Broadberry Gupta PDF

Stephen Broadberry and Bishnupriya Gupta
The Rise, Organization, and Institutional Framework of Factor Markets, 23-25 June 2005
http://www.iisg.nl/hpw/factormarkets.php
COTTON TEXTILES AND THE GREAT DIVERGENCE: LANCASHIRE,

INDIA AND SHIFTING COMPETITIVE ADVANTAGE, 1600-1850

Department of Economics, University of Warwick, Coventry CV4 7AL, United
Kingdom
S.N.Broadberry@warwick.ac.uk
B.Gupta@warwick.ac.uk
12 April 2005
File: CotDiv9
Abstract: The shift of competitive advantage in cotton textiles from India to Britain
was a key episode in the Great Divergence of living standards between Europe and
Asia. We offer a new, quantitative perspective on this pivotal development, centred
on the interactions between the two countries. The growth of cotton textile imports
into Britain from India via the East India Company opened up new opportunities for
import substitution as the new cloths, patterns and designs became increasingly
fashionable. However, high silver wages in Britain as a result of high productivity in
other tradable goods and services, meant that British producers of cotton textiles
could not use labour-intensive Indian production methods. The growth in British
labour productivity that resulted from the search for labour-saving technical progress
meant that unit labour costs became lower than in India despite the much higher
wages in Britain. However, the full effects of the rise in British productivity were
delayed until after the Napoleonic Wars by increasing wage and raw cotton costs
before supply adjusted to the major increase in demand for inputs.
JEL classification: N60, N70, O14, O31

Key words: Cotton, competitive advantage, unit labour costs, Lancashire, India
Acknowledgements: We would like to thank Bob Allen, George Grantham, Frank

Lewis, Jonas Ljungberg and seminar/conference participantss at Berlin, Kingston,
Leicester, Madrid, Montreal and Warwick, for helpful comments and suggestions.
The second author is grateful to the ESRC for financial support under grant
R000239492.
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http://www.iisg.nl/hpw/intro.php
I. INTRODUCTION
During the early modern period, India was the worlds main producer of cotton
textiles, with a substantial export trade. Indian textiles were exported to Britain on a
large scale from the seventeenth century (Baines, 1835: 55-83; Robson, 1957: 1). By
the early nineteenth century, however, Britain had become the worlds most important
cotton textile producer, dominating world export markets, and even exporting to India
(Ellison, 1886: 57-70; Robson, 1957: 1-3). This dramatic change in international
competitive advantage during the Industrial Revolution was surely one of the key
episodes in the Great Divergence of living standards between Europe and Asia.
However, the literature on the British cotton industry has traditionally focused on
domestic production issues, and has had relatively little to say about interactions
between India and Britain (Ellison, 1886: 14-70, Landes, 1969: 82-88; Rose, 2000:
22-37).1 To the extent that a comparative perspective has been taken at all, it has been
conventional to compare Britain with other European countries or the United States
(Landes, 1969: 159-169; Rose, 2000: 37-56).
This paper anlayses the shift in competitive advantage in terms of changing

unit labour costs, emphasising the interactions between Britain and India. The growth
of cotton textile imports into Britain via the East India Company from the seventeenth
century opened up new opportunities for British manufacturers via a strategy of
import substitution and re-export substitution, as the new cloths, patterns and designs
became increasingly fashionable (de Vries, 1993; Berg, 2002; Inikori, 2002: 428).
However, high silver wages in Britain as a result of high productivity in other tradable
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goods and services, meant that British manufacturers could not use labour-intensive
Indian production methods. Broadberry and Gupta (2005) show that an unskilled
labourer in India earned little more than 20 per cent of the English unskilled wage as
early as 1600, when Indian wages are converted to pounds sterling at the prevailing
exchange rate. Low Indian wages acted as a spur to labour-saving technical progress
in the British cotton textile industry. As British productivity increased, a point was
reached where Britains higher wages were more than offset so that unit labour costs
were lower in Britain and the reversal of competitive advantage occurred. However,
the shift was delayed in international markets during the late eighteenth and early
nineteenth centuries by rising wage and raw cotton prices in Britain as the increase in
production put pressure on labour and material input markets. The shift in
competitiveness in the Indian market was delayed further by transport costs, which
continued to give Indian producers an advantage in their home market until the 1860s
(Ellison, 1886: 63; Twomey, 1983).
The paper proceeds as follows. In section II we set out the quantitative

dimensions of the development of the industry in the two countries. We then examine
comparative wages and productivity in section III, showing the shift in competitive
advantage as productivity increased in Britain and stagnated in India. Section IV then
adds in raw cotton costs and shows how productivity and cost factors interacted to
bring about the growing dominance of the British cotton industry in world markets.
Section V re-examines the issue of high wages and labour saving technical progress,
while Section VI concludes.
1
This view is perhaps most memorably summarised by the anonymous schoolboys answer to a
question on the Industrial Revolution which began with the phrase About 1760 a wave of gadgets
4
II. DEVELOPMENT OF THE BRITISH AND INDIAN COTTON TEXTILE

INDUSTRIES
1. The British cotton textile industry
There is widespread agreement that the arrival on a large scale of Indian cotton cloth
in Britain in the seventeenth century had a substantial effect on the domestic textile
industry. Indian patterns and designs quickly became fashionable and forced domestic
textile producers to react, on the one hand lobbying for protection, and on the other
hand imitating through printing on wool, linen and calico (Wadsworth and Mann,
1931: 118; Thomas, 1926: 25-66). It is significant, however, that there was no attempt
by domestic producers to imitate Indian labour-intensive production methods, which
could not have been economically viable at British wage rates.
In fact, the cotton industry was probably first introduced into Britain by
immigrants from the European continent, fleeing religious persecution. Baines [1835:
99] mentions Walloon and Dutch immigrants to East Anglia in the second half of the
sixteenth century. However, the cotton industry did not take permanent root there
(Wadsworth and Mann, 1931: 19-20). Rather, the industry took root in the already
established textile producing region of Lancashire at the beginning of the seventeenth
century, initially through the production of fustians, a combination of cotton weft and
linen warp (Wadsworth and Mann, 1931: 15; 527).
The British industry remained small throughout the seventeenth century and
the first half of the eighteenth century, since it was not yet competitive with Indian
swept over England (Ashton, 1948: 48).
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cotton textiles. The output of the cotton industry is usually gauged from the
consumption of raw cotton, measured by retained imports (Deane and Cole, 1969:
185; Hoffman, 1965: 254-257; Farnie, 1979: 7). Table 1 shows that when figures
begin at the end of the seventeenth century, raw cotton consumption was only about 2
per cent of its volume at the beginning of the nineteenth century. Indeed, as late as the
1750s, cotton consumption was still less than 5 per cent of the level of the early
1800s.
The lack of competitiveness of the early British cotton textile industry can be
seen most clearly in the trade data of Tables 2 and 3. Trade data were collected by
customs officials on a value basis, but at official rather than current prices. These
official prices were set to reflect normal or typical prices ruling in 1694, with great
care being taken to eliminate temporary fluctuations (Schlote, 1952: 15). Although
much attention has been focused in the literature on how these official values provide
a misleading guide to current values of trade, particularly after the late eighteenth
century, this does not invalidate their use as indicators of trade volumes. Indeed,
Mitchell (1988: 446) quotes Flux (1899: 81) to the effect that (t)he official values
appear to give a much better indication on the movements in the volume of trade than
one could have expected. Certainly, the increase in the volume of both piece goods
and yarn exports during the first half of the nineteenth century shown in part B of
Table 2, moves broadly in line with the official values of exports in part A over the
same period. At the beginning of the eighteenth century, British cotton textile exports
were a mere 0.5 per cent of their level at the beginning of the nineteenth century. By
the 1750s, despite substantial growth, export volumes remained just 3 per cent of the
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level of the early 1800s. In part A of Table 3, derived from the work of Davis (1954;
1962) on the regional breakdown of trade by commodity, the data on trade values at
official prices show how British cotton textile exports were a small fraction of the
imports of cotton cloth from India before the 1780s.
Worries about competition from India in the British market led to pressures for
protection. But it should be noted that the pressure for such measures came more from
producers of woollens and linens than from the small community of British cotton
textile producers, since fine woollens and linens were the closest substitutes for
printed cottons from India (Baines, 1835: 106). Initial measures from 1690 took the
form of import duties, but these were too low to make much impact on the huge
labour cost differences (Davis, 1966: 309). From 1701, however, printed calicoes and
certain other types of cotton cloth imported from India were prohibited (Wadsworth
and Mann, 1931: 117-118). The 1701 Calico Act still allowed the importation of
white cottons from India for printing within Britain, until further legislation in 1721
prohibited these imports unless they were for re-export.
OBrien et al. (1991: 413-418) see these protectionist measures, which

remained in force with various amendments until 1774, as giving an important boost
to the British cotton industry. However, Wadsworth and Mann [1931: 118, 128] play
down their significance for cotton, since linen could also be used for printing, and
import barriers could anyway do nothing to offset Indias competitive advantage in
export markets. Furthermore, as Chaudhuri (1978: 278) notes, a consideration of
Indian exports to Britain suggests that the measures must have been circumvented
7
even in the British market. Part A of Table 3 certainly shows continued growth of the
volume of imports from India during the eighteenth century, although the broad
equality of re-exports and imports until the repeal of the protective legislation in 1774
suggests that the East India Company at least paid lip-service to the principle that this
cloth should not reach the British consumer. Thomas [1926: 135-137] cites legal
documents from prosecutions as well as allegations by contemporaries to implicate
the East India Company in smuggling, but the scale of such operations remains
difficult to ascertain.
By the mid-eighteenth century, Britains cotton producers were still not able to
compete seriously on world markets (Baines, 1835: 81). But the search for laboursaving inventions, driven by the much higher wages in Britain than India, had already
begun by this time, and Timmins (1996: 34-39) lists developments in all the main
sections of preparation, spinning and weaving before the Industrial Revolution.
Worthy of note are Lewis Pauls carding cylinder (1746), Lewis Pauls spinning
machine (1738) and John Kays flying shuttle (1733). It is interesting to note that the
other major innovation before the Industrial Revolution was the Dutch or engine
loom, which originated from the other high wage centre of Europe (Timmins, 1996:
36-37). However, the crucial macro inventions of the Industrial Revolution period
had not yet appeared, since searching for any particular invention does not guarantee
that it will be found immediately (Mokyr, 1990; Crafts, 1977). Hence, whilst labour
productivity in Britain was higher than in India, it was still not sufficiently high to
offset the higher wages. Indeed, since wages increased more rapidly in Lancashire
than in southern England during the eighteenth century, the Anglo-Indian wage gap in
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cotton textiles increased substantially (Gilboy, 1934). This provides an example of a

general phenomenon of input prices being bid up by an increase in demand before
supply has responded fully.
During the second half of the eighteenth century, however, labour productivity
increased dramatically in the British cotton textile industry as a result of further
labour-saving technical progress, while technology and productivity stagnated in
India. This led to a shift in competitive advantage, so that by the early nineteenth
century, Britain was dominant in world markets, and even able to export to India.
Between 1780 and 1800, output grew at an annual rate of 10.8 per cent, while exports
expanded at an astonishing 14.0 per cent per annum. During the first half of the
nineteenth century, output continued to grow at an annual rate of 5.0 per cent, while
exports increased at a rate of 6.3 per cent per annum. However, Britains conquest of
world markets was hampered during the early stages of the Industrial Revolution
between the 1780s and the 1820s by he high price of inputs resulting from the sudden
surge in British demand. This applied most obviously in the labour market, where
shortages of handloom weavers famously led to very high earnings. However, it also
affected the price of raw cotton in Britain, which reached very high levels in the late
eighteenth and early nineteenth centuries (Mitchell, 1988: 759-760). However, as
supply increased, particularly from the United States, the price of raw cotton in
Britain fell back to the level of the early eighteenth century during the 1830s, and
Indian producers were faced with the full force of British competition.
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As current prices began to deviate substantially from official prices towards

the end of the late eighteenth century, Davis (1979) provided estimates of trade values
at current prices, shown here in part B of Table 3. These figures suggest that after the
repeal of the protective legislation, imports exceeded re-exports by a considerable
margin until the beginning of the nineteenth century. However, exports exceeded
imports already by the early 1790s.
British-made cottons first broke into the export trade in the African and
American markets during the eighteenth century, but success tended to be limited to
periods when the availability of Indian goods was restricted by war. Wadsworth and
Mann [1931: 159-160] show that Indian goods were still able to take market share
from the British-produced cottons in Africa when the disruption of the Seven Years
War ended in 1763. With the struggle over American independence adding to the
difficulties of Britains cotton exporters, it is perhaps fortunate that from the 1770s
technological developments made Britain competitive in Europe, finding a growing
market for what were called in the trade data Manchester cottons and velverets
(Wadsworth and Mann, 1931: 168-169). As Edwards (1967: 50) notes, the ability of
merchants and manufacturers to switch flexibly between the American and European
markets was important during the period of the Revolutionary and Napoleonic Wars
between 1793 and 1815. Not only was British trade with Europe frequently disrupted
by the fighting on the Continent during this extended period, but Britain also went to
war with the United States between 1812 and 1814. Inikori (2002: 444) shows that
Indian cottons continued to share the West African market equally with British-made
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cottons during the second half of the eighteenth century, but that Lancashire goods
pulled ahead decisively after the Revolutionary and Napoleonic Wars.
The penetration of British cotton textile exports into the Indian market
proceeded more slowly, however, since Indian producers retained a transport cost
advantage which they lacked in competition between the two countries in Africa,
America or Europe. To estimate Britains share of the Indian market, it is necessary to
make assumptions about cotton consumption in India. Ellison [1886: 63] assumes
cotton consumption of 2 lb per head of population, which leads to the estimates of
total cotton consumption in Table 4. This can be married up with reliable data on
British exports to India to obtain estimates of Britains market share. Ellisons data
suggest that Indian producers supplied a larger share of their home market than
British producers until at least the 1860s. Twomey (1983: 46, 53) makes similar
assumptions to estimate the share of British exports in the Indian market as rising
from 10 per cent in 1850 to a peak of 60 per cent in 1880-84 before falling back to 50
per cent by 1910-14.
2. The cotton textile industry in India

Before the dramatic rise of Lancashire in the late eighteenth and early nineteenth
centuries, the worlds most important cotton textile industry was located in India
(Robson, 1957: 1). Chaudhuri (1978: 238) argues that Indias competitiveness in this
industry can be explained by an abundant supply of skilled labour, with specialised
tacit knowledge being passed down through the generations in classic Marshallian
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fashion.2 Occupations related to the production of particular types of textiles were

caste-based and led to regional specialisation. Raw cotton was available locally and
regional varieties often had a crucial impact on the type of cloth produced. Although
spinning and weaving activities were widely dispersed throughout the country,
regional specialisation was a key aspect of the Indian cotton textile industry. Coarse
cloth was produced for the local market and was spread across all regions. Fine cloth
was produced for interregional and international markets, mainly in the four regions
of Gujarat, the Punjab, the Coromandel Coast and Bengal (Chaudhuri, 1978: 243).
The Gujarat cotton industry exported largely to the Red Sea ports, while
exports from the Punjab went overland to Afghanistan, East Persia and Central Asia
and by river and sea to the Persian Gulf (Chaudhuri, 1978: 243-245). Before the
growth of the European trade, the Coromandel industry exported mainly to south-east
Asia, while Bengal supplied upper India. From the seventeenth century, substantial
quantities of Indian cotton cloth were exported to Europe, particularly through the
English East India Company (EIC) and the Dutch United East India Company
(Verenigde Oostindische Compagnie or VOC). The European companies set up
trading posts along the coast and encouraged the settlement of weavers. This was
particularly true of the Coromandel Coast in the south of India (Ramaswamy 1985:
120-121). In Bengal, textile production was primarily a domestic rural industry.
Although there were urban centres of production, weavers showed much less mobility
than in the Coromandel (Chaudhury 1995: 158).
Marshall [1920: 225] famously noted that The mysteries of the trade become no mysteries; but are as
it were in the air.
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Part A of Table 5 shows the number of textile pieces exported to Britain

between the 1660s and 1750s by the EIC from Bombay (the Gujarat trade), Madras
(the Coromandel Coast trade) and Bengal, together with the data on textile exports to
Europe via the VOC. Although the textile data include small amounts of silk goods
and mixtures of silk and cotton, they are dominated by cotton cloth. Total textile
exports from these three key centres of the Indian cotton textile trade to Britain show
a strong upward trend from the 1660s to the 1680s, followed by a sharp downturn due
to political conflict and war with the Mughal Empire. A second downturn in the first
decade of the eighteenth century can be explained by the introduction of measures to
protect British textile producers, together with bullion shortage and war (Chaudhuri,
1978: 295). However, ways were found around the protective measures and Indian
textile exports to Britain fluctuated around 600,000 to 800,000 pieces for the rest of
the first half of the eighteenth century. Part B of Table 5 picks up the story from the
1770s to the 1790s, but with the Gujarat trade passing through Surat rather than
Bombay. Note that Indian exports to Britain continued to thrive during this period.
Note, however, that the regional balance of the Indian export trade to Britain
changed substantially between the seventeenth and eighteenth centuries. Whereas
Bombay and Madras were clearly more important during the seventeenth century,
Bengal became the dominant supplier of textiles to the EIC during the eighteenth
century. The declining importance of the Coromandel Coast as a supplier partly
reflected the disruption caused by political conflict, particularly during the MughalMaratha wars (Arasaratnam, 1986: 153). However, Chaudhuri (1978: 296) also notes
a relative cheapening of Bengal cottons, which suggests that the shift in competitive
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advantage between India and Britain was foreshadowed by a regional shift in

competitive advantage within India. Exports via the VOC were generally lower than
via the EIC, and exports by the French and Danish companies were lower again
(Morineau, 1999: 252, 266).
Table 6, taken from Twomey (1983), shows Indian cotton textile exports
during the late eighteenth century and the first half of the nineteenth century. The
figures for Bengal in the 1790s match well with the figures from Table 5, although the
higher figures for total India suggest that the three centres account for only about half
the trade. Table 6 suggest that there was a sharp decline in Indian cotton textile
exports to the British market only from the 1790s, which accords with the pattern of
British imports in Table 3. Note, however, that the decline in total Indian exports to
all markets was substantially slower.
3. Textile prices and the world market

Our explanation of the shift in competitive advantage relies on the existence of an
integrated world market in cotton textiles. Although transport costs provided local
producers with a limited amount of shelter from international competition in local
markets, even with a relatively light product such as cloth, competitive forces also
clearly stopped local prices from getting too far out of line with world market prices.
This was much less true of grain prices in the early modern period, since grain was
much more expensive to transport on account of its high weight-to-value ratio
(Broadberry and Gupta, 2005).
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Textile prices and grain prices for England during the period 1500-1850 are
shown in Figure 1, based on Phelps Brown and Hopkins (1981: 44-59). The relative
price of textiles clearly trended downwards over the period as a whole, as agricultural
prices increased more rapidly than textile prices. Note that English textile prices
showed no trend increase or decrease in nominal terms during the seventeenth and
eighteenth centuries, which amounted to a substantial real price decline (Shammas,
1994). This is the context in which we need to assess what was happening to textile
prices in India, with prices on world markets setting limits to the prices that could be
paid to Indian producers. As already noted in the discussion of lobbying for protection
in Britain, there was a clear appreciation amongst textile producers of competition
between types of cloth, with fine woollens and linens seen as close substitutes for
printed cottons (Baines, 1835: 106). Hence the Indian export prices charted in Figure
2 for the period 1665-1759 show little upward trend. However, they also indicate a
fairly constant differential between the higher prices in Madras and Bengal than in
Bombay, reflecting differences in the type of cloth produced in the different regions.
The constraint imposed by the price that could be obtained on the English market is
illustrated by the fact that after 1760, the East India Companys offer price to the
weavers in Bengal at times fell short of the weavers cost-determined asking price, so
that supply to the EIC fell short of demand (Hossain, 1988: 55).
It seems likely that, against this generally competitive background, the EIC
enjoyed monopsony power in at least some regions of India in some periods, due to
the scale of its operations. Nevertheless, the general framework of analysis is one of
international competition within an integrated world market for cotton textiles. As
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technical progress in Britain put downward pressure on cotton textile prices, Indian
producers found it increasingly difficult to compete, and competitive advantage in
cotton textiles shifted from India to Britain. As Mitra (1978: 193) put it, In 1818, the
Dacca factory was closed down. It was not the freight, nor the protective duty which
prompted the Court to abandon it in 1818, but the sharp reduction in prices of English
cotton goods of a similar description and the fine piece-goods of Bengal increasingly
lost their market.
III. WAGES AND PRODUCTIVITY IN INDIA AND LANCASHIRE

1. Anglo-Indian wage differences in cotton textiles
The cotton textile industry adds value to raw cotton, using labour intensive production
processes. Hence competitiveness on world cotton textile markets depends largely on
comparative unit labour costs, given by the ratio of comparative money wages
measured in a common currency and comparative labour productivity in volume
terms. In this section we compare the wages of cotton textile workers in Lancashire
and India. Chaudhuri (1978: 237) notes the views of an anonymous author writing in
1701 that the same amount of labour as would cost a shilling in England may be had
for two pence in India. To what extent did this six-to-one wage differential exist in
cotton textile production, and how did it vary over time?
Broadberry and Gupta (2005) show that the money wages of unskilled and
skilled labourers in India were already much lower than in Britain by the end of the
sixteenth century, when compared at prevailing exchange rates. Since currencies at
this time can be compared on the basis of their silver content, this is labelled the silver
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wage. Although the silver wage was much higher in Britain than in India, providing
greater command over tradable goods, it should be noted that the price of non-tradable
goods was also much higher in Britain. Hence, differences in the grain wage, defined
as the silver wage divided by the price of grain, the principal foodstuff, were much
smaller. Differences in living standards (or real consumption wages) lie somewhere
between the limits set by silver wage differences and grain wage differences.
Table 7 presents a comparison of earnings in the cotton industry between 1680

and 1820. The Indian earnings are collected from a variety of sources for the
Coromandel and Bengal. Data for the early period are taken from several studies of
the handloom industry in southeastern India, while data for the later period are mainly
from Bengal. This is in line with the regional shift of production for export discussed
earlier. The Lancashire earnings for 1770 are taken from the authorative study of
Wadsworth and Mann [1931], and derive originally from the work of Arthur Young,
based on the weekly earnings of a handloom weaver operating a single loom, with
some assistance from his wife and children.3 The Indian data for 1770 are derived
from an estimate of the monthly earnings of a loom operated by two men with the
assistance of their wives and children.4 These data put the Lancashire wage at 600 per
cent of the Indian wage, consistent with the six-to-one differential noted by
Chaudhuris (1978: 237) anonymous tract author.
Working back from 1770, we take the 1680 figure for India from Brennigs
(1986) study of the Coromandel textile trade in the late seventeenth century. The
3
These figures for the earnings of English weavers are also used by Parthasarathi (1998: 83-84).
17
weekly data are derived as one quarter of the estimated monthly earnings of a master
weaver operating a single loom with the help of an assistant. The weaver would also
have been assisted in ancillary tasks by his wife. For Lancashire, we have used
Gilboys (1934) estimate of the daily wage of a craftsman, assuming a six-day week.
Working forward from 1770, we take the earnings in Lancashire for circa
1790 from Gilboy (1934: 280-287). The figure used here is for skilled workers. Wood
(1910) suggests even higher earnings for handloom weavers during the late 1790s,
due to a substantial imbalance between the spinning and weaving sections of the
industry at this time, following a number of dramatic improvements in spinning
technology but before the successful introduction of the powerloom. However, Gilboy
(1934) suggests a substantial increase in earnings during the course of the 1790s, and
spinners earnings were substantially lower. Since the wages of handloom weavers
increased much more slowly in India, the English wage as a proportion of the Indian
wage increased. For 1820, the Lancashire earnings data are taken from Wood (1910:
127) and refer to all cotton operatives, including factory workers as well as handloom
weavers. With handloom weaving now being threatened by factory production, and
with a general rebalancing of supply and demand in the labour market, English wages
fell back in cotton textiles.5 Mitra (1978: 128-129) shows that the wages of Indian
cotton spinners remained constant in money terms between 1790 and 1820, so that
the English wage fell back to 517 per cent of the Indian level.
Since all earnings are attributed to male weavers rather than allocated between weavers and other
family members, the true wage of an individual weaver is, if anything, overstated in these sources.
5
Money wages also fell in line with prices in England during the postwar deflation (Gayer et al., 1953:
818).
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2. Anglo-Indian productivity differences in cotton textiles

Direct estimates of the level of labour productivity in cotton textile production for
both England and India during the crucial Industrial Revolution period are scarce.
Nevertheless, there is sufficient information to shed quantitative light on the changing
balance between Anglo-Indian wage and productivity differences, and hence in
comparative unit labour costs. We focus first on comparative levels of labour
productivity around 1770 and then turn to establishing trends over time.
Dealing first with comparative levels of labour productivity in spinning,

Catling (1970: 54) provides data on English labour productivity for spinning 80s
cotton yarn, using the concept of OHP, or operative hours needed to process 100 lb of
cotton, which is just the inverse of labour productivity. This takes account of the
effects of the increasing speed of the newer mules, the increasing number of spindles
per mule and the later practice of operating the mules as pairs. If a machine is tended
by three operatives and has an output of 25 lb per hour, then the OHP is 12. In Table
8, the OHP requirement for 80s yarn around 1780 was 2,000. For India, Catling
suggests a rough estimate of 50,000 for the Indian OHP around 1780, which would
give Britain a huge labour productivity advantage. For coarser counts, however,
Buchanan Hamilton (1833: 289) suggests that a woman spinner working full-time
could clean and spin two-and-a-half pounds of cotton in a month. Assuming a ten
hour working day and a six day week, that would translate into around 100 hours to
process a pound of cotton, or an OHP of 10,000. These figures would also suggest a
substantial British labour productivity advantage in spinning.
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In weaving, it seems likely that the British labour productivity advantage

around 1770 was smaller than in spinning, since technological progress was more
limited in weaving before the introduction of the power loom. There are, nevertheless,
clear suggestions in the literature of a higher capital-labour ratio in Lancashire than in
India. In Coromandel weaving, Brennig (1986: 348) for the late seventeenth century
and Arasnaratnam (1980: 269) for the late eighteenth century, indicate two full-time
male operatives per handloom, in addition to ancillary labour inputs from family
members. Mitra (1978: 113-115) also presents evidence to suggest that two men
worked per loom in late eighteenth century Bengal. In the Patna region of the Bengal
Presidency, Sinha (1984: 26-27) finds three weavers per loom towards the end of the
eighteenth century. A similar capital- labour ratio is also suggested by Buchanan
Hamilton (1833: 296) and Hossain (1988: 40-41). Typically, three men worked per
loom for finer textiles with design and two per loom for coarser textiles. Estimates of
weavers fixed costs confirm that the technology used was highly labour intensive.
Buchanan Hamiltons (1833: 298) survey put the cost of a loom at two-and-a-half
Rupees, less than a weavers monthly earnings. The cost of a weaving shop or shed
was put at 4 Rupees and accessories at less than a quarter of a Rupee. The cost of yarn
for two pieces of cloth, at 5 Rupees, was the main part of the production cost.
Hossains (1988: 20) work on eastern Bengal in the eighteenth century echoes this
view, arguing that the capital input was minimal, with output being increased by
drawing in surplus labour.
Descriptions of Indian weaving equipment by contemporary writers suggest

the use of rudimentary technology, such as a warp set up on four bamboo sticks by
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two men on open ground and then fixed to the loom. It took these two men ten to
thirty days to lay the warp (Hossain 1988: 40). One of these men held by hand two
small wheels around which the thread was wound as he laid the warp. The loom was
placed in a pit inside a weaving shed. The weaver sat on the side and operated the
loom (Taylor, 1840: 174-175). Simple, though numerous, tools were used in spinning
and weaving. These tools were made of locally available materials such as bamboo,
reed, wood and wire (Hossain, 1988: 48). While the technology remained stagnant, it
is likely that Indian productivity was nevertheless high by pre-industrial standards,
due to the extent of the division of labour, where each task was performed by a certain
social group. The spinning and embroidery were done by the women, washing and
dyeing by specific caste groups.
Although Wadsworth and Mann [1931: 324-339] also indicate ancillary labour
inputs from family members in the Lancashire industry during the first half of the
eighteenth century, each loom was operated by only one full-time male weaver. This
suggests that before the major technological changes of the second half of the
eighteenth century, the Indian industry started out with two to three times as much
labour per handloom as the English industry. If we assume that English and Indian
looms were capable of producing the same output, this would result in a two-to-one or
three-to-one labour productivity advantage for England over India.6 This would be
consistent with Lancashire being unable to compete seriously on world markets at the
beginning of the eighteenth century, since wages were four times higher than in India.
It would also be consistent with Lancashire being able to draw on the technological
change that had occurred in the European cotton industry and in textile manufacturing
21
in general during the late medieval and early modern periods (Mazzaoui, 1981: 7386).
Turning now to trends in comparative labour productivity over time, there are
clear signs of labour saving technical progress in the Lancashire cotton industry
during the eighteenth century, particularly in cotton spinning. The key technological
breakthrough in spinning came at the end of the 1770s. Cromptons mule, introduced
in 1779, combined innovations from Hargreaves spinning jenny, introduced in 1764
and patented in 1770, and Arkwrights water frame, patented in 1769 (Timmins,
1996: 40-43). While mules remained hand-driven, they were limited in size to around
100 spindles, setting limits to the increase in labour productivity over the older singlespindle jersey wheel technology. However, once power was applied, the capacity of a
single mule increased to upwards of 1,200 spindles by the early 1830s (Timmins,
1996: 43).
Technical progress in spinning led to a sharp fall in the relative price of cotton
yarn from the first half of the 1780s. However, as can be seen in Table 9, the real
price fall was greater in the higher counts, with mechanisation making the spinning of
very fine yarns in England an economic proposition for the first time (Harley, 1998:
50). On the coarse counts that dominated the trade at this time, such as 18s weft, real
prices fell by a factor of about four between the first half of the 1780s and the first
half of the 1820s. On finer counts such as 40s warp, the real price fell by a factor of
nearly 8, and on very fine counts such as 100s twist, it fell by a factor of 15.
This amounts to the assumption of a common Leontieff production function.
22
However, spinning was only one task in the preparation of finished cotton
cloth, and technical progress was much less dramatic in other parts of the industry,
including preparation and finishing as well as weaving. In weaving, although
machinery was being continually improved, there were no major technological
breakthroughs between Kays flying shuttle, patented in 1733, and the successful
application of power to the loom, which was a long drawn-out affair from the 1770s.
The development of an economic powerloom proved a daunting technological
challenge, and was only really achieved on a commercial basis by Sharp and Roberts
in 1822 (Timmins, 1996: 46). This imbalance between spinning and weaving helped
to generate the high wages of handloom weavers in the late eighteenth century
apparent in Table 7. Given the less rapid technical progress in weaving than in
spinning, we should expect the real price of cotton cloth to decline more slowly than
the real price of yarn, and this is borne out by Table 9. The real price of calico fell by
less than a factor of 4 between 1780/4 and 1820/4, while the real price of muslin fell
by less than a factor of 3.
Since labour was not the only input, we need to demonstrate that real prices
declined in line with increasing labour productivity before the former can be used as
an indicator of the latter. We see that the fall in the real price of 100s yarn in Table 9
is very close to the increase in labour productivity for 80s yarn in Table 8. Both are
very fine counts for this period, so the high measure of agreement is reassuring. We
have taken the fall in the real price of cloth, the final product, as the best guide to the
increase in productivity in the cotton industry as a whole. Cuenca Esteban (1994: 101102) suggests a fall in the nominal price of cotton textile exports by a factor of 4.65
23
between 1770/4 and 1820/4, which translates into a fall in the real price by a factor of
6.53.
3. Unit labour costs

Now consider the implications for competitiveness between Lancashire and India in
Table 10. Competitiveness is measured here by comparative unit labour costs
(ULC/ULC*):
ULC
ULC *
eW/W *
(1)
y/y *
where an asterisk denotes the numeraire country, in this case Britain. Comparative
unit labour costs are calculated as the ratio between comparative money wages
converted to a common currency and comparative labour productivity (y/y*). Money
wages in India (W) and Britain (W*) are converted to a common currency in terms of
their relative silver contents (e).
In 1770, wages in Britain were about 6 time higher than in India, but labour
productivity in Britain was only between two and three times higher than in India.
This meant that the ratio of comparative silver wages to comparative labour
productivity, or comparative unit labour costs, took a value well above 100. With
much higher unit labour costs than in India, Britain had a substantial competitive
disadvantage in world markets. By 1820, however, with productivity having increased
in Britain by a factor of 6.53 and with the assumption of stagnation in India,
productivity in Britain had risen to 1625 per cent of the Indian level. Since British
wages had by this time fallen back to around 517 per cent of the Indian level, unit
24
labour costs were now lower in Britain than in India, and Britain had the competitive
edge in world markets.
IV. COMPARATIVE COSTS, PRICES AND CHANGING MARKET SHARES

1. Raw cotton costs
We see the shift in competitive advantage in cotton textiles from India to Britain as
driven primarily by changing comparative unit labour costs. However, it is helpful
also to take into account differences in raw cotton costs. Table 11 shows that the price
of raw cotton in Britain averaged about 7 old pence per lb in both the late seventeenth
century and the mid-nineteenth century. However, from the mid-eighteenth century to
the early nineteenth century, the price of raw cotton in Britain increased substantially,
in response to the sharp increase in demand and before supply had responded fully.
In Table 12, we see that India, with its local supply, faced a raw cotton price
that was generally cheaper than in Britain, which gave India a further competitive
edge over and above the lower wage costs. But what is interesting to note is that
whereas raw cotton prices followed a sharply upward trend in Britain after 1740, the
increase was much more gradual in India. Of particular significance was the sharp rise
in raw cotton costs in Britain during the period of the Revolutionary and Napoleonic
Wars. What Table 11 and 12 suggest is that relative raw cotton costs played an
important role in the timing of the shift in competitive advantage. For just as the
British cotton industry began to experience dramatic productivity growth in the late
eighteenth century that could offset the high wages, raw cotton costs rose rapidly to
delay the shift in competitive advantage. As raw cotton prices fell back after the end
25
of the Napoleonic Wars, the effects of the productivity growth were realised and
Lancashire cottons replaced Indian cottons in world markets.
2. Comparative costs and prices

Table 13 shows comparative GB/India combined costs as a weighted average of wage
and raw cotton costs. The weights are based on Jones (1933: 105) and Edwards (1967:
240), together with the assumption that the Anglo-Indian other costs ratio was the
same as the raw cotton costs ratio. It is tempting to think that this combined cost ratio
reflects the comparative total factor productivity ratio (TFP/TFP*), since the levels
equivalent of the familiar cost dual TFP equation is:
A / A* =
(W / W *) (C / C*)1
( P / P*)
(2)
where A is total factor productivity (TFP), W is the wage rate, C is the cost of raw
cotton, and P is the price of cotton yarn or cloth. An asterisk indicates the foreign
country, which is taken as India. In competitive markets, the selling price must be
equal, so it is tempting to think that the denominator in equation (2) should be unity.
However, it is important to note that the correct prices to use in the

denominator here are prices free on board (FOB), whereas the selling prices (SP)
include transport costs (T):
SP = P + T
(3)
In Table 13, we assume that the initial FOB price ratio was 200, obtained from
Chaudhuris (1978: 540-548) information on the East India Company mark-up on
Indian textiles. This has been extended forwards from 1770 using the British cotton
textile export price index from Cuenca Esteban (1994: 101-102), together with the
26
assumption of stagnant FOB prices in India. Evidence in favour of this latter

assumption is provided by Mitra (1978: 103-130), who notes that the EIC increasingly
ran into difficulties in fulfilling their orders for cotton cloth in India, yet were unable
to offer higher prices because of the situation in the English market. Given these
developments in combined costs and FOB prices on a comparative basis, we see in
Table 13 that Britains TFP advantage increased continually throughout the period.
The change in competitive advantage in the production of cotton textiles

occurred in three stages. In the first stage, which extended until the last quarter of the
eighteenth century, the selling price of Indian goods in the British market (SP*) was
lower than the British FOB price (P) for most products, which were therefore not
produced in Britain. In this stage, the British industry focused largely on the
production of fustians.
In the second stage, towards the turn of the century, competitive advantage
had started to shift in Britains favour. With rising productivity in Lancashire, the
FOB price in England now fell below the CIF price of Indian goods in Britain for a
growing range of products, so that Britain increasingly displaced India from the home
market. Also, Britain became increasingly able to compete against India in third
markets such as Africa, where transport costs were similar for both countries.
In the third stage, from about 1830, the productivity gains in Britain,
particularly now in weaving, reduced the British FOB price still further, so that the
British selling price in the Indian market, inclusive of transport costs, could fall below
27
the Indian FOB price in at least some products. We have already seen in Table 4 how
Britains share of the Indian market grew from 3.9 per cent in 1831-35 to 58.4 per
cent in 1880-81. This view of the dynamics of Britains penetration of the Indian
market during the nineteenth century, based on the work of Ellison [1886] is broadly
consistent with the picture presented by Twomey (1983), who is interested in the issue
of Indian de-industrialisation. Twomey (1983: 40, 53) argues that although India
became a net importer of cotton cloth from about 1830, handicraft production for the
home market turned down only after 1850.
V. HIGH WAGES AND LABOUR SAVING TECHNICAL PROGRESS

1. Wages and induced innovation
The idea of a link between high wages and labour saving technical progress was
originally proposed by Hicks (1932: 125). Although Salter (1960: 43) criticised
Hickss argument on the theoretical grounds that (t)he entrepreneur is interested in
reducing costs in total, not particular costs such as labour costs or capital costs, the
idea has persisted in empirical work, particularly where there are large differences
between countries in factor prices and productivity (Acemoglu and Zilibotti, 2001). In
the historical literature, this approach is most closely associated with the work of
Habakkuk (1962). However, Habakkuks focus was on the case of the United States
and Britain during the nineteenth century, with Britain cast in the role of the low wage
economy, and high wages inducing labour saving technical progress in the United
States.
28
Economic historians have been reluctant to apply this approach to the case of
the Industrial Revolution, with Britain cast in the role of the high wage producer. Von
Tunzelmann (1981: 159-160), for example, endorses Habakkuks view of the US/UK
case, but explicitly rejects its applicability to the case of Britain and Europe during the
Industrial Revolution. This reluctance to characterise Britain as a high wage economy
during the Industrial Revolution probably owes it origins to the long running standard
of living debate, which emphasises the slowness of real wages to rise for the working
class. However, this is quite consistent with the findings emphasised in Broadberry
and Gupta (2005), that whilst silver wages were much higher in northwest Europe
than in Asia, grain wages were not. The point is that British firms competing with
Indian producers had to think in terms of the silver wage, since they had to sell on
world markets at the world silver price.
Since silver wages were four times higher in Britain than in India, it is not
surprising that British producers seeking to imitate Indian cotton textiles could not
adopt labour intensive Indian production methods. Rather, British producers needed to
find new production methods, and it is this search which led them to the innovations
of the Industrial Revolution. The scale of this Anglo-Indian silver wage difference
prompts us to put it at the heart of the developments in cotton, and hence at the heart
of the Industrial Revolution. Some writers have considered the logical possibility, but
without perceiving the huge silver wage gap, have resisted giving it anything other
than a minor role. Thus Landes (1969: 115-116) devotes one paragraph to high wages
as a stimulus to mechanisation, but makes no mention of the inducement mechanism
in his later work (Landes, 1998). Others, such as Deane (1965: 97), only mention
29
wages and the British cotton industry to stress the importance of an almost
inexhaustible low-priced labour supply.
In our view, it is the combination of the focus on Europe rather than Asia
together with the consideration of grain wages rather than silver wages that accounts
for the previous neglect of the link between the Anglo-Indian wage gap and laboursaving technical progress in the British cotton industry. Thus although Parthasarathi
(2001) makes a direct comparison between Britain and India, he focuses on the grain
wage and hence follows other world historians in minimising the differences
between Europe and Asia during the early modern period (Frank, 1998; Pomeranz,
2000).
2. Biased technical change

Before we conclude in favour of labour-saving technical progress, however, we must
confront another strand in the literature, which emphasises the slow growth of capital
during the Industrial Revolution, combined with the rapid growth of labour as
population growth increased. Von Tunzelmann (1994: 289-290) claims that technical
progress in the economy as a whole was only strongly labour saving after 1830. The
data which underpin this conclusion are reproduced here in Table 14. Working at the
level of the economy as a whole, although total net fixed capital stock per head of
population did increase before 1830 at an annual rate of 0.2 per cent, this rose to 1.5
per cent after 1830. However, as Williamson (1990: 272) notes, the apparent modesty
of Britains investment requirement during the Industrial Revolution had much to do
with under-investment in dwellings and social overhead capital rather than in plant,
30
equipment and machinery, which is of most relevance to labour saving technical

progress. Indeed, plant, equipment and machinery per head was already increasing at
an annual rate of 0.8 per cent between 1760 and 1830, rising to 2.2 per cent after
1830.
Disaggregated data by industry are more patchy, and for cotton textiles, we
have only the capital stock data of Chapman and Butt (1988), which refer largely to
buildings. Nevertheless, there is evidence of an increasing capital labour ratio before
1830 as well as after, and this is consistent with labour saving technical progress in
the cotton textile industry.
V. CONCLUSIONS
The shift of competitive advantage in cotton textiles from India to Lancashire was a
key episode in the Great Divergence of living standards between Europe and Asia.
This paper offers a new perspective on this major development, centred on
comparative unit labour costs, and emphasising the interactions between the two
countries. We emphasise the growing imports of cotton cloth from India via the East
India Company during the seventeenth century, which opened up new opportunities
for import substitution as the new cloths, patterns and designs became increasingly
fashionable. However, high silver wages in Britain as a result of high productivity in
other tradable goods and services, meant that British producers of cotton textiles
could not use labour-intensive Indian production methods. This stimulated a search
for new methods of production that economised on the use of labour. As labour
31
productivity increased in Britain and stagnated in India, comparative unit labour costs
moved in Britains favour.
The shift of competitive advantage occurred in three stages. First, a small

cotton industry was established in Lancashire between 1600 and 1770. Although
labour productivity was higher than in India, wages were even higher so that
Lancashire was unable to compete seriously with India. Second, between 1770 and
1830 labour saving technological progress raised labour productivity and made
Lancashire competitive in world markets despite high wages. During this second
phase, the shift of competitive advantage in international markets was delayed by
rising wage and raw cotton costs, before supply responded fully to the increased
demand in factor and material input markets. Third, after 1830, further technical
progress made Lancashire competitive even in the Indian market.
32
TABLE 1: Raw cotton consumption, Great Britain 1697-1849 (million lb)
1697-99
1700-09
1710-19
1720-29
1730-39
1740-49
1750-59
1760-69
Annual
average
consumption
1.1
1.1
1.3
1.5
1.7
2.1
2.8
3.5
1770-79
1780-89
1790-99
1800-09
1810-19
1820-29
1830-39
1840-49
Annual
average
consumption
4.8
15.5
28.6
59.6
93.4
166.5
320.7
526.3
Sources: 1697-1780: Wadsworth and Mann [1931: Appendix G]; 1780-1810: Baines
[1835: 347]; 1810-1849: Ellison [1886: Table 1].
TABLE 2: Exports of cotton textiles, measured at constant official prices, Great

Britain, 1697-1850 (000 at 1697 prices)
A. Values at constant official prices (000 at 1697 prices)
Total
Piece
Yarn
goods
1697-99
16
1770-79
1700-09
13
1780-89
1710-19
8
1790-99
2,525
101
1720-29
16
1800-09
7,603
749
1730-39
14
1810-19
17,712
1,133
1740-49
11
1820-29
25,605
3,225
1750-59
86
1830-39
44,086
7,519
1760-69
227
1840-49
73,838
12,109
Total
246
756
2,626
8,352
18,845
29,830
51,605
85,947
B. Volumes
1800-09
1810-19
1820-29
1830-39
1840-49
Piece goods
m lin yds
m lb
109.5
20.0
205.0
37.4
320.3
58.5
552.4
100.8
977.5
178.4
Yarn
m lb
7.4
12.0
35.5
84.3
136.1
Sources: Part A: 1697-1808: Schumpeter (1960: Tables X, XI); 1808-1850:

Parliamentary Papers (various years), Finance Accounts: Trade and Navigation.
Part B: Robson (1957: 331).
33
TABLE 3: British imports and re-exports of cotton piece goods from India,
compared with British exports of cotton textiles, 1663-1856
A. Values at constant official prices (000 at 1697 prices)
Imports Re-exports
Exports
1663-69
182
1699-1701
367
340
20
1722-24
437
484
18
1752-54
401
499
83
1772-74
697
701
221
B. Values at current prices (000)
Imports Re-exports
1784-86
1,344
395
1794-96
1,687
1,148
1804-06
823
777
1814-16
515
433
1824-26
363
430
1834-36
347
406
1844-46
478
450
1854-56
481
532
Exports
797
3,801
16,339
18,994
17,375
22,398
25,835
34,908
Sources: Part A: 1663-1701: Davis (1954: 164-165); 1722-1774: Davis (1962: 300303). Part B: 1784-1856: Davis (1979: 94-125).
TABLE 4: British cotton textile exports in the Indian market, 1831-35 to 1880-81
1831-35
1856-60
1880-81
Indian consumption of
cotton textiles (m lb)
375
455
600
Source: Ellison [1886: 63].
Share taken by
British exports (%)
3.9
35.3
58.4
34
TABLE 5: Indian exports of textiles to Europe (pieces per year)

A. 1665-1759
To Britain via EIC from:
Bengal
Madras Bombay
1665-69
1670-74
1675-79
1680-84
1685-89
1690-94
1695-99
1700-04
1705-09
1710-14
1715-19
1720-24
1725-29
1730-34
1735-39
1740-44
1745-49
1750-54
1755-59
7,041
46,510
66,764
107,669
169,595
59,390
130,910
197,012
70,594
260,318
251,585
341,925
558,850
583,707
580,458
619,309
479,593
406,706
307,776
37,078
169,052
193,303
408,032
244,065
23,011
107,909
104,939
99,038
150,042
200,495
269,653
142,500
86,606
137,233
98,252
144,553
169,892
106,646
95,558
294,959
309,480
452,083
200,766
89,486
148,704
296,027
34,382
164,742
82,108
184,715
119,962
57,503
66,981
95,139
60,042
55,576
55,770
To Europe
Three
via VOC
centres
139,677
126,572
510,521
257,918
569,547
127,459
967,784
283,456
614,426
316,167
171,887
156,891
387,523
364,613
597,978
310,611
204,014
294,886
575,102
372,601
534,188
435,923
796,293
475,752
821,312
399,477
727,816
241,070
784,672
315,543
812,700
288,050
684,188
262,261
632,174
532,865
470,192
321,251
B. 1771-1792
Bengal
1771-74
1775-79
1780-84
1785-89
1790-92
652,158
584,889
435,340
697,483
727,717
To Britain via EIC from:

Madras
Surat
182,588
197,306
79,999
67,181
170,442
93,683
48,412
40,488
38,800
38,707
Three
centres
928,429
830,607
555,827
803,464
936,866
Sources: 1665-1759: Chaudhuri (1978: 540-545); Morineau (1999: 273-274). 17711794: Milburn [1813, vol.2: 234].
35
TABLE 6: Indian exports of cotton textiles, 1790-1859 (thousand pieces per year)
1790-99
1800-09
1810-19
1820-29
1830-39
1840-49
1850-59
Exports to Britain
Bengal
Total
India
787
2,200
1,331
1,824
1,358
431
6
271
304
Total exports
Bengal
Total
India
4,500
478
3,000
2,606
2,279
Source: Twomey (1983: 42-44).
TABLE 7: Weekly earnings of cotton operatives in Britain and India, circa 16801820 (s/d)
c.1680
c.1770
c.1790
c.1820
Lancashire
India
6s/0d
9s/0d
13s/3d
10s/4d
1s/6d
1s/6d
2s/0d
2s/0d
Lancashire as
% of India
400
600
663
517
Sources and notes: India: circa 1680: Brennig (1986: 348-349) for southern India;
circa 1770: Arasaratnam (1980: 269) for southern India, Chaudhury (1999: 161-162)
for Bengal; circa 1790: Arasaratnam (1980: 269), Ramaswamy(1985: 156),
Mukherjee (1967:25) for southern India; Chaudhury (1999: 161-162), Hossain (1988:
52-53), Chaudhury (1999: 163-165) for Bengal; circa 1820: Mitra, (1978: 128-129),
Buchanan Hamilton, (1833: 296-298) for Bengal. All Indian earnings given on a
monthly basis converted to a weekly basis on the assumption of a 4-week month.
Lancashire: circa 1680: Gilboy (1934: 280-287); circa 1770: Wadsworth and Mann
[1931: 401-402]; circa 1790: Wood (1910: 112); circa 1820: Wood (1910: 127).
Lancastrian earnings given on a weekly basis, except Gilboy (1934), given on a daily
basis and converted to a weekly basis on the assumption of a 6-day week.
36
TABLE 8: Best-practice labour productivity in spinning 80s yarn in England,

1780-1825 (operative hours to process 100 lb of cotton)
1780
1790
1795
1825
Technology
Cromptons mule
100 spindle mule
Power-assisted mule
Roberts automatic mule
OHP
2,000
1,000
300
135
Source: Derived from Catling (1970: 54).
TABLE 9: English cotton yarn and cloth prices deflated by general price index,
1780-1829
1780/4
1785/9
1790/4
1795/9
1800/4
1805/9
1810/4
1815/9
1820/4
1825/9
Yarn (d per lb)

18s weft 40s warp 100s twist
47
168
-47
142
761
36
97
318
36
77
112
27
55
80
19
39
66
15
30
50
15
30
62
11
22
51
10
20
52
Cloth (s per piece)

calico
muslin
52
116
43
80
34
64
29
44
24
38
16
35
18
27
19
31
15
40
10
33
Note: The general price index used to deflate the nominal prices is from Feinstein
(1995). Deflated yarn and cloth prices are in constant 1825/9 prices.
Source: Harley (1998: 55, 59).
TABLE 10: Anglo-Indian comparative wages, labour productivity and unit

labour costs in cotton textiles, 1770-1820 (India=100)
1770
1820
Comparative Comparative Comparative

unit labour
silver wages
labour
costs
productivity
600
250
240
517
1625
32
37
Sources: Derived from Tables 7-9. See text for details.
38
TABLE 11: Price of raw cotton in Britain, 1680-1879
1680-89
1690-99
1700-09
1710-19
1720-29
1730-39
1740-49
1750-59
1760-69
1770-79
d per lb
7
7
7
9
10
10
10
16
16
16
1780-89
1790-99
1800-09
1810-19
1820-29
1830-39
1840-49
1850-59
1860-69
1870-79
d per lb
23
24
17
19
16
8
5
6
15
8
Sources: 1680-1780: Wadsworth and Mann [1931: Appendix H]; 1780-1879: Mitchell
(1988: 759-760).
Notes: Before 1800, annual averages for West Indian cotton are calculated as the
mean of the range quoted, and decade averages are obtained from the incomplete
number of annual observations. After 1800, data are annual average prices for upland
or middling American cotton.
TABLE 12: Comparative raw cotton prices in Britain and India, 1710-1830
1710
1740
1792-93
1802-03
1812-13
1822-23
GB
(d per lb)
8
9
24
14
20
8
India
(d per lb)
4.4
4.6
5.0
6.3
6.3
6.3
GB/India
(India=100)
182
196
480
222
317
127
Sources: India: 1710, 1740: Mukund (1999: 84) gives the cotton price in the south as
23 pagodas per candy of 500 lb in 1710, with 1 pagoda equal to 8s (Chaudhuri, 1978:
471); 1792-1823: Mitra (1999: 126-127) gives average cotton prices in Bengal as
12.42 rupees per maund of 74.5 lb in 1792-93; Britain: Wadsworth and Mann [1931:
Appendix H]; Mitchell (1988: 759-760).
39
TABLE 13: Comparative GB/India wage and cotton costs combined (India =100)
c.1680
c.1770
c.1790
c.1820
Wages
(W/W*)
Raw cotton
(C/C*)
Combined costs
(W / W *) 0.5 (C / C*) 0.5
FOB
price
(P/P*)
TFP
(A/A*)
400
600
663
517
182
320
480
127
270
438
564
256
200
200
150
43
135
219
376
596
Sources: Wages and raw cotton costs derived from Tables 7 and 12; Prices FOB
derived from Chaudhuri (1978) for 1680 and 1770, extended to 1790 and 1820 using
Cuenca Esteban (1994).
TABLE 14: Capital- labour ratios in Great Britain, 1760-1850 (1850=100)
1760
1770
1780
1790
1800
1810
1820
1830
1840
1850
Whole economy
Plant,
Total net
equipment,
fixed capital
machinery
stock per
per head
head
63.4
36.3
62.6
36.6
62.9
39.0
64.8
43.9
67.8
47.1
69.1
50.6
69.9
52.4
74.1
64.5
85.2
82.1
100.0
100.0
Cotton
Fixed
capital
per
worker
13.9
22.3
26.0
47.3
100.0
Sources: Whole economy: capital stock from Feinstein (1988: 454); population from
Wrigley et al. (1997: 614); Cotton industry: fixed capital in current prices from
Chapman and Butt (1988: 124-125) converted to constant prices using the implicit
deflator of gross capital in manufacturing from Feinstein (1988: 433, 448).
Employment from Mitchell (1988: 376).
40
FIGURE 1: Textile and grain prices in England,

1500-1850
3000
1451-75=100
2500
2000
Textile price
1500
Grain price
1000
500
1848
1819
1790
1761
1732
1703
1674
1645
1616
1587
1558
1529
1500
EIC purchase price ( per piece)

16
65
-6
16 9
75
-7
16 9
85
-8
16 9
95
-9
17 9
05
-0
17 9
15
-1
17 9
25
-2
17 9
35
-3
17 9
45
-4
17 9
55
-5
9
FIGURE 2: Indian textile prices, 1665-1759

1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Bombay
Madras
Bengal
41
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Stephen Broadberry and Bishnupriya Gupta

COTTON TEXTILES AND THE GREAT DIVERGENCE: LANCASHIRE,

Stephen Broadberry and Bishnupriya Gupta

JEL classification: N60, N70, O14, O31

Acknowledgements: We would like to thank Bob Allen, George Grantham, Frank

This paper anlayses the shift in competitive advantage in terms of changing

The paper proceeds as follows. In section II we set out the quantitative

II. DEVELOPMENT OF THE BRITISH AND INDIAN COTTON TEXTILE

swept over England (Ashton, 1948: 48).

OBrien et al. (1991: 413-418) see these protectionist measures, which

cotton textiles increased substantially (Gilboy, 1934). This provides an example of a

As current prices began to deviate substantially from official prices towards

2. The cotton textile industry in India

fashion.2 Occupations related to the production of particular types of textiles were

Part A of Table 5 shows the number of textile pieces exported to Britain

advantage between India and Britain was foreshadowed by a regional shift in

3. Textile prices and the world market

III. WAGES AND PRODUCTIVITY IN INDIA AND LANCASHIRE

Table 7 presents a comparison of earnings in the cotton industry between 1680

2. Anglo-Indian productivity differences in cotton textiles

Dealing first with comparative levels of labour productivity in spinning,

In weaving, it seems likely that the British labour productivity advantage

Descriptions of Indian weaving equipment by contemporary writers suggest

This amounts to the assumption of a common Leontieff production function.

3. Unit labour costs

IV. COMPARATIVE COSTS, PRICES AND CHANGING MARKET SHARES

2. Comparative costs and prices

However, it is important to note that the correct prices to use in the

assumption of stagnant FOB prices in India. Evidence in favour of this latter

The change in competitive advantage in the production of cotton textiles

V. HIGH WAGES AND LABOUR SAVING TECHNICAL PROGRESS

2. Biased technical change

equipment and machinery, which is of most relevance to labour saving technical

The shift of competitive advantage occurred in three stages. First, a small

TABLE 1: Raw cotton consumption, Great Britain 1697-1849 (million lb)

TABLE 2: Exports of cotton textiles, measured at constant official prices, Great

Sources: Part A: 1697-1808: Schumpeter (1960: Tables X, XI); 1808-1850:

Source: Ellison [1886: 63].

TABLE 5: Indian exports of textiles to Europe (pieces per year)

To Britain via EIC from:

Source: Twomey (1983: 42-44).

TABLE 8: Best-practice labour productivity in spinning 80s yarn in England,

Source: Derived from Catling (1970: 54).

Yarn (d per lb)

Cloth (s per piece)

TABLE 10: Anglo-Indian comparative wages, labour productivity and unit

Comparative Comparative Comparative

Sources: Derived from Tables 7-9. See text for details.

TABLE 11: Price of raw cotton in Britain, 1680-1879

TABLE 14: Capital- labour ratios in Great Britain, 1760-1850 (1850=100)

FIGURE 1: Textile and grain prices in England,

EIC purchase price ( per piece)

FIGURE 2: Indian textile prices, 1665-1759

Davis, Ralph (1966), The Rise of Protection in England, 1689-1786, Economic

Landes, David S. (1969), The Unbound Prometheus: Technological Change and

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