Interesting throughout, and difficult to excerpt.
You would imagine, therefore, that once the iron-hulled ocean-going screw-propellered steamship and the submarine telegraph cable had made their appearance, factory work worldwide would have rapidly gone to where labor was cheap. Yet from 1850-1980 that was not the case. Factory work by and large stayed where labor was expensive. And those economies that did manage to figure out how to utilize British Industrial Revolution and Second Industrial Revolution technologies at near-frontier levels of efficiency rapidly joined the club of rich economies that was the Global North.
I actually disagree with DeLong’s answer to this puzzle, which is that the underdeveloped world failed to industrialize because the countries of the Global South lacked strong home markets. I take the view that differences in culture and institutions were the key factors. I believe that it is Gregory Clark who pointed out that when early cotton manufacturing entrepreneurs took factories to India, they found that the workers did not function effectively.
Does Kling commentary begin with “I actually disagree”?
Not always.
nice
(2)The resulting fiscal-military state coupled with the fact that Great Britain is an island created the first British Empire and funneled the maritime trade profits of the world into the island.
(3) The resulting high wages coupled with the extremely low price of coal made the R&D to invent and deploy the first generation of technologies of the coal-steam-iron-cotton-machinery complex profitable.
Not that I’m well-versed in the subject or anything, but I thought it was pretty well-established that the British Empire cost more to maintain than it generated in revenue, even as it created many private fortunes.
Does that historical narrative work for the U.S.? Didn’t industrial output (e.g
Steel and automobile production) expand westward to the rust belt to take advantage of cheap labor, dispersed due to the era of agricultural dominance of the labor force’s economic activity, were ‘liberated’ by farm mechanization and willing to accept lower wages than urban workers facing higher costs of living.
That’s why we have a whole rust belt – extending into Canada – instead of all those plants being built in northeastern cities “where most of the demand was”, and despite major economies of scale and agglomeration.
There were, however, apparently major limits at the time to extending this dispersal overseas until the more recent era of globalization and outsourcing.
Those limits are probably a combination of local worker and institutional characteristics, as well as regulatory barriers to international trade.
Actually, the industrial production moved westward into the Ohio Valley and Great Lakes region due to the location and transport of iron ore, coal, lumber, etc. Along with the flow of water transportation and easier train transport of raw materials, i.e., not over the Appalachians but rather westward out of them. Detroit became the center for car manufacture due to the port which could accept iron ore, coal and in early cars, lumber from across the Great Lakes.
If you pull back on a map of the United States, you see that the Eastern half, the most populated part of the interior is essentially a huge peninsula (after such connections as the Erie Canal). This access by water to the interior from both the north and the south was a big driver of American industrialization.
Does anyone have any numbers on the historical economic / cost advantage of this transport of raw materials vs. that of final products?
” I take the view that differences in culture and institutions were the key factors. ” A K
There is much to support that conclusion.
“Cultures” are formed by sufficient commonalities of motivations of the members of a social grouping.
When we come to the use of the term “institution,” we find its use has varied intentions; but here it seems intended to refer to the facilities or instrumentalities social groupings develop to deal with their commonly perceived needs as a group.
So, here again, the “institutions” (so described) will reflect the motivations that generate “social needs.”
The factors that shape, influence, or perhaps even determine motivations (and their commonalities) in diverse social groupings vary in degrees and kinds.
Effective transfers or adjustments amongst differing diverse social groupings appear (historically) to require a necessary (but not always sufficient) condition of adjustments in motivations and their commonalities.
Macro-sociology concepts, like their counterparts in economics are directly dependent on the facts of micro-sociology.
My suspicion is it was the final conversion to intermodal containerized shipping systems that was the reason for the transition happening in the 80s. Prior to that point all the pieces weren’t in place (specialized ships, experience, dockyard conversions, union contracts, routing software, regulatory issues, etc. ) and break bulk shipping is considerably more expensive and risky.
I think the development of the container ship in mid century had a lot to do with globalizing production. “The Box” is a book that describes it all quite nicely. Thank Malcom McLean.
Excellent book. It was fascinating to follow the container and container ship development from concept, to his first attempt and onward. And then to see the follow-on effects: size standardization of the containers so that cranes could be designed to handle them, and they could be stacked & locked together for stability; ports trying to figure out what shipping volume point justified the expense of deepening harbors and redesigning port facilities; resistant unions trying to protect their longshoremen membership; new computer systems to identify container contents and location.
And that doesn’t even touch on the adaptations to container shipping of railroads and trucking.
What can I say? I’m a nerd: I loved it.
It is a fine book, and well-written too. In terms of understanding the modern world, it ranks up there with Robert Bruegmann’s Sprawl: A Compact History (who knew that most new suburban housing is not McMansions but high-density low-rises?).
“…touch on the adaptations to container shipping of railroads and trucking.”
That sounds as though we’re shipping railroads and trucks.
Lemme rephrase: “…touch on the adaptations made by the railroad and trucking industries to accommodate containers for the last transport mile(s).
OT
There is definitely a connection between the Lean Startup / Eric Ries idea that a startup is in the business of validated learning and the idea that an economy is patterns of sustainable specialization and trade. Ries has some good videos on youtube that express his idea that an entrepreneur is a scientist conducting experiments to discover a sustainable pattens of trade.
Why was labor cheap vs expensive in those respective places?
I was part of a team just to take a product line to a plant in Mexico. The project leader had a spreadsheet of the technical issues we’d look at during the phone conferences at 8 point font on the projector. It went on and on and on. It was unbelievable. It felt like a moonshot. On top of that they had previously locked out the workers due to union problems. I don’t know if they ever got the plant running up to snuff. It had all standard equipment. My sense was that if you had an army of cheap labor behind an ex-pat engineer and an army of Americams on the phone, that was what our outsourcing was like. It didn’t feel very homogeneous aggregate macro. It felt very very micro. On top of that, maybe the government just decides to take the plant away with a “thank you for the plant gringos!”
You say that “when early cotton manufacturing entrepreneurs took factories to India, they found that the workers did not function effectively.” But might you be setting too high a standard of *effectiveness*? DeLong approvingly quotes Arthur Lewis that “between the tropical and temperate countries, the differences in food production per head were much greater than in modern industrial production per head. . .”; in other words, while Indian (etc.) farmers were much less productive than English (etc.) farmers, Indian factory workers did not lag so far behind English factory workers. Perhaps Indian comparative advantage lay, after all, in manufacturing rather than in agriculture.