encouraged import substitution in wool cloth and a certain amount of export success.[14] Edward III (1327-77) is believed to have been the first king who deliberately tried to develop local wool cloth manufacturing. He wore only English cloth to set an example to the rest of the country,[15] brought in Flemish weavers, centralized trade in raw wool and banned the import of woollen cloth.[16]
The Tudor monarchs gave further impetus to the development of this industry with what can only be described as a deliberate infant industry promotion policy. The celebrated eighteenth-century merchant, politician and novelist, Daniel Defoe, describes this policy in his now-almost-forgotten book,
According to Defoe, Henry VII had, prior to his coronation in 1485, ‘been a kind of a Refugee in the Court of his Aunt the Dutchess of
As Defoe emphasizes, Henry VII realized that, given Britain’s technology gap with the Low Countries, this transformation was going to take a long time, and therefore he took a gradualist approach.[23] Therefore, he raised export duties on raw wool only when the industry was better established. As soon as it became clear that Britain simply did not have the capacity to process all the raw wool it produced, he withdrew the ban on raw wool export he had imposed.[24] According to Defoe, it was not until the time of Elizabeth I (1587), nearly a hundred years after Henry VII started his import substitution policy (1489), that Britain was confident enough about its wool manufacturing industry’s international competitiveness to ban raw wool export completely.[25] This eventually drove the manufacturers in the Low Countries to ruin.
According to Defoe’s analysis, other factors besides this import substitution policy helped the achievement of British victory in the wool industry under Elizabeth 1. Some of these factors were fortuitous, such as the migration of Protestant Flemish textile workers following the war of independence from Spain in 1567. However, other elements were deliberately created by the state. In order to open new markets, Elizabeth I dispatched trade envoys to the Pope and the Emperors of Russia, Mogul, and Persia. Britain’s massive investment in building its naval supremacy allowed it to break into new markets and often to colonise them and keep them as captive markets.[26]
It is difficult to establish the relative importance of the above-mentioned factors in explaining the British success in wool manufacturing. However, it does seem clear that, without what can only be described as the sixteenth-century equivalent of modern infant industry promotion strategy put in place by Henry VII and further pursued by his successors, it would have been very difficult, if not necessarily impossible, for Britain to achieve this initial success in industrialization: without this key industry, which accounted for at least half of Britain’s export revenue during the eighteenth century, its Industrial Revolution might have been very difficult, to say the least.[27]
The 1721 reform of the mercantile law introduced by Robert Walpole, the first British Prime Minister, during the reign of George I (1714-27) signified a dramatic shift in the focus of British industrial and trade policies.
Prior to this, the British government’s policies were in general aimed at capturing trade (most importantly through colonialization and the Navigation Acts, which required that trade with Britain had to be conducted in British ships[28]) and at generating government revenue. The promotion of wool manufacturing, as discussed above, was the most important exception to this, but even this was partly motivated by the desire to generate more government revenue. In contrast, the policies introduced after 1721 were deliberately aimed at promoting manufacturing industries. Introducing the new law, Walpole stated, through the king’s address to Parliament: ‘it is evident that nothing so much contributes to promote the public well-being as the exportation of manufactured goods and the importation of foreign raw material’.[29]
The 1721 legislation, and its subsequent supplementary policy changes, included the following measures.[30] First of all, import duties on raw materials used for manufactures were lowered, or even dropped altogether.[31] Second, duty drawbacks on imported raw materials for exported manufactures – a policy that had been well established in the country since the days of William and Mary – were increased.[32] For example, the duty on beaver skins was reduced and in case of export a drawback of half the duty paid was allowed.[33] Third, export duties on most manufactures were abolished.[34] Fourth, duties on imported foreign manufactured goods were significantly raised. Fifth, export subsidies (‘bounties’) were extended to new items like silk products (1722) and gunpowder (1731), while the existing export subsidies to sailcloth and refined sugar were increased (in 1731 and 1733 respectively).[35] Sixth, regulation was introduced to control the quality of manufactured products, especially textile products, so that unscrupulous manufacturers could not damage the reputation of British products in foreign markets.[36]
Brisco sums up the principle behind this new legislation as follows: ‘[manufacturers] had to be protected at home from competition with foreign finished products; free exportation of finished articles had to be secured; and where possible, encouragement had to be given by bounty and allowance’.[37] What is very interesting to note here is that the policies introduced by the 1721 reform, as well as the principles behind them, were uncannily similar to those used by countries like Japan, Korea and Taiwan during the postwar period, as we shall see below (section 2.2.7).
With the Industrial Revolution in the second half of the eighteenth century, Britain started widening its technological lead over other countries. However, even then it continued its policy of industrial promotion until the mid-nineteenth century, by which time its technological supremacy was overwhelming.[38]
The first and most important component of this was clearly tariff protection. As we saw from table 2.1, Britain had very high tariffs on manufacturing products as late as the 1820s, some two generations after the start of its Industrial Revolution, and when it was significantly ahead of its competitor nations in technological terms. Measures other than tariff protection were also deployed.
First of all, Britain banned the imports of superior products from some of its colonies if they happened to threaten British industries. In 1699, the Wool Act prohibited exports of woollen products from the colonies, killing off the then superior Irish wool industry (see section 2.3). In 1700, a ban was imposed on the imports of superior Indian cotton products (‘calicoes’), debilitating what was then arguably the world’s most efficient cotton manufacturing sector. The Indian cotton industry was subsequently destroyed by the ending of the East India Company’s monopoly in international trade in 1813, when Britain had become a more efficient producer than India (see section 2.3). By 1873, two generations after the event, it was already estimated that 40-45% of all British cotton textile exports went to India.[39]
By the end of the Napoleonic Wars in 1815, however, there were increasing pressures for free trade in Britain from the increasingly confident manufacturers. By this time, most British manufacturers were firmly established as the most efficient in the world in most industries, except in a few limited areas where countries like Belgium and Switzerland possessed technological leads over Britain (see section 2.2.6). Although a new Corn Law
