. The Crown kept increasing the taxes to pay for the constant wars with France. It was not industrial policy, only a means to raise revenue. This tax encouraged the English to shift from raw wool to processing the raw wool into woolen cloth.
Then in 1363 the Calais Staple Company, a government-sponsored import monopoly in Calais, was established to shift taxes to the Low Countries. By the 1390s the taxes were 50% of the price of wool exports. Due to the taxes, the Flemish switched from English raw wool to Spanish merino wool as a supplier.
From 1465-1550s England dominated the European wool cloth industry (based mainly on exports to Antwerp).
A similar change happened with New Draperies, a lighter, cheaper and less durable type of woolen cloth), and later cotton textiles. The Calico Act of 1721 forbade importation and wearing of Indian textiles, helping the fledgling British cotton textile industry.
It is interesting that medieval taxes on the Flemish were modulated to ensure support for the Anglo-Normans in their battle to retain France against the Frankish kingdom (which became known as France).
Isn't part of the problem with ISI that the locals are too poor to afford cars or textile in the first place. I guess you can adopt different paths for different sectors at the same time.
For example, in Bangladesh we give export incentives to textiles and ICT. But we do import substitution for cars and consumer electronics. Personally, I'm more moderate on industrial policy. But I'm fine with "protecting" the car industry because less than 10% of Bangladeshis own cars and crude oil is our biggest import. Worst case scenario, it's basically a luxury tax. I think Ethiopia banned ICE passenger vehicles because fuel is also a big import item. Plus 30% of our taxes comes from tariffs despite being the lowest taxed country in the world. So we can't exactly afford to stop imposing tariffs.
Vector 1, the government either encourages private firms or creates the industry via an SOE, protect the industry from foreign competition, subsidize it and focus on domestic markets. (This is ISI leading to internal focus)
Vector 2, the government either encourages private firms or creates the industry via an SOE. protect the industry from foreign competition, subsidize it and focus on on external markets.
(This is ISI leading to Export led industrialization. The government still protects and grows domestic industry but you need to make your industry better via exports).
Textiles and ICT firms already exist in Bangladesh (especially textiles for Bangladesh), so it makes sense to encourage growth through export incentives. Meanwhile you still have infant cars and consumer electronics firms right? So the government isn't focused yet on export incentives for them.
From looking at Bangladesh's atlas and Bangladesh's low car ownership proportion this seems to be the case.
It makes sense that Bangladesh focuses on export incentives for textiles and ICT since those are your leading exports. But since Bangladesh cars and consumer electronic exports are very small, they still need protection.
Again it also depends on what tariffs you can afford to have. The government will never impose a tax on fertiliser industry to build up a chemicals industry. We also don't have taxes for tractor and commercial truck imports.
"caring about the people" means nothing. The Indian independence generation also cared about the people and it meant fuck all. As they say the path to hell is paved with good intentions.
Also using the example of Singapore and Malaysia as an argument against internationalism is ridiculous.
Additionally if free trade was so bad why hasn't global inequality fallen since the 90s?
The argument above was not against Internationalism, it was against rampant Internationalism. It was not about caring for a population it was about favouring a population (notice that the word "care" was not used above).
"Internationalism" as an ideology is a product of multinational companies, international banks and countries that currently dominate international trade (Internationalists). This ideology holds that the removal of borders and discrimination in favour of your own nation are impediments to prosperity. The reason that Internationalists proselytise this ideology is that it favours them.
The model adopted by China, Japan and post-war Germany was of the Nation as a business. The objective is to increase the value of the nation (measured in PPP terms).
This means retaining high value added industries within your borders.
You don't let foreign companies replace your industries with their products for more than a few years, you learn from them then edge them out. You don't let foreign companies buy your manufacturers and replace their factories with warehouses for their own goods (even if they promise to employ the previous workforce as warehouse staff) because this is a low value added deal. You don't let the government buy sundries and services from overseas. You use International trade as a method of increasing the the turnover and profits of your own industries. This is "favouring" your own people.
Ok? Assuming your country is some kind of democracy, your country will engage in trade insofar as it benefits the median voter. I think you're overestimating the role of ideology. The world is just an emergent order from self interested individuals.
You can also encourage investment into particular sectors by inviting foreigners. Asianometry's video on the Thai car industry comes to mind. I'm pretty sure Bangladesh's car policy takes many cues from there. Like the incentives ensure that you can start out using car assembly kits and then increase value addition over time.
The only issue I would raise is that because England was the first industrialised nation it did not have access to huge markets overseas. This is clear from the proportion of GDP that came from overseas trade before 1800: it only increased from 3% to 5% of GDP over the whole of the 18th century. An added 2% of GDP was unlikely to provide the additional funds for an industrial explosion. It looks like the first phase of the industrial revolution was due to the coincidence of abundant domestic raw materials and the socio-economic changes that occurred after Henry VIII legalised Lollardy (Protestantism) which increased domestic demand as people were allowed to better themselves materially.
I particularly liked this:
"Asking fledgling industries to compete on global markets immediately is like letting your five year old child to immediately drudge his life away in a factory, instead of allowing him to be educated for 22 years so he can get a good job as a software engineer."
UK Members of Parliament should have this etched on their brains.
Hah, and here I thought I was taking a break from reading about US tariffs on Chinese cars. Your work always makes me want to learn more about the subject in question, which can only be a good thing (not that I have that kind of time, but still).
ISI is an interesting idea, but my biggest criticism of it is that it seems to be operating on an ‘everything everywhere all at once’ development strategy for businesses, whilst simultaneously having the potential to isolate countries from the largest and most profitable markets. Rather than going down the British route, it seems that EOI whilst expanding into custom’s unions and enabling specialisation to occur within much larger markets is the way to go, ideally with richer, friendly countries opening up their own markets to goods in exchange for access with their own distinct industries is the way to go - incidentally, this is part of the idea behind my Northern Europe/Commonwealth proposal
Yea ISI is very high risk, high reward. You can protect everything but still stink at everything (especially if the market is small or the SOEs are just robbed).
All of this depends whether the country wants its own brand or is ok being a factory shop for another country. Some African countries are hyper nationalist about having their own car, airplane, or etc industry (Nigeria) while others have no problem being a factory shop, they just want more investment (Rwanda).
Great essay. The origins of the English textiles industry are quite interesting and historically relevant.
One additional point that could be made is that the impact of government policy on the English textile industry goes much further back than Defoe. The industry went through 4 phases. Each was heavily influenced by government policy:
1 Raw wool exports
2 Wool cloth exports (so-called Old Draperies)
3 New Draperies
4 Cotton textile exports
In the 13th and 14th Century raw wool made up 90% of England’s export revenues. In 1275 the Crown started taxing raw wool exports for the first time. The Crown kept increasing the taxes to pay for the constant wars with France. It was not industrial policy, only a means to raise revenue. This tax encouraged the English to shift from raw wool to processing the raw wool into woolen cloth.
Then in 1363 the Calais Staple Company, a government-sponsored import monopoly in Calais, was established to shift taxes to the Low Countries. By the 1390s the taxes were 50% of the price of wool exports. Due to the taxes, the Flemish switched from English raw wool to Spanish merino wool as a supplier.
From 1465-1550s England dominated the European wool cloth industry (based mainly on exports to Antwerp).
A similar change happened with New Draperies, a lighter, cheaper and less durable type of woolen cloth), and later cotton textiles. The Calico Act of 1721 forbade importation and wearing of Indian textiles, helping the fledgling British cotton textile industry.
I need to finish your book Poverty to Progress !
Yes, you do!
LOL
It is interesting that medieval taxes on the Flemish were modulated to ensure support for the Anglo-Normans in their battle to retain France against the Frankish kingdom (which became known as France).
Isn't part of the problem with ISI that the locals are too poor to afford cars or textile in the first place. I guess you can adopt different paths for different sectors at the same time.
For example, in Bangladesh we give export incentives to textiles and ICT. But we do import substitution for cars and consumer electronics. Personally, I'm more moderate on industrial policy. But I'm fine with "protecting" the car industry because less than 10% of Bangladeshis own cars and crude oil is our biggest import. Worst case scenario, it's basically a luxury tax. I think Ethiopia banned ICE passenger vehicles because fuel is also a big import item. Plus 30% of our taxes comes from tariffs despite being the lowest taxed country in the world. So we can't exactly afford to stop imposing tariffs.
There's two vectors to ISI.
Vector 1, the government either encourages private firms or creates the industry via an SOE, protect the industry from foreign competition, subsidize it and focus on domestic markets. (This is ISI leading to internal focus)
Vector 2, the government either encourages private firms or creates the industry via an SOE. protect the industry from foreign competition, subsidize it and focus on on external markets.
(This is ISI leading to Export led industrialization. The government still protects and grows domestic industry but you need to make your industry better via exports).
Textiles and ICT firms already exist in Bangladesh (especially textiles for Bangladesh), so it makes sense to encourage growth through export incentives. Meanwhile you still have infant cars and consumer electronics firms right? So the government isn't focused yet on export incentives for them.
From looking at Bangladesh's atlas and Bangladesh's low car ownership proportion this seems to be the case.
https://atlas.cid.harvard.edu/explore?country=22&queryLevel=location&product=undefined&year=2021&productClass=HS&target=Product&partner=undefined&startYear=undefined
It makes sense that Bangladesh focuses on export incentives for textiles and ICT since those are your leading exports. But since Bangladesh cars and consumer electronic exports are very small, they still need protection.
Again it also depends on what tariffs you can afford to have. The government will never impose a tax on fertiliser industry to build up a chemicals industry. We also don't have taxes for tractor and commercial truck imports.
Whatever the fine detail, it is clear that countries with governments that favour their own people prosper. Japan went from ruin to riches after WWII, Singapore went from a refugee centre for Malaysian Chinese to almost the most prosperous country in the world. China has large a domestic economy - foreign trade is only 40% of GDP - so favours the People (see https://www.researchgate.net/figure/Share-of-foreign-trade-in-the-GDP-of-China-Source-Authors-according-to-World-Bank_fig1_369421475 ). etc. etc.
Corruption, especially by foreign interests, and rampant Internationalism are the causes of relative poverty.
"caring about the people" means nothing. The Indian independence generation also cared about the people and it meant fuck all. As they say the path to hell is paved with good intentions.
Also using the example of Singapore and Malaysia as an argument against internationalism is ridiculous.
Additionally if free trade was so bad why hasn't global inequality fallen since the 90s?
The argument above was not against Internationalism, it was against rampant Internationalism. It was not about caring for a population it was about favouring a population (notice that the word "care" was not used above).
"Internationalism" as an ideology is a product of multinational companies, international banks and countries that currently dominate international trade (Internationalists). This ideology holds that the removal of borders and discrimination in favour of your own nation are impediments to prosperity. The reason that Internationalists proselytise this ideology is that it favours them.
The model adopted by China, Japan and post-war Germany was of the Nation as a business. The objective is to increase the value of the nation (measured in PPP terms).
This means retaining high value added industries within your borders.
You don't let foreign companies replace your industries with their products for more than a few years, you learn from them then edge them out. You don't let foreign companies buy your manufacturers and replace their factories with warehouses for their own goods (even if they promise to employ the previous workforce as warehouse staff) because this is a low value added deal. You don't let the government buy sundries and services from overseas. You use International trade as a method of increasing the the turnover and profits of your own industries. This is "favouring" your own people.
See https://therenwhere.substack.com/p/globalisation-is-a-mistake for a review of Internationalism and Globalisation
Ok? Assuming your country is some kind of democracy, your country will engage in trade insofar as it benefits the median voter. I think you're overestimating the role of ideology. The world is just an emergent order from self interested individuals.
You can also encourage investment into particular sectors by inviting foreigners. Asianometry's video on the Thai car industry comes to mind. I'm pretty sure Bangladesh's car policy takes many cues from there. Like the incentives ensure that you can start out using car assembly kits and then increase value addition over time.
Thank you for this article. Great stuff.
The only issue I would raise is that because England was the first industrialised nation it did not have access to huge markets overseas. This is clear from the proportion of GDP that came from overseas trade before 1800: it only increased from 3% to 5% of GDP over the whole of the 18th century. An added 2% of GDP was unlikely to provide the additional funds for an industrial explosion. It looks like the first phase of the industrial revolution was due to the coincidence of abundant domestic raw materials and the socio-economic changes that occurred after Henry VIII legalised Lollardy (Protestantism) which increased domestic demand as people were allowed to better themselves materially.
I particularly liked this:
"Asking fledgling industries to compete on global markets immediately is like letting your five year old child to immediately drudge his life away in a factory, instead of allowing him to be educated for 22 years so he can get a good job as a software engineer."
UK Members of Parliament should have this etched on their brains.
You might like: https://therenwhere.substack.com/p/the-role-of-slavery-in-british-economic
Hah, and here I thought I was taking a break from reading about US tariffs on Chinese cars. Your work always makes me want to learn more about the subject in question, which can only be a good thing (not that I have that kind of time, but still).
ISI is an interesting idea, but my biggest criticism of it is that it seems to be operating on an ‘everything everywhere all at once’ development strategy for businesses, whilst simultaneously having the potential to isolate countries from the largest and most profitable markets. Rather than going down the British route, it seems that EOI whilst expanding into custom’s unions and enabling specialisation to occur within much larger markets is the way to go, ideally with richer, friendly countries opening up their own markets to goods in exchange for access with their own distinct industries is the way to go - incidentally, this is part of the idea behind my Northern Europe/Commonwealth proposal
Yea ISI is very high risk, high reward. You can protect everything but still stink at everything (especially if the market is small or the SOEs are just robbed).
All of this depends whether the country wants its own brand or is ok being a factory shop for another country. Some African countries are hyper nationalist about having their own car, airplane, or etc industry (Nigeria) while others have no problem being a factory shop, they just want more investment (Rwanda).