pseudoerasmus

Many “global historians” argue that the British cotton industry was the product of (unintentional) infant industry protection from Indian competition in the 18th century. The various Calico Acts created an import-substitution industry by banning Indian cloths and reserving the home market for British producers. This supposedly gave them the freedom to invent and adopt the machines that led to the Industrial Revolution.

To the best of my knowledge, economic historians have never seriously examined this issue, perhaps because the necessary data are lacking or remain unearthed. Nonetheless there are sound historical reasons for doubting the presumption that “protection allowed British goods to become competitive”.

Warning: This is a tedious post which gets into some detail about the British textile industry in the 18th century. A must-skip, if you ask me. Which is why I provide this handy summary:

1. The Calico Act of 1721 (which was intended to protect the wool and silk industries) actually banned most varieties of pure-cotton cloths in general, not just Indian.
2. Before the era of mechanisation, British ‘cotton’ was overwhelmingly cotton-linen, a limitation of British technology (in the economic sense).
3. Mainstream economic theory supplies many justifications for interventionist trade policy to promote innovation. But the standard rationales simply do not apply to constant returns-to-scale activities such as handicraft cottage industry.
4. Lancashire would have survived competition with Indian cloths in an unprotected home market.
5. British machine-spun yarn never faced any direct foreign competitor, since Britain barely imported cotton yarn in the 18th century. The domestic output of yarn was affected by foreign competition only to the extent that it was turned into printed cloth.
6. But there were many other products besides British imitations of Indian cloth which used cotton yarn as a major input, and their role in the mechanisation of yarn production is overshadowed by a selective, Whiggish genealogy which overemphasises the calico branch.
7. IF, as so many argue, competition in the export markets was an important stimulus to inventions in cotton, then the home market could have served just as well and the only reason overseas became so important is that British firms were denied a home market for all-cotton cloths by the Calico Acts!
8. Therefore, it’s entirely plausible — not demonstrated — that the Calico Acts functioned as a Luddite policy which delayed the mechanisation of textile production by decades.

This post elaborates on the above points, covering the period up to 1774, when the Calico Act was repealed.

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