Region and Strategy in Britain and Japan: Business in Lancashire and Kansai 1890-1990

Region and Strategy in Britain and Japan

Britain and Japan have both achieved, in succession, a position of global economic primacy. Within each state, one region has served as an economic powerhouse. Both regions, dominated respectively by Manchester and Osaka, enjoyed a golden age which coincided with the golden age of their respective national economies. A pioneering long-term comparison of the two regions of Lancashire and Kansai is now undertaken in this work. Adopting both an innovative and arguably unique perspective, each chapter is jointly written by a British and Japanese scholar who are recognised authorities in their field. Together they make a substantial contribution to our understanding of the continuing importance of national and regional differences in industrial development. With chapters focusing upon big business, electronics, shipbuilding and textiles, the resulting study throws a welcome new light on world economic history. Douglas A.Farnie is Visiting Professor at the Business History Unit, The Manchester Metropolitan University. Tetsuro Nakaoka is Professor of History of Industry and Technology, Osaka University of Economics. David J.Jeremy is Professor of Business History at The Manchester Metropolitan University. John F.Wilson is Professor of Industrial and Business History, also at The Manchester Metropolitan University. Takeshi Abe is Professor of Business History at the Graduate School of Economics, Osaka University.

Frontispiece Sanji Muto (1867–1934) in 1931. He served Kanegafuchi Spinning Company (Kanebo) for thirty-six years, rising to the status of president (1921–30). He became a leading pioneer in Japan of modern business management. His published works fill nine volumes (1963–6, Tokyo, Shinjusha).

Region and Strategy in Britain and Japan Business in Lancashire and Kansai, 1890–1990 Ei Nichi Ryokoku ni okeru Chiiki to Keiei Senryaku Rankasha to Kansai no Bijinesu, 1890–1990

Edited by Douglas A.Farnie, Tetsuro Nakaoka, David J.Jeremy, John F.Wilson and Takeshi Abe

London and New York

First published 2000 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2005. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 2000 Edited by Douglas A.Farnie, Tetsuro Nakaoka, David J. Jeremy, John F.Wilson and Takeshi Abe. The copyright to individual chapters is held by the respective authors. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Region and strategy in Britain and Japan: business in Lancashire and Kansai, 1890–1990=Ei Nichi Ryokoku ni okeru Chiiki to Keiei Senryaku: Rankasha to Kansai no Bijinesu/edited by Douglas A. Farnie…[et al.]. p. cm.—(Routledge international studies in business history; 7) A collection of 10 comparative essays, each jointly written by a British and a Japanese scholar. Includes bibliographical references and index. 1. Industries—England—Lancashire—History. 2. Lancashire (England)—Economic policy. 3. Industries-Japan—Kansai RegionHistory. 4. Kansai Region (Japan)-Economic policy. I. Farnie, D.A. II. Title: Ei Nichi Ryokoku ni okeru Chiiki to Keiei Senryaku: Rankasha to Kansai no Bijinesu III. Series. HC257.R44 1999 338.09427’6–dc21 99–29578 CIP ISBN 0-203-97832-3 Master e-book ISBN

ISBN 0-415-20317-1 (Print Edition)

Routledge International Studies in Business History Series editor: Geoffrey Jones 1 Management, Education and Competitiveness Europe, Japan and the United States Edited by Rolv Petter Amdam 2 The Development of Accounting in an International Context A Festschrift in Honour of R.H.Parker T.E.Cooke and C.W.Nobes 3 The Dynamics of the International Brewing Industry since 1800 Edited by R.G.Wilson and T.R.Gourvish 4 Religion, Business and Wealth in Modern Britain Edited by David Jeremy 5 The Multinational Traders Geoffrey Jones 6 The Americanisation of European Business Edited by Matthias Kipping and Ove Bjarnar 7 Region and Strategy in Britain and Japan Business in Lancashire and Kansai, 1890–1990 Edited by Douglas A.Farnie, Tetsuro Nakaoka, David J.Jeremy, John F.Wilson and Takeshi Abe

Contents

List of illustrations

1

2

x

List of tables

xii

List of contributors

xiv

Preface

xv

Region and history DOUGLAS A.FARNIE AND TAKESHI ABE

1

The origins of the region

2

Region and State

2

The region and scholarship

3

The intellectual rejection of the region

4

The resurgence of the region

4

The pre-eminence of Osaka in the regional historiography of Japan

5

The challenge posed by a new approach to regional economic history

6

Notes

7

Region and nation DOUGLAS A.FARNIE AND TETSURO NAKAOKA

9

The primacy of commerce in the initiation of global economic change

9

A comparison of Manchester and Osaka

12

A comparison of Liverpool and Kobe

19

The changing relationship between Lancashire and London, 1890–1926

21

The rise of the Hanshin (Osaka and Kobe) industrial zone, 1890–1935

25

The era of high-speed growth, 1955–73

33

The repercussions of the oil-price shocks, 1973–80

38

The constraints upon business strategy in Lancashire

42

vii

3

4

The collapse of the export markets of Lancashire, 1926–90

45

The economic involution of Lancashire

47

The repercussions of the emergence of Tokyo as a world city, 1920–90

53

The transition from a manufacturing economy to a service economy

58

The bubble economy in Kansai, 1984–90

64

The importance of regional control over an economy

67

Acknowledgements

69

Notes

69

Comparisons between the development of big business in the north-west of England and in Osaka, 1900–1990s DAVID J.JEREMY, TAKESHI ABE AND JUN SASAKI

78

Size of firm

78

Industrial activity

82

Location of head office

88

Strategies and structures

89

Chairmen

96

Survivors

96

Conclusion

98

Notes

98

Japan, Lancashire and the Asian market for cotton manufactures, 1890–1990 DOUGLAS A.FARNIE AND TAKESHI ABE

116

The Lazonick revolution in historiography

116

Barriers to understanding: the difference in business culture

117

Barriers to understanding: the entrenched belief in the primacy of manufacturing

120

The turning point of the 1890s

120

A comparison of the cotton industries in Lancashire and Japan

122

The advantages of Japan: superior marketing strategy

128

The advantages of Japan: cost-cutting capacity

132

Japan and the China market, 1890–1930

136

viii

5

6

7

8

The repercussions upon Lancashire, 1920–25

141

Japan and the world economic depression, 1929–32

141

The establishment of Japanese primacy in Asian markets: the Dutch East Indies and India

144

The repercussions upon Lancashire, 1926–39

147

The challenge by the mainland of Asia to Japan, 1945–90

149

The repercussions upon Lancashire, 1945–90

152

Acknowledgements

153

Notes

153

Labour management in the textile industry KENNETH D.BROWN AND KINGO TAMAI

160

Notes

175

Electronics manufacturers in Osaka and Manchester: a comparison of Matsushita and Ferranti TETSURO NAKAOKA AND JOHN F.WILSON

178

Founders: culture and strategy

179

The domestic environment and early company growth to the 1940s

186

Expansion and prospects since the 1940s

190

Conclusions

199

Notes

205

A comparison of Cammell Laird and Hitachi Zosen as shipbuilders TORU TAKAMATSU AND KEN WARREN

209

Acknowledgement

227

Notes

227

Sources

228

Management education in Japan and the United Kingdom: regional dimensions JOHN F.WILSON AND TAMOTSU NISHIZAWA

229

The role and impact of education in economic development

230

Attitudes to management education in Osaka prior to 1945

231

British business and management training prior to the 1940s

235

ix

9

10

Postwar educational reform in Japan and the business response

238

Business schools in Britain: a revolution?

242

Conclusion

245

Notes

247

Industrial research in Osaka and north-west UK from the 1920s to the 1960s MINORU SAWAI AND GEOFFREY TWEEDALE

255

Introduction

255

Public research organisations

256

Private industrial research

271

Conclusion

294

Acknowledgements

296

Notes

296

Region and strategy DOUGLAS A.FARNIE, TETSURO NAKAOKA, DAVID J.JEREMY, JOHN F.WILSON AND TAKESHI ABE

303

Significant issues arising from the comparison of the Lancashire and Kansai 303 regions The inherent limitations of a national perspective

304

Region and nation during the era of expansion

305

National and regional policy during the era of re-adjustment

306

The divergence in business culture between Lancashire and Kansai

306

The inherited image and the statistical reality

308

Notes

309

Index

310

Illustrations

ii Frontispiece Sanji Muto (1867–1934) in 1931. He served Kanegafuchi Spinning Company (Kanebo) for thirty-six years, rising to the status of president (1921–30). He became a leading pioneer in Japan of modern business management. His published works fill nine volumes (1963–6, Tokyo, Shinjusha). Map 1 The Lancashire region, 1890. xvii Map 2 The Lancashire region, 1990. xx Map 3 Kansai, 1894. xxii xxiv Map 4 Kansai, 1990. 17 2.1 Tomoatsu Godai (1835–85). At the end of the Edo period as a principal officer of the Satsuma Han (now Kagoshima Prefecture), he inspired the foundation of the Kagoshima Spinning Mill, the first modern spinning mill in Japan. After the Meiji Restoration he played an important role in restructuring the economy of Osaka which had suffered a collapse. In Osaka he founded not only many companies and factories but also such key institutions as the Osaka Chamber of Commerce, the Osaka Stock Exchange and the Osaka Commercial Training School. 2.2 Takeo Yamanobe (1851–1920) in Manchester in 1879. He served 57 Osaka Spinning Company (Osakabo) for thirty-two years and its successor, Toyo Spinning Company (Toyobo), for two more years, rising to the status of president (1898–1916). He acquired the technology of cotton spinning and weaving in Lancashire in 1879–80, and became a leading engineer in the modern Japanese cotton industry. 2.3 John Whittaker in 1996, the chairman of Peel Holdings plc and 61 the pre-eminent entrepreneur of the Lancashire region. 3.1 The Hartford New Works of Platt Bros. at Werneth, Oldham, c. 82 1900. The ‘New Works’, equipped with labour-saving machine tools, were built adjacent to the railway from 1845 onwards. At their apogee they comprised 38 blocks of buildings extending over 60 acres and employing over 12,000 people. 97 3.2 Coming from the mill, 1990: the Lily Mill, Linney Lane, Shaw, Oldham. A double mill, built in 1904 and 1917, it was purchased in 1977 by Littlewoods Ltd and converted into an ultra-modern mail-order warehouse. The conversion symbolised the transition

xi

4.1 4.2 4.3

6.1 6.2 7.1 7.2

7.3 7.4

from manufacturing to services in a leading mill-town. The workers coming from the mill may be contrasted with those depicted by Lowry in his famous painting ‘Coming from the Mill’ (1930). The more-looms proposal in the Lancashire weaving trade, 1931. Japanese competition in the Indian market, 1931. Great expectations were aroused in Lancashire by the Cotton Industry Reorganisation Act of 1939 which was, however, shelved on the outbreak of war. Konosuke Matsushita (1894–1989), the founder of Matsushita Electric in 1983 at the age of 89. Sebastian Ziani de Ferranti (1864–1930). the founder of Ferranti Ltd, robed in his doctoral gown in 1926 at the age of 62. British shipbuilding, 1957. HMS Ark Royal before its launch at Birkenhead in 1937. This vessel was the third to bear the name first given to Lord Howard of Effingham’s flagship which led the attacks upon the Spanish Armada in 1588. The aircraft carrier was torpedoed and sunk in the Mediterranean in 1941. Japanese shipbuilding, 1900–90. A Japanese supertanker constructed in 1971 at the Sakai Shipyard of Hitachi Zosen on Osaka Bay during the great tanker-building boom of 1969–74. Its dead-weight tonnage of 238,588 was tenfold the 22,000 tons of the Ark Royal.

137 147 149

180 180 210 212

213 219

Tables

2.1 Population of the cities of Manchester, Osaka, Liverpool and Kobe, 1871–1991 (thousands) 2.2 Employment in the North-west region of England, 1911–90 2.3 John Friedmann’s hierarchy of thirty world cities, 1990 3.1 Employment sizes of the fifty largest firms in the North-west and Osaka c. 1907, 1935, 1955 and 1992 3.2 Aggregate North-west employment of NW50 compared to UK employment of UK50 and aggregate Osaka employment of Osaka50 compared to Japanese employment of Japan 50 3.3 Minimum sizes of the fifty largest employers in the UK and Japan, 1900–1990s showing North-west firms qualifying for inclusion on the strength of (a) employee numbers in the North-west; and (b) UK employees; and showing Osaka firms qualifying for inclusion on the strength of (a) employee numbers in Osaka; and (b) Japan employees 3.4 Industrial activity of the fifty largest employers in the North-west by firms and numbers (%) employed in the North-west; compared to industrial activity of the fifty largest employers in Osaka by firms and numbers (%) employed in Osaka, c. 1907, 1935, 1955 and 1992 (using UK Standard Industrial Classification, 1968) 3.5 Headquarters locations of the fifty largest employers in the North-west and Osaka c. 1907, 1935, 1955 and 1992 (%) 3.6 Numbers of firms among the fifty largest with 100 per cent of their workforces within the region 3.7 Organisational forms of the fifty largest employers in the North-west and Osaka 3.8 Chairmen as entrepreneurial types (%) 3.9 Survivors: firms present among the regional fifty largest employers, 1900–1990s 3.10 The fifty largest companies in Cheshire and Lancashire, as measured by employment within the region, in 1907, 1935, 1955 and 1992 3.11 The fifty largest companies in Osaka Prefecture, as measured by employment within the region, in 1902, 1931, 1954 and 1993 5.1 Machine hours worked per year, 1953–63, in the British and Japanese cotton industries 6.1 The growth of Matsushita, 1920–95 6.2 The growth of Ferranti, 1907–87 6.3 Domestic production of electrical appliances in Japan, 1950–70

17 48 55 79 80

81

83

89 89 90 95 97 100 108 173 183 185 194

xiii

7.1 Ships built with the support of subsidies under the Shipbuilding Encouragement Act between 1897 and 1910 7.2 Ships launched in Japan, the United Kingdom and the world, 1936–38 and post-Second World War, 1949–85 (thousand gross registered tons) 7.3 Tonnage of ships launched/completed by Cammell Laird and Hitachi Zosen, 1950–95 (thousand tons) 7.4 Structure of sales at Hitachi Zosen in the 1995 financial year (% of total) 7.5 Targets for reductions of shipbuilding capacity in the Stabilisation Master Plan 7.6 Indices of labour productivity at Cammell Laird (Birkenhead) and in the Hitachi Zosen Group 1957–80 8.1 The diffusion of internal management training in Japan by 1970 (percentages) 9.1 The number of staff, patents obtained and value of budget and expenses settled of Osaka Industrial Research Institute, Osaka Prefectural Industrial Research Institute and Osaka Municipal Technical Research Institute, 1918–65 9.2 Number of tests and research by Osaka Municipal Technical Research Institute, 1916–65 9.3 Number of guidance, tests and other activities by Osaka Prefectural Industrial Research Institute, 1953–70 9.4 R&D in north-west England, 1920 9.5 R&D in north-west England, 1930–47 9.6 R&D in north-west England, 1964 9.7 List of private industrial research organisations in Osaka (at the end of 1923 and in April 1943) 9.8 List of private industrial research organisations in Osaka (post-war period) 9.9 Innovations in north-west England

214 215 217 218 224 225 241 261

266 268 272 277 282 283 287 296

Contributors

Takeshi Abe is Professor of Business History, Graduate School of Economics, Osaka University Kenneth D.Brown is Dean of the Faculty of Legal, Social and Educational Sciences, The Queen’s University of Belfast. Douglas A.Farnie is Visiting Professor, Business History Unit, The Manchester Metropolitan University. David J.Jeremy is Professor of Business History, The Manchester Metropolitan University. Tetsuro Nakaoka is Professor of History of Industry and Technology, Faculty of Information Management, Osaka University of Economics. Tamotsu Nishizawa is Professor of the History of Economic Thought, Institute of Economic Research, Hitotsubashi University. Jun Sasaki is Associate Professor of the Economic History of Japan, Faculty of Economics, Ryukoku University. Minoru Sawai is Professor of Business History, Graduate School of Economics, Osaka University. Toru Takamatsu is Associate Professor of the History of Industry and Technology, Faculty of Information Management, Osaka University of Economics. Kingo Tamai is Professor of Social Policy, Faculty of Economics, Osaka City University. Geoffrey Tweedale is Senior Research Fellow, Business History Unit, The Manchester Metropolitan University. Ken Warren was formerly Fellow of Jesus College, Oxford. John F.Wilson is Professor of Industrial and Business History, The Manchester Metropolitan University.

Preface

This study in Anglo-Japanese business history originated in discussions held during the Anglo-Japanese Conference on Textile History held in Kyoto in 1987, the proceedings of which were published in 1988 in a special issue of Textile History. The project has been financed by a substantial grant made by the Economic and Social Science Research Council of the UK. It has also been supported by the Japan Society for the Promotion of Science, by the Union of National Economic Associations in Japan, by The Manchester Metropolitan University, by Osaka City University, by Osaka University and by the Osaka University of Economics. Its purpose is to study the history of modern business in an industrial context and to focus upon the two leading textile regions of Lancashire and Kansai. Those two major regions have been made the object of detailed comparative study in the belief that such research may yield insights denied to the students of a single society, even over a long period of time. The time-span extends over the century from 1890 to 1990 and includes the classic period of Anglo-Japanese relationships. In this way it seeks to illuminate, by means of a new approach, the history of the world economy during the twentieth century. The structure of the book combines four general chapters with six chapters devoted to key sectors of the economy of the two countries. Each chapter, it must be emphasised, is a joint product, written in close co-operation by a British and a Japanese scholar. Each scholar is a leading authority in his own respective field. The original pioneers of the project were David J.Jeremy in Manchester and Tetsuro Nakaoka in Osaka. Professor Nakaoka has been able to call upon the assistance of eminent scholars from such centres as Osaka University, Osaka City University, Shimonoseki City University and Hitotsubashi University. In Britain Professor Jeremy secured the willing aid of scholars from the Universities of Oxford, Manchester, Leeds and Belfast. The process of collaboration between six British and seven Japanese authors has entailed prolonged and intensive consultation in an exercise which may be unique in the annals of scholarship. In addition to the normal channels of communication, six successive international conferences have been held in order to promote the project. Those conferences were held in Osaka in 1990 and 1993, in Manchester in 1991 and 1994, at Hagley in 1992 and in Glasgow in 1997. To all the participants in those conferences and to their organisers a considerable debt of gratitude is owed. The British editors wish to record their

xvi

thanks to their Japanese co-editors and especially to Takeshi Abe, without whose enthusiastic collaboration the work would never have been completed. They gratefully acknowledge the encouragement offered to them by Professor Clive H.Lee of Aberdeen. All the editors believe that this work is original in its combination of subject matter and method, in its comparative and regional approach, in its extensive use of statistical data, in the blending of text and illustrations, in the structure of its chapters, in its conclusions and, above all, in the joint authorship of its separate chapters.

Map 1 The Lancashire region, 1890.

xviii

xix

Map 2 The Lancashire region, 1990.

xx

xxi

Map 3 Kansai, 1894.

xxii

xxiii

.

Map 4 Kansai, 1990.

xxiv

1 Region and history Douglas A.Farnie and Takeshi Abe

During the century between 1890 and 1990 the population of Kansai increased fourfold as fast as that of North-west England. Its wealth increased in even greater proportion. As late as 1958 per capita GDP in the North-west region was treble that in Kansai. By 1990 per capita GDP in Kansai was double that in the Northwest region. The purpose of this book is to explain how and why that transformation occurred. Its approach is both comparative and regional. Comparisons provide of course the very core and framework of any serious study. They remain however very rare because it is difficult for any single person who is no ‘Renaissance man’ to become thoroughly versed in the sources relating to more than one period, place, or subject. That obstacle has been overcome by the creative device of joint authorship. The chronological limits of the comparison have been determined by the peculiar significance of the decade of the 1890s in both British and Japanese history. The territorial limits of the comparison are clear. Kansai comprised the six prefectures of Osaka, Hyogo, Kyoto, Wakayama, Nara and Shiga. The term ‘Kansai’ (‘west of the three barriers’ at Suzuka in Ise (now Mie Prefecture), at Fuwa in Mino (Gifu Prefecture) and at Achira in Echizen (Fukui Prefecture)) has been preferred to such alternatives as ‘Kinki’or ‘Kinai’, because of its historical significance. The north-west region of England comprised the two historic counties of Lancashire and Cheshire as they existed until 1974, although the influence of ‘Lancastria’ radiated outwards in all directions.1 The use of the region as a category of analysis may however require more extensive justification. The two particular regions selected for study merit examination in their own right. Both became the seat of urban, entrepreneurial, commercial and industrial societies. Both exerted an influence upon the outside world out of all proportion to their size. The emphasis upon the region moreover harmonises completely with the powerful regional renaissance which has taken place since the 1950s. It remains essential to set the region in as wide a context, both national and international, as possible and to do so, wherever appropriate by using the comparative mode of analysis.

2 DOUGLAS A.FARNIE AND TAKESHI ABE

The origins of the region Three elements combined to create the region, geographical location, physical endowment and human settlement. The region proper was formed by Nature herself, in all her variety, and predated the State. Regional sentiment became the bond linking inhabitants to their ancestral abode. ‘Of all the bonds uniting men, the strongest is the bond of locality, for it creates a community of purposes and interests…The similarity in the mode of life, family connections, friendships, participation in the same local institutions—sporting, philanthropic, educational — lead to the creation of a living bond.’2 The most overt sign of such a bond lay in the emergence of a regional mode of speech and in a regional literature. Regional languages and literature were created within every society in the world, save for Russia, with its extensive uniformity of geographical features. Such local solidarity was further reinforced by the influence of a similar way of life, of religion and of a shared system of values. The strength of regional sentiment varied in proportion to the antiquity, density and duration of human settlement and in proportion to the barriers to communication, to trade and to migration. Where such barriers were strong, a locality inevitably generated a deep attachment to the place where people were born and reared and with which they were most familiar. Its capacity to inspire loyalty remained immense, as Scott had recognised in 1805 ‘This is my own, my native land.’ Such territory became part of the personality of its inhabitants and was loved and cherished, as an essential foundation of daily life. The power of tradition, maintained amongst ‘the people who have always been there and belong to the places where they live’, impregnated them with distinctive social and cultural patterns.3 Region and State Until the nineteenth century the states of Europe remained unintegrated and decentralised structures. Both Greece and Italy made their greatest contribution to civilisation through their city-states. In the modern era both Switzerland and the United Provinces preserved a federal structure and reaped therefrom enormous benefits. During its five formative centuries Spain became ‘Las Espanas’ rather than a unified Espana. Until the nineteenth century Germany remained divided amongst some 300 separate states and conferred the greatest of benefits upon civilisation before the year 1871, when ‘the German mind’ was uprooted ‘for the benefit of the German Empire’. From the fifth century to the 1860s Italy remained, in the phrase of Metternich, a mere ‘geographical expression’. After the unification of the peninsula the industrialisation of the North created an intractable regional problem. ‘The problem of the South…is none other than the problem of the State itself.’4 France remained the classic realm of the pays and before the Revolution was, in the opinion of Napoleon expressed in 1808, ‘rather a union of twenty kingdoms than a single State’. The USA became a loose federation of many regions, whose vitality was stimulated rather than depressed by the Civil War. The rise of the nation-state took

REGION AND HISTORY 3

place at the expense of the historic regions of Europe and enlisted the support of society’s educated elite, especially amongst historians and especially in Germany. ‘World-history is, and always will be, State history.’5 That elite dismissed any evidence of local dissent with pejorative phrases first coined during the 1870s in Italy, Spain, France and England, viz.: ‘regionalismo’ ‘régionalisme’ (1875) and ‘regionalism’ (1881). In turn they suffered excoriation themselves for the betrayal of the ideals fundamental to their profession.6 A tradition of centralisation had however developed earlier in such states as Britain, France and Japan. England was already in the twelfth century, in the opinion of Maitland, a much-governed country. The historic county was nevertheless used for parliamentary representation as well as for administration through the shire-reeve. It became the basis of the county regiment, the county history, county cricket and a host of associations, especially in the West Country, the Midlands and North-east England. The county was ignored in the new Poor Law Unions created after 1834 but became the basis for the county councils created in 1888 and located in the county town. Under the pressures of war England was split in 1918 into seven administrative divisions and the UK was placed in 1939 under twelve Regional Commissioners, on the model of the Anglo-Saxon Heptarchy, the recreation of which had once been favoured by Socialist intellectuals.7 The region and scholarship The region provided the basis for a range of intellectual disciplines, including geography, economic history, anthropology and sociology. In the field of geography the study of regions was developed during the eighteenth century in France, the Netherlands, Italy and especially in Germany by the historian J.C. Gatterer (1727– 99).8 ‘The regional concept constitutes the core of geography’.9 The pioneering sociologist Frédéric Le Play provided in 1855 a recipe for the regional survey based upon three categories, Lieu, Travail, Famille. That triad was ranked by Patrick Geddes (1854–1932) as the ‘prime movers of civilisation’ and was translated as ‘Place, Work, People/Folk’. From 1887 Geddes preached his gospel, inspiring generations of geographers, and in 1914 established the Regional Survey Association. One disciple, C.B.Fawcett (1883–1952) divided England into twelve separate provinces, using the large city as a central criterion. He noted that the modern unity of the Lancashire province was reflected in ‘a very strong and distinctive individuality’ and that ‘Lancashire is likely to be a leading province in a Federal Britain’.10 In France Edmond Demolins investigated in 1901 the way of life of such regional types as the Breton and the Provençal. In the USA Frederick Jackson Turner (1861–1932) studied the seminal role in American history of the frontier (1893) and of sections (1932) while Howard W.Odum (1884–1954) created in The Southern Regions of the United States (1936) regional sociology.

4 DOUGLAS A.FARNIE AND TAKESHI ABE

The intellectual rejection of the region The aspiration to categories of universal validity came naturally to deracinated intellectuals especially in the fields of modern economics and sociology. The regional approach was even denounced as unsystematic and unscientific by two geographers, by G.H.T.Kimble in 1951 and by E.A.Wrigley in 1963.11 Dr Wrigley combined his criticism with an iconoclastic onslaught in 1962 upon the traditional identification of the Industrial Revolution with the cotton industry. Together with a whole generation of progressive thinkers, he believed that the Industrial Revolution had made regions an anachronism, relegating them to ‘the rubbish-heap of history’. He favoured the suppression of the regional approach by the demographic and statistical method, using the triad of People, Work and Place wherein ‘Place’ was degraded from pole position to third place. He incurred however criticism from fellow-geographers as ‘radically wrong’.12 An Oxford geographer demonstrated that the Industrial Revolution had not undermined the regions but had been in essence a regional phenomenon and had intensified regional loyalties.13 The resurgence of the region From 1965 the British government began to publish a regular annual series of regional statistics. Eminent historians such as J.D.Marshall and Sydney Pollard (1925–98) validated the role of the region in the study of British and European economic and social history.14 Above all, Clive Lee placed the subject upon an impregnable basis for posterity by using population and employment as proxies in order to measure long-term regional change. A Cambridge geographer used Lee’s statistics in order to generate a whole series of incomparably enlightening essays.15 In France the members of the Annales School followed the example set by their founder, Lucien Febvre in his study of Franche-Comté (1911) and produced their finest work within the field of regional history. ‘Development Studies’ were pioneered by Schumpeter and elaborated from 1958 by Myrdal, Hirschman and Isard who recognised that an ideal region for all purposes could not exist. From the 1960s ‘regional science’ experienced a renaissance within the field of geography. That revival was inspired by W.Christaller (1893–1969), formulator in 1933 of central-place theory, and by A.Lösch (1906–45), who extended the theory of industrial location first elaborated by J.H.von Thünen in 1826 and by Alfred Weber in 1909. It inspired the foundation of some eight separate journals (1965–91). Within Europe the formerly ‘prohibited nations’ began to re-emerge, especially in the mountain fastnesses of the Pyrenees. The Occitanian revival began in the 1960s, the Catalan and Basque renaissances in the 1970s and the Flemish and Lombard renaissances during the 1980s. A rising tide of decentralisation swept through Italy, Belgium, Spain, France and Hungary after 1965, extending even to India and China. That tide reached high-water mark in the largely unpredicted ‘Great Transformation’ of 1989–91, when Germany was reunited upon a federal basis in

REGION AND HISTORY 5

1990 and the vast Soviet empire collapsed in 1991.16 Germany became a model for the world in its federal structure. The German language acquired in 1980 the new word of ‘Regionalismus’, which was wholly free from the pejorative overtones of the earlier ‘Partikularismus’ (1843).17 The Council of European Regions was established in 1986. Even Britain was forced to make grudging concessions to Ulster, to Scotland and to Wales. As states relinquished some of their traditional functions and as regions became more autonomous the differences between countries and regions became increasingly differences in degree rather than in kind. ‘Countries have in important respects become more like regions, and regions more like countries.’18 ‘Bio-regionalism’ was placed firmly upon the progressive agenda by environmentalists.19 The pre-eminence of Osaka in the regional historiography of Japan The Meiji Restoration remains the central event in modern Japanese history and the subject of a never-ending debate. The new regime established a centralised government on the Prussian model in order to unite the nation in the face of the foreign challenge to its way of life. The new government claimed a total competence over society and assumed most of the functions formerly performed by feudal lords. It established a new capital in Tokyo, although the old regime had been overthrown largely by a powerful coalition of the Satsuma and Choshu clans in south-west Japan. After the Meiji Restoration local and regional loyalties remained strong throughout the country, excepting only in Tokyo itself. Those sentiments were based upon antiquity of settlement, upon continuity of residence in the ‘homeland’ and upon inherited tradition. From the 1890s they inspired local historians and local governments to undertake intensive research into local history and to write accounts of every prefecture, county, city, town and village. Within the academic world however the subject remained comparatively neglected until the 1950s. Scholars apparently preferred universal theories of history to parochial issues or perhaps discovered that regional history presented a challenge of an unusual order. To this general rule the Osaka region presents the one splendid exception. Its many excellent scholars produced outstanding works within the field of regional history. They were inspired by the memory of the political primacy enjoyed in the past by Kansai (as Kinai), by its rich cultural heritage and by the rapid expansion of the economy since the 1880s. From 1901 the city of Osaka sponsored the publication of a civic history. Osaka-shi-shi (A History of the City of Osaka) became the first real local history to be compiled in the whole of Japan. Five substantial volumes were published between 1911 and 1915, covering the entire period from ancient times until the Edo era (1603–1868). The most important contributor to the collective work was Shigetomo Koda (1873–1954), who became the real pioneer of scientific research into the local history of Japan. After the first Osaka-shi-shi had been published, the city of Osaka continued to support the extension of the work

6 DOUGLAS A.FARNIE AND TAKESHI ABE

forwards to include the modern and recent periods of history. Koda left Osaka after completing his task but his work served as an inspiration to such scholars as Eijiro Honjyo, Wataro Kanno, Iwao Kokusho, Heijiro Kuroha, Yasuzo Horie and Mataji Miyamoto, most of whom were graduates of Kyoto University, founded in 1897. They examined all aspects of the history of the city and published a series of works, which remain a wide-ranging and invaluable intellectual heritage. To this day Osaka University, Osaka City University and Osaka University of Economics, to which some of the above-mentioned scholars belonged, remain centres of active research into the history of Osaka. Later historians followed their example. They extended their horizons into the modern era after 1868 and their range of interests into such fields as commerce, industry, agriculture, management, labour problems, regional policy, etc. In the postwar era many scholars embarked upon the empirical study of local history. The high speed of economic growth from 1955 stimulated a prodigious intellectual investment in regional history, in sharp contrast to the neglect of the subject elsewhere in Asia. Many socio-economic historians in the 1950s discussed the development of local indigenous industries, such as weaving and silk reeling, and sought to relate their expansion to larger international trends. In 1960–61 the Chiho-shi Renraku Kyogikai [the Association of Local History], compiled Nippon Sangyo-shi Taikei [Japanese Industrial History] (Tokyo, 1961). The City of Yokohama published between 1958 and 1982 Yokohama-shi-shi in thirty-two volumes (Yokohama), a monumental work upon local socio-economic history. During the postwar era the Institute of Economic Research at Hitotsubashi University, also in Tokyo, compiled an important series of Estimates of Long-Term Economic Statistics of Japan since 1868. The preliminary results of that study appeared in 1953 and fourteen substantial volumes were published (1965–88), presenting aggregate statistics for the whole of Japan. The thirteenth volume was devoted to Regional Statistics and included sixty valuable tables covering the period 1889–1906. That volume appeared in 1983, almost as an afterthought. Quantitative methods were increasingly introduced from the 1960s into local studies, especially into historical demography and into the history of wages and prices. Homage to the essential unity of the State continued to be paid by Western scholars, even where they made use of regional comparators in Britain. The Cambridge History of Japan similarly felt compelled to exclude from its purview, published in six volumes, all of ‘the riches of local history’. Recently ‘The Potential of Regional History’ [Chiiki-shi no Kanosei] has, however, been examined in eleven articles, comprising a special issue of Kindai Nippon Kenkyu [The Journal of Modern Japanese Studies], 19, 1997. The challenge posed by a new approach to regional economic history When economic history was born in the 1890s it offered an understanding of the emergence of modern civilisation, modern society and the modern State. By the

REGION AND HISTORY 7

1950s it had become one of the most productive of academic fields. During the 1960s it underwent, however, a complete revolution in method and in purpose, as what Lance E.Davis proudly called in 1961 ‘the New Economic History’ burst upon the scene. The emergence of the new school in the USA was followed by certain consequences. First, it offered to its practitioners intellectual and material rewards as well as prestige. The romance of cliometrics understandably intoxicated all historical economists. Secondly, a sharp decline occurred from the 1970s in the number of courses on economic history offered in American universities. Thirdly, a reactive interest developed in England from the 1960s in such non-cliometric fields as social, urban and labour history. Fourthly, the number of members of the Economic History Society in the UK declined from its peak level of 1975 by 40 per cent by 1998. Apparently students were deserting the subject in droves and voting with their feet. They preferred to seek an understanding of the world in other disciplines. The Anglo-American editors of a leading textbook, forged within the new tradition, expressed their own faith in economic history as ‘an exciting subject, a subject full of problems and controversy’.20 Students however wanted something more than mere controversy and would have appreciated the judgement passed by Macaulay in 1828: ‘our historians practise the art of controversy but neglect the art of narrative’. Modern masters of the written word have long regarded the subject of economic history, new or old, with suspicion and disdain. They have epitomised their contempt in such imaginary thesis titles as ‘The Domestic Industries of Brabant in the Middle Ages’, ‘The Economic Influence of the Development in Shipbuilding Techniques, 1450 to 1485’ and ‘The Wool Trade in Cricklade, 1536 to 1546.’21 The authors of the present work are well aware that the subject of economic history is in a condition of self-induced crisis. They have therefore avoided any attempt to generate erudite mathematical models, the product of an academic pastime satirised by Hermann Hesse in The Glass Bead Game (1943). They have simply sought to study ‘mankind in the ordinary business life’, in the tradition of Alfred Marshall of Cambridge. They have tried to avoid the dangers of superficiality22 and to set the two regions firmly in a national and global context. Notes The place of publication of all sources cited below is London unless otherwise indicated. 1 A.G.Ogilvie, Great Britain Studies in Regional Geography (Cambridge, 1928), 262–89, W.Fitzgerald, ‘Lancastria’. H.J.Mackinder, Britain and the British Seas (Oxford, 1906, 1925), 275. 2 P.Sorokin, Society, Culture and Personality (New York, 1947), citing H.Lagardell (Moscow, 1906). 3 N.Lewis, The World, the World (1996), 293. 4 F.W.Nietzsche, The Use and Abuse of History (1873). Carlo Levi, Christ Stopped at Eboli (1946). R.Rocker, Nationalism and Culture (Los Angeles, 1948), 433.

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5 Oswald Spengler, The Decline of the West (1918). 6 Julien Benda, La Trahison des Clercs (Paris, 1927), translated as The Great Betrayal (1928). 7 Fabian Society, The New Heptarchy (1905). 8 L.D.Stamp (ed.) A Glossary of Geographical Terms (1961), 392. 9 Annals of the Association of American Geographers (1952), 195, P.E.James. 10 C.B.Fawcett, Provinces of England—A Study of Some Geographical Aspects of Devolution (1919), 232. 11 G.H.T.Kimble, ‘The Inadequacy of the Regional Concept’ in L.D.Stamp and S.W.Woolridge (eds.), London Essays in Geography (1951). E.A.Wrigley, ‘Changes in the Philosophy of Geography’ in R.J.Chorley and P.Haggett (eds.), Frontiers in Geographical Teaching. The Madingley Lectures for 1963 (1965), 3–20. 12 R.E.Dickinson, Regional Concept: the Anglo-American Leaders (1976), 376. 13 John Langton, ‘The Industrial Revolution and the Regional Geography of England’, Transactions of the Institute of British Geographers, N.S.9, 1984, 145–67. 14 S.Pollard, Marginal Europe: the Contribution of the Marginal Lands since the Middle Ages (Oxford, 1997). 15 C.H.Lee, Regional Economic Growth in the UK since the 1880s (1971). British Regional Employment Statistics, 1841–1971 (1979). The British Economy since 1700 (1980), which devoted one-tenth of the text to ‘Regional Growth’. R.Martin, ‘The Political Economy of Britain’s North-South Divide’, Transactions of the Institute of British Geographers, N.S. 13:4, 1988, 389–418. R.Martin, P.Sunley and Jane Wills, ‘The Geography of Trade Union Decline: Spatial Dispersal or Regional Resilience?’, idem, N.S., 18:i, 1993, 36–82. 16 Ryszard Kapucinski, Imperium (1995). Paul Kennedy, Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500–2000 (1988), like almost all contemporary intellectuals, failed both to foresee and to forecast ‘die grosse Wende’. 17 Celia Applegate, A Nation of Provincials (1990). 18 Peter Maskell et al. (eds.), Competitiveness and Regional Development (1998). 19 Kirkpatrick Sale coined the phrase in 1993. 20 R.Floud and D.McCloskey (eds.), The Economic History of Britain since 1900 1:1700– 1860 (Cambridge, 1981, 1994), xvii. 21 Henrik Ibsen, Hedda Gabler (1890). Kingsley Amis, Lucky Jim (1954). John Treherne, Mangrove Chronicle (1986). 22 J.D.Wirth and R.L.Jones (eds.), Manchester and Sao Paulo, Problems of Rapid Urban Growth (Stanford, 1977).

2 Region and nation Douglas A.Farnie and Tetsuro Nakaoka

The primacy of commerce in the initiation of global economic change The leading role of commerce in economic development was an article of faith to the first generation of economic historians. Its supreme importance has always been recognised by the historians of America and of Asia, by historians of the Middle Ages in Europe and, above all, by historians interested in the emergence of a ‘world system’ during the early modern era. It should therefore be unnecessary to reiterate a truism, to the effect that the growth of trade initiated a process of fundamental and global social and economic change. The primary transition from an agricultural to an industrial way of life was undoubtedly stimulated by a remarkable growth in international trade. Between 1800 and 1913 the value of world trade not merely increased at a rate fivefold as fast as the growth in world population: it also developed upon a multilateral basis, so conferring maximum benefits upon all participants. That trend did not however continue unchecked. From 1914 a sharp reversal of trend occurred as the ratio of world trade to world production began to decline and continued to do so for sixty years. From 1930 the absolute value of world trade sank by 60 per cent (1929–38) and bilateral trade increased in favour at the expense of multilateral trade. Economists diverted their interests away from the subject of international trade to that of the business cycle and national income.1 From 1945 international trade began to increase once more, especially between industrial states. The rate of its expansion soared (1950–90) to treble the rate attained in 1800–1913 and to one nearly sixfold the rate of world population growth. During the nineteenth and twentieth centuries two states have played a dominant role in international commerce. The golden age of each state as a world power broadly coincided with their era of supremacy in world trade. Thus Britain dominated world trade from 1787 until 1940. The extension of British commerce to the world of Asia encouraged Japan to respond to the challenge to its national identity embodied in the influx of alien goods into its ports in the 1860s. Whether the elite of Meiji Japan had any long-term plan in mind when they began the process of political change remains a highly debatable issue. It remains

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certain however that in one fundamental aim they remained united, namely in their determination to preserve their independence, both economic and political. In order to fulfil that purpose they decided to remodel their country into a modern Westernstyle industrial state. In 1870 they established the Ministry of Public Works (Kobusho) and embarked upon an ambitious scheme of industrial development. The scheme was based upon the establishment of new government enterprises, including nine mines, an oil well, an iron manufacturing plant, two shipyards, three manufactories, two railway lines and a telegraph network. In order to guide the development of these enterprises 580 Western advisers were recruited. In 1871 the new government decided to abolish the feudal system. At the close of the year it despatched a large delegation of forty-eight members, including five important leaders of the new government under Prince Tomomi Iwakura (1825–83), upon a prolonged tour of the major Western states, which were visited in succession. The official purpose of the delegation was to undertake diplomatic negotiations for the revision of ‘the unequal treaties’ of 1858 but the real aim was to study the political, social, economic and industrial system of each country as a possible model for their design of a modern state. When they returned to Japan in 1873 after a year and ten months abroad they discovered that the project of industrialisation by means of state enterprises had encountered serious difficulties. Railway construction consumed far more money than had been expected. The financial returns generated by most enterprises remained abysmal. Most of the Western advisers, except for a few of high calibre, proved to be only a financial burden upon an impoverished state. The government was moreover facing a crisis arising from mounting dissatisfaction among the samurai, who had lost both their function and their high social status upon the abolition of the feudal system. The crisis reached a climax in 1877 when the Satsuma rebellion occurred. The balance of foreign trade meanwhile remained adverse from 1869 to 1881. That cumulative imbalance, coupled with a huge deficit in public finances, generated a serious inflation, which caused much suffering. The government followed up its victory in the civil war against Satsuma by undertaking a whole series of drastic changes in policy in order to cope with the grave economic crisis. Financially, ministers adopted a policy of strict retrenchment and made every effort to restore equilibrium in public finance and in international trade. The Bank of Japan was founded in 1882 and was given the exclusive responsibility for the issue of paper currency. It called in inconvertible paper currencies and burned all of the notes, in order to reduce the disparity between internal and external prices and to facilitate the adoption of the silver standard. Within the sphere of industry, they recalled Japanese students who were studying abroad and employed them as substitutes for Western advisers. In 1880 they decided to sell off all government enterprises to private entrepreneurs, with the exception of the arsenals, the Mint and some important gold and silver mines. In 1881 they created a new Ministry of Agriculture and Commerce and in 1885 they abolished the Ministry of Public Works. Those drastic changes in policy brought about a serious deflation, which lasted from 1881 until 1885. From 1886 the Japanese economy began however to expand vigorously.

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The role of the State in Japanese economic development will always remain a subject for debate. The elite of Meiji Japan undoubtedly took the original initiatives. The success of the new policy was however fully attributable to its reorientation away from high-cost heavy industry towards agriculture and related light industries and to the self-restraint of the government in anticipating positive responses to its own initiatives from farmers, businessmen and merchants. After the opening of the country’s ports the traditional economy of Japan entered upon a new stage of development under the powerful influence of international trade.2 The most remarkable expansion occurred in sericulture and silk-reeling, in tea cultivation and processing, in the manufacture of ceramics, in response to the growth of Western demand, and in cotton cultivation and weaving, which were stimulated by the import of new materials and techniques. The purview of the Ministry of Agriculture and Commerce embraced all of those fields: its actions proved successful in encouraging initiatives among farmers, merchants, private entrepreneurs and investors. From those sectors two important light industries, silk and cotton, emerged: those industries continued to support the Japanese economy until 1935. Throughout the period 1873–88, while the elite was struggling to overcome the crisis and to implement new policies, its main concern lay in the preparation of the constitution of Japan. In 1889 the constitution was promulgated amidst a period of vigorous economic growth, so creating in effect a new designer-state. The country was remodelled ‘as it were on the field of battle and in front of the enemy’.3 The new state may have been based upon the accumulation since 1871 of an unexampled array of information about modern Western states but it proved to be slightly more despotic than its Western counterparts and considerably more aggressive in its relations with the neighbouring states of East Asia. That particular disposition may perhaps have originated in the recruitment of the elite of Meiji Japan largely from the ranks of the samurai. Their aggressiveness played an important positive role in preserving the independence of Japan but it acquired a negative function as the new state enlarged its powers. The Sino-Japanese War, the Russo-Japanese War, World War I, a series of wars waged against China and World War II were related inextricably to the demographic and industrial development of Japan. Under the new regime the elite once more gradually strengthened, from 1895 onwards, the powers of the government and also reverted to the policy of promoting heavy industry. The industrial development of Meiji Japan was accompanied by a rapid increase in the import of machinery and of intermediate goods, in a manner common to latecomers in the process of economic development. The extension of capacity for machine-making became a principal means of maintaining a satisfactory balance of trade through the technique of import-substitution. After the SinoJapanese War the government subsidised the shipping and shipbuilding industries.4 The government also established in 1901 a large State enterprise for the manufacture of iron and steel, namely the Yawata steelworks, a pre-cursor of Nippon Steel, which became in 1975 the world’s largest steelmaker. After the RussoJapanese War it nationalised the main lines of the private railway companies and, under the leadership of the National Railway, undertook the domestic manufacture

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of locomotives. Around the turn of the century newly emerging engineering firms began however to produce munitions.5 That tendency was substantially reinforced during the interwar period. Most engineering firms, especially those equipped with high technology, became more and more involved in munitions manufacture. The hyper-development of heavy industry thus created a serious imbalance in industrial development. Only after the postwar destruction of the munitions industry could the machine-making capacity of heavy industry serve in full as a propelling agency in the industrial development of Japan. Throughout the fifty years from 1885 to 1935 it was the cotton industry and the silk industry which provided the main pillars of the Japanese economy. That judgement may be confirmed from the course of international trade. Japan had first acquired a staple export during the 1860s, as disease ravaged the silk cocoons of Europe. That trade in raw silk was buttressed by the export of tea, also to the USA, and from the 1870s by the shipment of bunker coal by Mitsui to the ports of Asia. Such commerce in primary produce supplied the initial impetus to the expansion of exports, which accelerated when shipments of machine-spun cotton yarn began in the 1890s. Between 1870 and 1935 Japan expanded its exports at a rate tenfold as fast as the rest of the world. Between 1950 and 1990 that rate was twice as fast as the rest of a rapidly developing world. During most of that long era two regions had been keen competitors for the world market, Lancashire and Kansai. The most famous of economic treatises has tended to mislead later generations in so far as it focused in 1776 upon the wealth of nations rather than upon the wealth of regions.6 Economic development has always been regional rather than national in its incidence. City-regions have always been the powerhouses of economic life, serving as such in both Britain and Japan. Manchester played a dominant role in the textile trade of the nineteenth century. Its function was inherited in the twentieth century by Osaka. The impact of industrial expansion upon the regions controlled by those two cities revolutionised their way of life during a period which must be recognised as a defining era in the history of the world. That transition was much more than an economic phenomenon and may well be compared to those epoch-making transformations chronicled by Jacob Burckhardt in The Civilisation of the Renaissance in Italy (1860), by Ferdinand Lot in The End of the Ancient World (1927) and by Johan Huizinga in The Waning of the Middle Ages (1924). The Industrial Revolution in Kansai differed however fundamentally from that in Lancashire in so far as it formed an inseparable part of the systematic remoulding of national life which took place after the ‘opening up’ of Japan. A comparison of Manchester and Osaka The rise to prominence of Manchester and Osaka was the result of deep-seated geographical and socio-cultural factors: it was not the product of historical accident. Both cities served their dependent regions primarily as centres of commerce rather than of industry. Both lay open to the seaboard and were linked to the ocean highways through the intermediary of a great port. Both had access to abundant

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supplies of the water essential for the processing of textiles. Both enjoyed a humid climate, dominated by south-westerly winds and favourable to the easy spinning of cotton fibre. Both cities had developed, from the sixteenth century onward, the manufacture of cotton and both had discovered, in the manipulation of that fibre, a key to prosperity. Both made textiles into a staple trade and became swarming hives of industry, enterprise and innovation. Both came to serve as the focus of a highly integrated but diversified structure of industry, comprising a host of small enterprises as well as a clutch of giant firms. A central role in the process of integration was played by the development of facilities for transportation and communication. Both cities had exploited the advantages of cheap water-borne carriage, especially by means of canals. Those canals became the nuclei of a dense network of transportation facilities and made Osaka into ‘theVenice of Japan’ or ‘the City of Bridges’ while Manchester earned the label of a ‘Venice in Hell’.7 Thus the two cities extended their influence over their hinterland and created a mutually advantageous division of labour between town and country. Each city-region developed not only a wide range of manufacturing industries but also an immense array of ancillary trades, including engineering and chemical manufacture. Such industries generated external economies in abundance, permitting firms to thrive upon a small scale of operations and to serve as sub-contractors to the staple trades of the region. Both cities thus became organising centres for the industry of a vast enterprise zone. As such they supplied the central market for the products of their manufacturing hinterland and served as the powerhouses and supreme co-ordinators of their respective regional economies. Each city became a metropolis and, in time, the hub of a whole system of cities. Both Manchester and Osaka concentrated within a relatively small area an intense degree of economic activity, a feature which remained typical of the great cityregions of the world.8 Both city-regions occupied a relatively small proportion of the total area of their respective states. The North-west region of England had been identified as an administrative sub-division for the purposes of the Census of 1851: it comprised the counties of Lancashire and Cheshire and had the smallest area of all the eleven standard statistical regions of the UK. The Osaka Prefecture was similarly the smallest of all the forty-seven prefectures of Japan: it occupied only 7 per cent of the total area of the six prefectures of Kansai (Osaka, Hyogo, Kyoto, Nara, Wakayama and Shiga), which in turn covered only 7 per cent of the total area of Japan. Both Manchester and Osaka became, in consequence of the intensity of their industrial development, fertile centres of environmental pollution, acquiring an ingrained negative image. Thus Manchester seemed in 1903 to possess ‘all the defects of a great city, in exceptional degree—the crowding, noise, vice, squalor and grime’ while Osaka became ‘the metropolis of smoke’ and impressed one visiting historian in 1921 as ‘a hideous manufacturing town for all the world like Manchester.’9 To identify the two cities primarily as centres of manufacture is however largely to misunderstand their essential function and their historic role. The extent of misunderstanding may well be greater in the case of Manchester than in that of Osaka because of its higher historic profile. For long Manchester has been

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misrepresented by an exaggerated emphasis upon its cotton mills, its social divisions and its living conditions. Thus it has been misleadingly depicted as ‘the first industrial city’ and as ‘the shock city of the age’.10 That particular emphasis was always misplaced. The real function of Manchester, even during the era of its most rapid industrial expansion, always remained commercial. The city experienced its true golden age during the long nineteenth century, from 1790 to 1920. The dominant figure in Victorian Manchester always remained the merchant, its central institution the Exchange and its most typical building the warehouse. Both cities prospered as centres of domestic commerce but developed in time a thriving export trade. Through their export-earnings they created opportunities for employment upon a scale which could never have been satisfied from purely local sources. Thus they became magnets for immigrants and centres of a process of acculturation. They became bustling hives of an industrious population imbued with a practical capacity, a work ethic and even with a quasi-spiritual exaltation, stemming from a profound belief in the possibility of human progress. Both cities became the seats of mercantile elites, quick to respond to opening windows of opportunity in the outer world. Both benefited from the market connections developed by foreign merchants and became training schools in mercantile skills as well as in business leadership. Thus Chinese merchants supplied the original and indispensable link between industrial Kansai and the world market, providing especially the essential connection between Osaka and Shanghai. They had long acquired a considerable and diversified competence within the sphere of foreign trade, in sharp contrast to the Japanese whose tradition of splendid isolation had restricted the development of relations with other states and had imbued them with a distrust of foreigners. The native merchants of Kansai nevertheless developed their own capacity, resources and connections a generation after the admission of the Chinese to Osaka in 1871 and the consequent stimulus given to the export of consumer goods to the markets of mainland China. During the 1890s they proved able to reduce their dependence upon their mentors, especially after the SinoJapanese War. They increased their numbers in Shanghai to surpass those of any other foreign colony, supported a service launched upon the Yangtze in 1898 by the Osaka Shosen Kaisha and even established branches in Lancashire itself. Those Manchester branches were established by S.Ishiyama, as manager of the Kansai Trading Company, in 1898 and by Yonekichi Matsumoto in 1900, in order to handle the trade in machinery and textiles to China, Japan and Korea.11 Both cities fulfilled on occasion military functions but they became in the main seats of a vibrant mercantile culture and, in time, cradles of a liberal world-outlook. Such a perspective, generated by plain living and high thinking, elevated economics above politics and nourished little respect for politicians. It was best embodied in the powerful provincial press represented by the Manchester Guardian (established in 1821), the Manchester Examiner (1845) and by the Asahi Shimbun (1879) and the Osaka Mainichi Shimbun (1888). Each city retained a sense of difference from, and perhaps even of superiority to, the way of life of their respective capitals. Both competed for the great markets of Asia and especially for those of China and India.

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Both began to reduce their textile industries during the 1960s as competitors finally made inroads into their traditional preserves. Both regions achieved their peak share in their respective national GDP at about the same time, North-west England in 1966–67 and the Osaka Prefecture in 1969. Both suffered the loss of their export trade in textiles as their states became during the decade 1978–87 net importers of textiles. Both shifted the basis of their economy from manufacturing industry to services. Both suffered from the inhibiting competition of the metropolis, especially in the supply of business services. Fundamental differences nevertheless remained between the two regions. First, Lancashire lacked any claim to historic antiquity, comparable to Kansai. It had emerged as a separate county only in 1168 and had remained a marginal region until the seventeenth century.12 Nor had Manchester ever enjoyed any close association with the national capital. Osaka dated back to at least the seventh century, acquired imperial palaces, and flourished as a port for the China trade in the seventh century AD. It had become one of ‘the three metropolises’ of Tokugawa Japan, together with Edo and Kyoto, the imperial capital from 794 to 1868. Through its links with Kyoto and Nara it had developed a close association with the traditional civilisation of the nation. It had even been chosen by Toshimichi Okubo (1830–78), a principal architect of the Meiji Restoration, as a potential capital in place of Kyoto, as it had been between 744 and 793: it had even served as the residence of the Meiji Emperor for 44 days in 1868. Okubo’s plan was frustrated and in 1869–72 Osaka suffered a severe recession, after the seat of power shifted eastwards to Tokyo and its elite paid the price for their support of the old regime. Secondly, the fertility of the plain of Osaka, one of the few plains in a mountainous country, created a highly productive agro-commercial economy. Such productivity was paralleled in the NW of England only within the Cheshire plain and contrasted sharply with the limited returns reaped upon the barren moorlands of East Lancashire. Those moors supplied pasture for the sheep which were absent from Kansai. Osaka also lacked the coal beds of South Lancashire but could import cheap coal from North Kyushu. Its industry was less dependent upon the supply of coal than upon the supply of labour and upon facilities for transportation, especially by water.13 Moreover, Osaka lacked the rock salt deposits of Cheshire and had to rely upon the evaporation of sea water. Thirdly, Osaka had surpassed Edo in the degree of its economic development during the Tokugawa era: it had built up the most advanced economy in all Japan and had served as its commercial and financial capital, with a highly developed market-economy and money-economy. It may never have rivalled Edo in the number of its inhabitants but it undoubtedly surpassed Manchester in size until the 1850s, mustering in 1680 fiftyfold its population (300,000 to 6,500) and in 1720 fortyfold its population (375,000 to 9,000).14 The foundations of Osaka as a commercial metropolis were laid by private enterprise rather than by any government action.15 The merchants of Osaka may have begun as retailers or brokers but they prospered more than the samurai of the surrounding domains, becoming financiers to the State. The commercial elite of Kansai had as its core such old-established dynasties as Sumitomo, founded in Kyoto in the 1590s. That firm

16 DOUGLAS A.FARNIE AND TETSURO NAKAOKA

prospered through the mining, refining and export of copper, so supplying the needs of the Dutch and the Chinese for currency; it also developed a thriving business in money-exchange. Such dynasties were paralleled only faintly in Liverpool and were wholly absent from Manchester. They formed the summit of a hierarchy of firms, whose base comprised a vast number of small businesses. They embodied a pattern and an ideal to which all aspired. Such enterprises began life as family-firms and provided for management-succession when necessary through the practice of adoption. They might develop into household corporations, similar to an artificial family. The future-oriented principle of impartible and single-heir inheritance not only prevented any fragmentation of capital but also encouraged the foundation by younger sons of new generations of small businesses.16 Thus they strove to realise the inspiring ideal of continuity of operation over time without any definite limit. Such firms partook of the nature of an organic community rather than of a mere impersonal association. They made training into their primary function and undertook the assiduous education of apprentices in the ‘way’ of the firm. They sedulously inculcated the ethic of labour and identified work as a duty to the firm, as a means of self-improvement and as a fountain of honour. Thus they capitalised upon the national virtues of loyalty and obedience. They generated a strong sense of corporate commitment, integrating all members in the common service of the ancestral property of the enterprise. The distinctive Japanese ability to co-operate whilst competing with other enterprises reduced the turnover of firms to a minimum and fostered a long-term perspective but provided a continuing stimulus to creative innovation. Thus Osaka developed by 1670 the use of double-equity accounting17 and pioneered dealing in futures, first in rice from the 1730s and then in cotton from the 1760s.18 In Lancashire the turnover of firms always remained very high, under the pressure of a ferocious degree of competition. In Kansai by contrast firms enjoyed a remarkable degree of longevity. There the business elite found its first natural leader for the new era in the person of the samurai Tomoatsu Godai (1835–85)19 who has no true parallel in the history of the Lancashire region. Godai sought to preserve the Japanese way of life by encouraging efforts at modernisation. As an agent of the lord of Satsuma he paid a secret visit to Oldham in 1865 and bought from Platt Bros. the spinning machinery for the Kagoshima Mill which began operations in 1867. As an official of the new Meiji government he curbed the unbridled expansion of foreign enterprise in the new international settlement opened in Osaka in 1868, so reducing the dependence of native merchants upon foreigners. In the next and most productive phase of his career he created three key institutions in the form of the Osaka Chamber of Commerce (1878), the Osaka Stock Exchange (1878) and the Osaka Commercial Training School (1880). He became the first president of the new Chamber of Commerce and the pre-eminent founder of modern Osaka. As one of the leading entrepreneurs of the Meiji era he rightly ranks with Eiichi Shibusawa (1841–1931), who himself became a model for emulation by a host of little Shibusawas.

REGION AND NATION 17

Figure 2.1 Tomoatsu Godai (1835–85). At the end of the Edo period as a principal officer of the Satsuma Han (now Kagoshima Prefecture), he inspired the foundation of the Kagoshima Spinning Mill the first modern spinning mill in Japan. After the Meiji Restoration he played an important role in restructuring the economy of Osaka which had suffered a collapse. In Osaka he founded not only many companies and factories but also such key institution as the Osaka Chamber of Commerce, the Osaka Stock Exchange and the Osaka Commercial Training School.

18 DOUGLAS A.FARNIE AND TETSURO NAKAOKA

Table 2.1 Population of the cities of Manchester, Osaka, Liverpool and Kobe, 1871–1991 (thousands)

Sources: B.R.Mitchell, British Historical Statistics (Cambridge, 1988) 26–28; B.R.Mitchell, International Historical Statistics, Africa, Asia and Oceania 1760–1993 (third edition, 1998), 41–42. Note: The date of the decennial national census was 1891 in the UK, but 1890 in Japan. The Japanese figures for the year 1871 refer to 1874. Successive changes in civic boundaries have inflated the size of the population enumerated. Thus six parishes were incorporated into the city of Liverpool (1891–1901) and twelve parishes into the city of Manchester (1881–1911). In order to facilitate comparisons two estimates are cited for Liverpool for the census years 1891, 1901, 1911 and 1921 and for Manchester for the census years 1901 and 1921. Greater Osaka was created in 1925.

In comparison to Osaka, Manchester may well have enjoyed a relatively short, if explosive, era of importance in the history of the world. It did however achieve a greater degree of global fame than Osaka. Its economic triumphs inspired the foundation by 1880 of forty other Manchesters outside England, including thirty in the USA.20 The penetration of Manchester goods into the markets of two-thirds of the world was facilitated by the expansion of British shipping, British trade, and the British Empire as well as of English civilisation. It was also aided by the spread of a new institution in the form of the department store (‘depato’ in Japanese) with its Manchester Department retailing a full range of household textiles. Above all, Manchester became from the 1830s a true metropolis of the spirit and ‘an active manufactory of agitation and thought’,21 spawning countless movements for social and economic reform and even sending forth Christian missionaries rather than importing them.22 The close association of the Manchester School of political economy with the cause of free trade ‘sent its name to the ends of the earth’.23 It converted most economists into a belief in the new doctrine and inspired Ukichi

REGION AND NATION 19

Taguchi (1855–1905) to become from 1877 a publicist for the cause of economic liberalism.24 When the fame of Manchester goods was eclipsed by that of a soccer team, Manchester United, the city entered upon a new lease of global popularity while the Hanshin Tigers, founded in the year 1935, remained in contrast the idols of a devoted but purely domestic following. Fifthly, the true golden age of Lancashire (1780–1860) preceded that of Kansai (1890–1960) by a full century. Thus comparisons between the two regions restricted to the twentieth century will fail to compare like with like and may well generate misleading conclusions. Finally, the cotton industry of Japan differed fundamentally from that of Lancashire in so far as originally it drew upon the largest and best of domestic cotton crops, cultivated around Osaka.25 Moreover, that industry played an even more important role in the economic development of modern Japan than in that of Britain. Its achievements were chronicled in detail in the statistics compiled by the Osaka Prefecture from 1882 and by the Greater Japan Cotton Spinners’ Association from 1903. Such data remained far superior in chronological coverage to the regional statistics of the UK, which dated back only to 1965. A comparison of Liverpool and Kobe Both Liverpool and Kobe were subject to constraints upon their development. They responded to the challenge posed by Nature, extended ribbon settlement along their waterfront and rose to the status of world ports. Both cities became magnets for migrants. Both attracted colonies of alien merchants and acquired their own Chinatown. Both were developed by the enterprise of merchant families as much as by that of individuals. Both built up commercial connections extending far overseas as well as inland. Both developed bulk trades, especially in textiles and chemicals, as the basis for fleets of cargo liners. Both established import-processing industries as well as shipbuilding. Both became centres of wealth-generation, capital-accumulation and financial activity. Both became regional metropolises but maintained close links with their respective capitals.26 Both retained a low profile. Neither became a tentacular city comparable to Manchester or to Osaka or developed comparable cultural vitality. Important differences remained between the two ports. As Hyogo, Kobe dated back to ancient times and had been an important port for a thousand years longer than Liverpool, which was essentially a mushroom creation of the modern era. The golden age of Liverpool began in the 1770s, the modern golden age of Kobe a century later. Kobe surpassed Liverpool in population only during the 1930s, when the population of Liverpool reached a maximum. Liverpool mustered forty-five times the population of Kobe in 1870 (493,000 to 11,000) but only fourfold that population in 1890 (630,000 to 137,000). Liverpool became the second city of the UK by 1801 but Kobe never rose above the status of the sixth largest city in Japan, although Hyogo Prefecture did exceed Osaka Prefecture in population down to the year 1904. Liverpool and Manchester fulfilled down to 1894 complementary functions, as did the two ports of Osaka and Kobe.

20 DOUGLAS A.FARNIE AND TETSURO NAKAOKA

In 1890 Liverpool had served as the second port of the UK since the 1770s and as the world’s largest market for raw cotton for almost a century. The flow of manufactures from its industrial hinterland had transformed it into a general cargo port and also, since the 1820s, into a larger exporter than London itself. For the handling of raw cotton its traders had developed the most highly organised commodity market in the world, pioneering from the 1870s the use of derivatives in the form of cotton futures. Its business culture differed greatly from that of Manchester. Liverpool preserved the Greek idea of the city and of the state which Manchester lacked or lost: it remained the home of corporate enterprise through the sedulous development of its municipal estate, so making the corporation into the wealthiest in England outside London. Its mercantile elite comprised families rather than individuals, as in Manchester, and proudly distinguished themselves as ‘Liverpool gentlemen’ from mere ‘Manchester men’. They made their city into a veritable powerhouse of economic enterprise, a pioneer of innovation in the field of transportation and a leading financial centre. Their trade generated wealth to a degree second only to London, creating between 1809 and 1939 twice as many millionaires as Manchester.27 Liverpool increased its population faster than did Manchester for four-fifths of the period between 1700 and 1930. It expanded its shipbuilding industry to reach peak capacity, as measured by tonnage launched, in 1882. From the 1860s it developed its trade with Shanghai and Yokohama. It acquired a Japanese consulate in 1888, eighteen years before Manchester, in 1905, was so favoured. Kobe had been designated an open port in 1858 but its opening was delayed for a decade by the opposition of the Sat-Cho alliance. After 1868 Kobe prospered as never before, enjoying phenomenal growth comparable only to that of the new towns of the American West. Between 1870 and 1890 its population expanded fourfold as fast as that of Yokohama, fivefold as fast as that of Osaka and tenfold as fast as that of Liverpool. Foreign merchants, especially Chinese, were attracted in considerable numbers to Kobe, so making the port more cosmopolitan than Osaka. Its foreign colony became the most numerous in all Japan after the destruction of Yokohama in 1923.28 Kobe specialised in international trade while the port of Osaka served the coastal trade. It expanded the value of its import trade so as to surpass that of Yokohama from 1893. Those imports led in turn to the establishment of a range of commodity markets and exchanges. Kobe extended its facilities to a very large degree by founding a dock in 1875, a stock exchange in 1883 and an electric power company in 1887. Its advantages for commerce attracted at least four of the developing Zaibatsu, Sumitomo, Mitsubishi, Kawasaki and Suzuki Shoten (c. 1874–1927). Sumitomo opened in 1871 an office for the export of copper, expanded its activity to include the shipment of silk and also began in 1888–89 to process tea and camphor for export, although such trades did not prove successful. Mitsubishi for its part led the way after 1896 in developing the warehousing facilities of the port. It also began to acquire land and established in 1905 an affiliate for shipbuilding and heavy engineering, so inspiring the foundation by Suzuki of the Kobe Steel Company.

REGION AND NATION 21

Kobe drew upon the local supplies of cheap labour in order to develop a large industrial sector, which Liverpool began to establish only after 1936. Hyogo Prefecture became by 1902 the second largest centre of cotton spinning while Kobe developed its heavy industry, especially shipbuilding. Kobe Ironworks had been established in 1875 and built many steamships before its bankruptcy in 1883.29 The Hyogo Shipyard established by the State in 1871, was privatised in 1886 as Kawasaki Zosen. That yard became the second largest in all Japan and extended its range of output especially after the Sino-Japanese War when it began to build large ocean-going steamships. The Kobe factory of the government railway completed the construction of the first locomotive in Japan in 1893 and pioneered the local manufacture of railway rolling stock. Under the guidance of Richard Francis Trevithick (1845–1913), it became in effect a school for the training of Kansai railway engineers. After the nationalisation of railways in 1906 its locomotive manufacturing technology was successfully transferred to private firms in Kobe and Osaka. Kobe attracted Dunlop Rubber in 1909 and became the largest importer in Japan of rubber from Singapore, for manufacture into tyres and shoes. Inevitably the secondary industries of the port came to specialise in the processing of imported raw materials and enjoyed rapid expansion. Thus, it built up a larger chemical industry than Osaka itself.30 It also became the leading centre for the manufacture of woollens, sake and matches, exports of which reached a peak during 1919.31 Kobe maintained the closest of relations with Osaka, with which it was linked from 1874 by rail (extended in 1889 to Tokyo) and from 1893 by telephone. Its establishment of a higher commercial school in 1902 followed the example set by Osaka in 1901. No major issue disturbed the harmonious relations with Osaka, in contrast to the discord which frequently envenomed commercial relations between Liverpool and Manchester. The changing relationship between Lancashire and London, 1890–1926 The shift in the balance of power between London and ‘the metropolis of the manufacturing world’32 became more marked during the 1890s but had already begun some forty years earlier. During the decade 1851–61 the northern challenge to London reached its greatest intensity, as measured by a cohort of ten statistical indices, both regional and national: • The number of cotton mills in the borough of Manchester reached a maximum in 1853. • The share of the textile industry of the NW in the total labour force of the region reached a peak in 1861.33 • The share of manufacturing employment in both the labour force and the total population of the region reached a peak in 1861. • The share of female industrial workers in the female labour force of the region reached a peak in 1861.

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• The joint share of Manchester and Liverpool in the total population of the region reached a maximum in 1851. The robustness of those five regional indicators is reinforced by five national indices: • The cotton industry generated its maximum share of national income in 1861. • Manufacturing industry recorded its peak shares in succession of the national labour force in 1851 and of the total population in 1861. • Industrial and manufacturing income attained its peak share of middle-class income in 1859–61.34 • The differential in regional per capita income between the North-west and the South-east reached its lowest point in 1859–60. Only one single index failed to reflect that climacteric: the share of the NW in national manufacturing employment did not reach a peak until 1881. Thus the decade of the 1850s represented a turning-point in the relations between the two regions. Thenceforward the relative rate of increase in population in the north slackened while London began to grow faster in population than Manchester and reaped most of the benefits of the new postal and telegraph services. The region of the South-east had always been the true heartland of the kingdom, with its immense armoury of military, naval, political and commercial power. London itself had remained throughout the period of the Industrial Revolution the largest single centre of manufacturing industry. It had undergone a silent renaissance during the decade 1800–10 when it had begun once more to increase its share of the nation’s population, after a full century of decline. From the 1820s it resumed its traditional role as the leading textile market of the realm.35 The Manchester School attained its greatest political triumph with the repeal of the Corn Laws in 1846. In the general election of 1857 its representatives suffered a decisive defeat, a defeat applauded by the Manchester Guardian, as London became more than ever ‘the Rome of today’.36 The Cotton Famine of 1862–65 undoubtedly served as a contributory influence to that dramatic reversal of fortune. It ushered in no retreat from an industrial way of life in the Lancashire region as the labour force employed in agriculture reached its absolute peak in 1861. It did however accelerate the process of occupational diversification, a process which served to sustain the region for a further seventy years. It also gave a notable stimulus to the expansion of the cotton industry abroad and, after a decade of stability, reduced the share of Lancashire in world productive capacity. It demonstrated conclusively that the cotton industry was vital to Lancashire but not essential to the welfare of the country. Outside Lancashire Britain enjoyed extraordinary prosperity, stimulated by the expansion of the noncotton textile trades, the arms trade, the iron, steel and coal industries and rail transportation. Those industries were boosted by the succession of wars during the 1860s and they also benefited from an influx of Lancashire capital. GNP enjoyed

REGION AND NATION 23

the largest decennial increase of the whole century and suffered no recession before 1867–68.37 If the Victorian era was one of the most creative periods in British history, then the south-east of England became ‘the major growth area in the Victorian economy’,38 and more than ever the dominant region within the UK. London remained a unique city, without parallel in any other region of Britain or indeed elsewhere in the world, since no other capital fulfilled such a variety of functions.39 The key to the growth of its power and influence lay in its nodal position within the transportation and communications systems of England and the world. London became the ultimate beneficiary of the centralising influence exerted by nine separate railway systems. It became the exclusive beneficiary by the completion of the world cable network in 1870–72 and of the all-British cable system in 1902: the electric telegraph proved to be even more important than the railway in accelerating the flow of information. London remained the premier port and market of the realm by virtue of its immense population and wealth, its insatiable desire to consume and its preference for the highest quality of goods. As the preferred seat of fashionable society it retained all the luxury trades which had inspired Bunyan in 1678 to christen it ‘Vanity Fair’. Its economic expansion was stimulated by the growth of internal demand rather than by the growth of export markets.40 As the leading market in the UK it developed a full range of light manufacturing industries, especially after 1870. Above all, it remained the main supplier of services to the business world and attracted after 1865 a number of service firms from Manchester. By 1890 London had regained its eighteenth-century dominance within Britain. During the 1890s the City of London embarked upon a notable expansion of activity. London remained the undisputed heart of the British Empire and the primary beneficiary by the renewal of imperial expansion. Thereafter the capital derived continuing profit from the increased share of public expenditure in GNP from 1890 and from the increased share from 1910 of the central government in total public expenditure.41 The unique economic structure of London became the model adopted throughout the Home Counties. London extended its tentacles beyond the suburbs of the metropolis to embrace the whole realm by means of the provincial editions of its daily papers, which were published from 1900 onwards. Thus it remade the nation in its own image, so as to comprehend all those orders of society whose life and thought were determined within its boundaries.42 It provided the Belgian poet, Emile Verhaeren, with the prototype for his vision of ‘the tentacular cities’ (1895) of the modern age. Manchester reached its own apogee just before London renewed its expansion. In 1887 the city served as the seat of thirty foreign consulates and attracted 4.8 million visitors to its Royal Jubilee Exhibition. Its city-region undoubtedly experienced a renaissance, especially in the field of engineering under the stimulus supplied by the construction (1888–94) of the Manchester Ship Canal. The influence of London nevertheless increased as its merchant banks rescued the Ship Canal Company from bankruptcy in 1891 and as the Midland Bank absorbed three Lancashire banks (1888–98). The renaissance of the 1890s did not affect the cotton industry, which

24 DOUGLAS A.FARNIE AND TETSURO NAKAOKA

recorded the first inter-censal decline in the number of its operatives (1891–1901) after Lancashire reached its peak proportion of the nation’s population in 1891. The relative standing of Manchester in national politics was undermined as it was surpassed in population during the 1890s by Birmingham. Its municipal trading was overshadowed by the policy of municipal reform pursued in Birmingham since the 1870s. Its political economy was challenged by that of the Birmingham school of tariff reform. The rhetorical phrase coined in 1868 harked back to the campaign against the Corn Laws but remained forever unfulfilled. ‘What Lancashire thinks today, England thinks tomorrow.’43 Within the region the Edwardian boom carried the production of textile machinery and steam engines to an all-time peak in 1906 followed by the peak production of coal in 1907. The output of cotton textiles registered its own historic maximum in 1913. Cotton manufactures continued to dominate national exports for a further thirty years until 1942, reflecting a loss of export-oriented business competence. During the decade of 1901–11 the population of the region remained stable, so ending at least two centuries of expansion, while population elsewhere continued to increase. During the decade 1911–21 population began to suffer relative decline, especially under the ravages of war. Productive capacity reached its maximum in weaving in 1915 and in spinning in 1916. The ports of Liverpool and Manchester attained their peak proportion of the value of British trade in 1917–18. The brief postwar boom of 1919–20 witnessed the complete congruence of regional and national patterns of economic activity. During the year 1920 thirteen major socio-economic indicators recorded peak levels of activity which were to be exceeded only in 1939–40, i.e. GDP, GNP, NNI, imports, exports, income from interest, profits and dividends, wages, consumers’ expenditure, sales by the Cooperative Wholesale Society, marriage-rates and membership of co-operative societies, trade unions and the Labour Party. For the cotton industry the year 1920 proved to be its true year of wonders wherein peaks were recorded in some twelve separate categories, i.e. gross production, exports, mill margins, dividends, banking turnover, banking profits, the trade of the Port of Manchester, membership of the Manchester Royal Exchange, of the Manchester Chamber of Commerce and of the local learned societies, membership of the two main cotton trade unions and, above all the number of merchant shippers in Manchester. During 1921 the region attained its peak proportion, 48 per cent, of the total labour force employed in the textile industries of the UK. The labour force employed in manufacturing also reached its absolute peak of 1.4 million, forty-five years ahead of the corresponding national peak. The price of American cotton reached its peak in Liverpool on 18 February 1920, the highest price ever recorded in the annals of the trade, whereafter the industry reached a peak level of production during March. Exports by the industry in 1920 supplied 30 per cent of total exports and enough calico to clothe one-ninth of the world’s population. Lancashire generated 16.4 per cent of national tax revenues from only 11 per cent of the population of the UK. The budget of the borough of Manchester surpassed in size that of such states as Portugal, Greece, Serbia or even Switzerland. The city seemed to be ‘the hub of the universe’,44

REGION AND NATION 25

generating 46 per cent of provincial bank clearings, and was chosen as the site for the World Cotton Congress of 1921. The climacteric of 1920 has remained neglected by historians because it represented the culmination of an inflation of prices rather than of the volume of production, because it inspired an orgy of profitseeking speculation and company reconstruction and because it was followed by the onset of a catastrophic depression. The establishment on 27 September 1922 of a crisis committee for the cotton trade foreshadowed the world economic depression of 1929–32. No compensatory export-oriented industries developed as links with foreign markets weakened and textile exports collapsed. Textile firms failed to preserve their market-share, to develop alternative markets, to diversify operations within the textile sector or to invest in the growth-sectors of the economy outside the field of textiles. The depression manifested itself first in a slower pace of expansion. During the 1920s the share of manufacturing in the region’s labour force first sank below one half. Employment in the NW increased (1921–61) at only one-fifteenth of the national rate of increase.45 People began to migrate from the region, which lost some 2.6 per cent of its population (1921–31) through migration. A ‘regional problem’ began to emerge, as essentially a problem of unemployment, caused by the appearance of excess capacity in the staple industries. The turnover of Manchester banks no longer outpaced other provincial centres but declined at a rate one-fifth faster (1921–42) than elsewhere. By 1921 the region of the South-east employed a larger labour force in manufacturing than did the North-west.46 ‘The drift to the South’ on the part of industry was in fact a planned process as trading estates catering for light industry developed in the South-east in order to serve the London market. The central role of the capital was reinforced by the building of new arterial roads and by the influx of foreign investment. Even the export trade of London surpassed that of Liverpool during the 1920s, for the first time in a century. The North-west was also out-distanced as a centre of engineering, after ninety years of national pre-eminence, by the Midlands. Thus Lancashire failed to replace its staple trade by electrical engineering, by automobile engineering or by machine-tool manufacture. The year 1926 proved to be the climacteric in the history of the cotton industry in Britain and in the world. The last cotton mills were built in Lancashire. Man-made fibres began to eat into the traditional markets of the industry and chemical technology began to supersede mechanical technology. Manchester and Liverpool reached their peak populations in 1935 and in 1937 and entered upon an era of long-term decline. The long era of expansion begun in 1771 drew to a close. The rise of the Hanshin (Osaka and Kobe) industrial zone, 1890–1935 Two rival explanations of Japan’s transformation may well be complementary rather than opposed. One interpretation stresses the influence of the West during the Meiji period. The other emphasises the indigenous foundations of change laid

26 DOUGLAS A.FARNIE AND TETSURO NAKAOKA

gradually but securely during the Tokugawa period. The dichotomy requires some further modification. First, external influence upon Japan emanated from China as well as from the West. Secondly, technology-transfer was no simple process but involved two distinct parties. Thirdly, a dynamic interaction clearly occurred between imported and native technology. Finally, the emergence of new trends within the patterns of production inherited from the Tokugawa era further stimulated indigenous enterprise and inventive capacity. The development of the shipbuilding industry furnishes a good example of such interaction. Coastal shipping lines were highly developed during the Tokugawa period, starting from Osaka and Hyogo (Kobe) and reaching all of the main ports of the country. Builders of the Japanese style of wooden ship were consequently well established. That type of vessel competed keenly as a cargo-carrier with both Western sailing ships and steamships, because its cost was half that of a Western sailing ship of similar tonnage, because it required no fuel like the steamship and because it could sail directly to warehouses along the local network of canals. The traditional vessel was therefore for long used in Inland Sea shipping as the most economic carrier of such special cargoes as coal from North Kyushu to Osaka.47 On the other hand, as early as the late 1860s at least ten small steamships had been built in Osaka and Kobe, either in works established by foreigners or in traditional shipyards under the guidance of Western advisers. Most of those steamers were used as ferry-boats, plying between Osaka and Kobe, on which route they flourished until the government railway linked the two cities in 1874. Although Osaka-Kobe shipping declined rapidly thereafter, local merchants and shippers had prospered from the ferry business in the Inland Sea. Their orders continued to encourage the local construction of small steamers. By 1880 more than seventy shipowners were competing keenly for the ferry traffic of the Inland Sea, with over 110 small steamers in their service. In turn their custom stimulated steamship-building in Kobe and Osaka. By the end of 1884 at least eighty-four locally-built steamships were in service, of which fifty had been built in Kobe by five shipbuilders and another twenty-seven in Osaka by six builders. Those eleven builders comprised three Westerners and seven Japanese while the remaining one was the Hyogo Shipyard of Kobusho (the Ministry of Public Works).48 Another example of the dynamic interaction between the heritage of the past and foreign influences may be found in the development of rural cotton weaving which prevailed in the cotton cultivating area around Osaka and Kobe. Imported cotton yarn spun upon the new spinning machines became the prime movers in this particular trend. Cotton yarn spun locally upon a simple spinning wheel lacked the necessary tensile strength. The resulting frequency of warp-breakages kept productivity in weaving at a very low level. The use of imported yarn for warps enabled weavers however to solve this problem and to replace their primitive hand looms by the more efficient silk loom. That major innovation stimulated the development of the rural cotton industry. Putters-out modified silk looms for the specific purpose of weaving cotton and supplied them to peasant weavers. A whole sequence of technical changes followed and so sustained the new trend.49

REGION AND NATION 27

During the period 1858–85, when these developments took place, general conditions proved most harmful to the economy of Kansai. Repeated civil wars between Tokugawa and anti-Tokugawa factions resulted eventually in the Meiji Restoration but immediately brought confusion and devastation to the region. The political changes after 1868 dealt moreover a heavy blow to the economy of Kansai. The abolition of the feudal system brought about the disintegration of the whole economic structure whereon the prosperity of Osaka had become dependent. Kyoto suffered even more seriously from the transfer of the Imperial Palace to Tokyo. Not until the 1880s did the regional economy begin to recover from this catastrophe. Three new trends combined in the 1880s to bring about a renaissance. First, a boom occurred in the flotation of joint-stock companies, especially for cotton spinning and for the construction of private railways. Secondly, export-oriented and labour-intensive manufacture expanded, producing both traditional and Western goods such as rugs, straw matting, braids, knitwear, matches, soap, umbrellas, glassware, etc. Thirdly, rural cotton weaving underwent the development mentioned earlier. The interplay of these trends suggests that the recovery arose from a popular and local response to the economic crisis of 1880 and represented a shift from government leadership to popular initiative. The growth of industry reflected both a widespread response to the serious imbalance in trade and the unconstrained activity of foreign merchants in the international settlements, who developed the Asian and American markets for such goods. The joint-stock boom itself was a local reflection of a national boom which took place between 1886 and 1890. Certain important companies had however been founded earlier in Osaka. Osakabo (the Osaka Spinning Company) was established in 1882 by Eiichi Shibusawa in order to rectify the worst-ever imbalance in trade created by the soaring imports of cotton yarn.50 Cotton yarn imports formed over one-fifth of total imports between 1878 and 1882.51 The government planned to construct ten small cotton spinning mills in order to replace imports by a domestic product and to do so in co-operation with private entrepreneurs. Shibusawa was asked to assume the management of one such factory. He refused and explained that a mill upon such a small scale could not possibly become internationally competitive and would prove ineffective in replacing imports. He therefore established a joint-stock company and built a large mill in Osaka with 10,500 spindles from Lancashire. The company proved a remarkable success and provided a model for emulation by employing independent entrepreneurship, a joint-stock structure, a minimum scale of 10,000 spindles and Lancashire-made machinery. Another significant forerunner was a shipping company. By the early 1880s the cutthroat competition between the many small steamship owners within the narrow Inland Sea was proving disastrous to all concerned. The shipowners therefore merged together and formed a large shipping company. The Osaka Shosen Kaisha (Osaka Merchant Vessel Company) was formed in 1884 under the leadership of Saihei Hirose, the chief manager of the Sumitomo family. That company began from 1885 to order a series of new steamships with a gross tonnage of 600 from the

28 DOUGLAS A.FARNIE AND TETSURO NAKAOKA

Mitsubishi Nagasaki Zosen (Shipyard), Kawasaki Zosen, which took over Kobusho Hyogo Shipyard in 1886 and Osaka Ironworks, which had been established in 1881 by an Irish merchant, Edward Hazlitt Hunter (1843–1917) and was renamed in 1934 Hitachi Zosen. Thus it provided the three shipyards with the opportunity to build, for the first time, steel vessels and to equip them with the new tripleexpansion marine engine.52 A smaller but no less significant forerunner was a local railway company. A group of local entrepreneurs bought rails and locomotives from the defunct Kobusho Iron Manufacturing Works at Kamaishi in north-east Japan and established in 1884 the Hankai (Osaka-Sakai) Railway Company. That initiative gave a strong impetus to Osaka merchants to establish short-distance railways connecting Osaka to nearby cities or towns. Common to all of these pioneering enterprises were such features as a strong leadership by independent entrepreneurs, careful examination of the competitive conditions in the particular market and the challenge generated by a new but risky business enterprise. Such conditions contrasted sharply with those preceding the formation of Nippon Railways, which detonated the contemporary boom in Kanto in just the same way as Osakabo did in Kansai. Nippon Railways was regarded by the public as a private company but remained heavily dependent upon the State. All construction works were carried out by the government railways and the State guaranteed the company an 8 per cent return upon its capital. In contrast the companies of Osaka were organised by more independent entrepreneurs. Such a striking difference will explain why such ventures were able to trigger a revival in the mercantile culture of Osaka. The Osaka Stock Exchange as well as Osaka merchants played an important role during this boom. Their investments were not restricted to their native city but flowed outwards to other prefectures. For instance Amagasakibo (Amagasaki Spinning Company) was organised in 1889, with Osaka investors holding about three-fourths of its shares.53 According to the statistics of the Osaka Prefecture 156 joint-stock companies were established in Osaka between 1887 and 1893. Of those, seventy-seven, including fourteen spinning and two match-making companies, were in the manufacturing sector and twenty-two in the financial and insurance sector. From the industrial viewpoint cotton spinning was undoubtedly the propelling force in this development. The statistics show that Osaka in 1894 had sixteen spinning factories with 21,984 workers, which represented 45 per cent of the total number of workers in manufacturing industry. Each of the sixteen factories employed on average 1,374 workers. Next to the spinning industry was match manufacture, with thirty-four factories mustering 6,738 workers and with each establishment employing upon average 198 workers. These statistics did not however cover works employing less than ten workers. The statistical survey undertaken by the Ministry of Agriculture and Commerce in 1895 recorded the existence of 22,333 weaving houses with 59,754 weavers in the Osaka Prefecture. Their average size was 2.7 weavers per house. The pattern of industrialisation in Osaka was epitomised by the sharp contrast between the urban spinning industry and the rural weaving trade, which extended from south Osaka to Wakayama and Nara prefectures. Between 1887 and 1898 nine

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railway companies were launched. Their piecemeal construction gradually covered the whole cotton weaving area with a rail network which connected their main towns and villages to the city of Osaka.54 The rapid growth of industry was accompanied by a demographic boom which created a sharp contrast with Osaka’s era of recession around the time of the Meiji Restoration. In 1870 the population of the city had numbered 283,000 in comparison to the 351,000 of Manchester. That population increased at an average annual rate of 3.3 per cent (1890–1918), or almost fourfold as fast as the rest of the prefecture.55 The significance of that rate of increase may best be appreciated by comparing it with the rest of Japan and with Manchester itself. It was in fact treble the rate for Japan as a whole, which was increasing its population at record levels. It was however comparable to the rate of 3.2 per cent attained by Manchester (1775– 1821) but was fourfold the rate for England during the eighteenth century and fourfold as fast as Manchester between 1890 and 1918. The city of Osaka became self-governing in 1889, more than fifty years after the incorporation of Manchester in 1838. It first surpassed Manchester in population during the year 1897, when it extended the civic boundaries. Industrial expansion was also accompanied by a rapid growth in international trade. Both the government and private entrepreneurs thus became aware of their close dependence upon foreign merchants and foreign shipowners. Moreover, the import of ships, locomotives, spinning frames and other machinery, iron and steel, raw cotton, etc., soared in value and threatened to create a new imbalance in trade. The government’s concern shifted to those problems, leaving the growing industries in the hands of private entrepreneurs. The Sino-Japanese War of 1894– 95 may well represent a landmark in the emancipation of the merchants of Kansai from their dependence upon Chinese intermediaries. The government also passed in 1896 two maritime laws, which encouraged ocean-going shipping and the construction of large steel or iron vessels by the grant of state subsidies. Taking advantage of this law Osaka Shosen underwent a notable expansion, along with Nippon Yusen in Tokyo. The three shipyards of Mitsubishi Nagasaki, Kawasaki and Osaka Ironworks had each become large shipbuilders.56 The most successful of the three was Mitsubishi Nagasaki while Osaka Ironworks lagged behind the first two. Its slower pace of expansion was enforced by the shallow depths of Osaka Bay. In order to consolidate its superior position Mitsubishi constructed its Kobe Shipyard in 1905. After the Russo-Japanese War the State absorbed the main private railway lines and created the Japan National Railways. In Kansai the largest two lines, Sanyo Railway and Kansai Railway, were nationalised, together with a few short but important lines. Other suburban lines remained however in private hands and developed as electric railways connecting Osaka, Kobe, Kyoto and the surrounding rural regions. At the same time the National Railways embarked upon a new project for the import-substitution of locomotives (see page 21). Since 1893 the Kobe factory of the National Railways had accumulated a relatively large engineering capacity in the field of locomotive construction. The National Railways adopted a policy of encouraging private builders by transferring such capacity into their hands.

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The project as a whole reached in the 1920s a successful conclusion, by means of which Kisha Seizo (established in Osaka in 1896), Kawasaki and Mitsubishi Kobe developed as large locomotive builders while Sumitomo Steel Casting became a manufacturer of driving wheels.57 The expansion of the heavy engineering industries was accompanied by a large increase in the demand for various types of steel castings. The first private steel casting company in Kansai was Nippon Steel Casting, founded in Osaka in 1899. The Sumitomo family bought this company and established Sumitomo Steel Casting in 1901. Kobe Steel followed in 1905 while Kawasaki Zosen created its own steel casting branch in 1906. Those three firms became the forerunners respectively of Sumitomo Metal Industries, Kobe Steel and Kawasaki Steel. The main framework of the Hanshin Industrial Zone was thus formed by 1910. The outbreak of the First World War marked the starting-point of a new stage in the economic development of Kansai. The war cut off the supply of imports from Europe into Asia, reduced the imports of machinery into Japan by three-quarters and thus accelerated the process of import-substitution, especially in the engineering and chemical industries. The most significant achievements were made within the textile sector, whereJapan captured the China market for piece-goods from Lancashire during the year 1917. The China market also afforded a notable stimulus to the engineering industry. Japan shipped more machine tools than the UK to China from 1914 until 1920, more machinery in general between 1917 and 1919 and more textile machinery during the single year of 1919.58 Osaka shared as much as Manchester in the great postwar boom of 1919–20 when the Japanese cotton industry reached its first climacteric. During 1919 the total number of firms within the industry reached an all-time maximum, as domestic weaving expanded to its very limits, while manufacturing output in the Osaka Prefecture also reached a peak value. During the half-year ending on 1 July 1920 the member-firms of the Japanese Cotton Spinners’Association earned profits of 35 per cent upon their invested capital, made massive additions to their reserves and paid an average dividend of 37 per cent, a return which may be compared with the average dividends then paid in the cotton industries of Massachusetts of 29 per cent, of Oldham of 40 per cent and of Bombay of 50 per cent. The end of the war made possible a resumption in the export of machinery from Europe to Asia. Shipments of textile machinery to Japan during 1920 increased to form their peak proportion, 31 per cent, of the total value of such exports from the UK while Japan forged its links with Lancashire closer than ever before. The industrialisation of Osaka fostered its urbanisation, attracting an influx of population from the provinces to the west and south and even from distant Korea. The expanding city underwent a series of social changes. A large slum developed upon the southern periphery, arousing serious municipal concern about the problems of poverty and social welfare.59 The increase in racial hostility towards Korean workers and their families created another problem. Wage rates rose but rising prices caused hardship. The wartime boom inevitably strengthened the bargainingpower of employees, so encouraging the labour movement by mechanics within the

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large engineering firms. In particular, it inspired the Osaka branch of the Yuaikai, the Friendly Society of Japan established in 1912, to campaign for the transformation of the society into a National Confederation of Labour on the model of the American Confederation of Labor. Such a remodelling was effected in 1921 and helped to make Osaka into the birthplace of social democracy in Japan.60 The Osaka Industrial Association, founded in 1914, supported from 1919 the legalisation of trade unions. Urban expansion increased demand for the gas, electricity and water supplied either by the utility companies or by the city itself as well as for transportation and communication facilities. The rising demand benefited not only the utility companies but also the suppliers of the necessary capital goods. As early as the year 1900 the Kubota Ironworks seized the opportunity to supply the demand for castiron pipes for water-supply. In 1909 Kurimoto Ironworks followed its example by manufacturing pipes for water and gas. The foundation in 1907 of Osaka Hatsudoki Seizo (later Daihatsu) and in 1915 of Yamaoka Hatsudoki Seisakusho (later Yanmar Diesel) were related more or less to the expansion in demand for gas. New opportunities were seized from 1920 by Tanaka Sharp (later Kinki Sharyo), which developed mainly in response to the demand created by suburban electric railways. Shimano (1921) and Tsubakimoto Chain (1917) began operations by manufacturing parts for cycles, which had become the most popular means of personal transport. All of those engineering companies had by 1935 grown into large or middle-ranking companies: they were to develop further during the era of postwar economic growth. They constitute a group distinct from the large engineering companies arising from shipbuilding or locomotive manufacture and related more or less to the zaibatsu. A significant feature of the industrial life of interwar Osaka was the so-called ‘dual structure’. The Census of Factories shows that in 1925 there were 6,369 factories with 258,762 workers in Osaka. There were 6,067 factories with less than 100 employees employing a total of 108,096 (41.8 per cent) which had an average labour force of seventeen.61 On the other hand, seventy factories with more than 500 employees mustered 97,637 hands (37.7 per cent) and had an average size of 1, 395 per factory, or eighty times as many as the smaller factories. At that time the sub-contracting system did not prevail so that a clutch of large factories and an immense host of small firms formed two relatively separate worlds. Such was the dual structure. The higher group consisted mainly of large companies which had grown up with the development of modern industry; their business was restricted to three principal fields: namely, the supply of capital goods to large enterprises, both public and private, munitions-production for the army and the navy and the supply to the national market of such intermediate goods as cotton yarn, chemicals, steel, etc. The pattern was similar in Hyogo Prefecture, where the average size of factories was greater than in Osaka but where small and medium-sized factories were also innumerable. Indeed more micro-factories existed than were recorded in the census, which excluded all factories employing less than five persons. In fact along the lower reaches of the Yodo river, extending along the Osaka Bay westwards to Kobe and

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southwards to Sakai and Senshu (South Osaka) a vast industrial zone had developed, where many thousands of small and medium-sized factories crowded together. The origins of those small firms are varied and may be traced back to blacksmiths or iron founders of the Tokugawa period, to the expansion of rural cotton weaving as well as of the export-oriented match, soap, umbrella and other industries of the 1880s and 1890s and to mechanics trained in the early shipyards. Especially notable was the role played by the Osaka Arsenal. In every war its workforce expanded. At the end of the war it discharged a large proportion of them, so supplying mechanics as well as new small entrepreneurs to this sector. The main business of those small factories was first, the production of piece-goods for export, secondly the supply of consumer-goods to the large urban populations neglected by large companies and, thirdly, the supply of capital-goods to the small and medium firms themselves. Between 1906 and 1930 the spread of power-looms stimulated a remarkable shift from the putting-out to the factory system within the rural cotton industry of south Osaka. The small and medium-sized factories so created supported the export of cotton piece-goods from Osaka during the interwar period.62 The expanding cycle industry originated in the workshops of blacksmiths around Sakai and made Japan from 1933 into the world’s leading exporter of cycles.63 During the 1930s a new type of large company began to appear, rising up from the base of the dual structure of industry. The most striking example was afforded by Matsushita who established in 1917 a small family workshop with three employees and became a large manufacturer of electrical goods, with over 3,000 workers. It was however still zaibatsu companies which remained the most influential amongst the large firms. In Osaka the Sumitomo conglomerate remained one of the Big Three zaibatsu but pursued its own distinctive career. Sumitomo never became involved in the purchase of state enterprises. That policy perhaps originated from the family creed that is, never to embark upon a business diverging from the ancestral tradition, namely copper mining and refining. Although Sumitomo did take part in the establishment of Osaka Shosen, apparently distinct from its ancestral tradition, Inland Sea shipping provided in fact their ancestral tap root in so far as it linked their mine in Shikoku to their refinery in Osaka. Sumitomo diversified from 1874 into financial enterprise, from 1897 into the manufacture of copper wire, as a logical development of their core-competence, and from 1901 into the casting and manufacture of steel. It proved slow to follow the example set by Mitsui in establishing a holding company in 1909 and did not follow suit until 1921. It also lagged behind Mitsubishi’s example in founding a warehousing subsidiary in 1887 and did not follow suit until 1899. Such a slow pace of development might have acted to the disadvantage of Sumitomo in the field of mechanical engineering, where Mitsubishi proved more aggressive. Mitsubishi separated the internalcombustion engine division of its Kobe Shipyard from the shipbuilding division in 1920, established Mitsubishi Internal Combustion Engine Company and built its main plant at Nagoya. The next year it separated its electrical engineering division from the shipyard and established, as a joint venture with Westinghouse, Mitsubishi Electrical. Its internal combustion engine company actually developed into a leading

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manufacturer of aircraft engines and aircraft. In 1929 Mitsubishi also established a tank factory at Tokyo. Kawasaki underwent a similar process of diversification but suffered a serious blow in the financial crisis of 1927. Thereafter it struggled to recover its former standing and gradually changed the core of its business into the production of munitions. Kawasaki Aircraft, established in 1937 in Gifu Prefecture, next to Aichi, combined together with Mitsubishi and other aircraft factories in the Nagoya area to make it into the largest centre of aircraft production in all Japan.64 Japan remained unique amongst industrial states in increasing the volume of its exports during the depressed decade of the 1930s and in enjoying the highest rate of economic growth in the world. Between 1913 and 1934 its per capita real income more than doubled, rising at the highest rate in the world, while its national income almost quintupled.65 The value of manufacturing output in the Osaka Prefecture had reached in 1922 the all-time peak proportion of 20.4 per cent of the national total as production in the rest of Japan slumped by over one-fifth (1920–22), in the wake of the crisis of 1920. Osaka reached a new peak of national eminence as ‘one of the leading manufacturing cities of the world’ and as ‘the Manchester of the Orient’.66 The relative position of Kansai weakened however during the 1930s as the Nagoya region developed the manufacture of automobiles as well as aircraft and as the influence of Kanto was enhanced by the faster expansion of the metallurgical, machinery and electrical industries, by the outbreak of war in 1937, by the imposition of strict economic controls and by the prohibition of the manufacture of cotton goods for domestic consumption. After 1937 machinery superseded textiles as the staple industry of the Osaka Prefecture and the share of textiles in total output was drastically reduced. The shift in the internal economic balance was of great significance for the future. The industries of Kanto were in general newer and more up to date than those of Kansai. They represented more advanced technology, required higher skills and were housed in larger and more modern factories. In short they were sunrise industries representing the wave of the future. The era of high-speed growth, 1955–73 The mercantile elite of Kansai had developed a high degree of resilience. Their long dependence upon export markets had conditioned them to recognise the power of external forces which they were often incapable of influencing. Prolonged exposure to the hazards of overcrowded world markets had accustomed them to prepare for the unexpected and to respond rapidly to unforeseen contingencies. Their cumulative development of education and training could on occasion help in the anticipation of new trends. Thus they developed a positive genius for turning adversity to advantage, regarding every crisis as an opportunity. Such resilience was tested to the full by the profound shock of total defeat in a nine-year war, followed by the humiliation of alien occupation and by the continuing hostility abroad to Japanese exports. The interwar period had however built up extensive capacity both for production and for marketing. The war itself left behind a number of legacies which proved conducive to economic development.67 Those legacies comprised

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the establishment of a pattern of administrative guidance of business by the State, the decentralisation of industry in the interests of national defence, the development of corporate groupings of firms, centred around particular banks, the separation of the ownership of business from its management, the full efflorescence of the structures of managerial capitalism, the consolidation of the system of subcontracting and the improvement in the technical capacity of small workshops. The postwar era may be divided broadly into two sub-periods, the years 1945– 55, dominated by the textile industry, and the years 1955–73, characterised by general and rapid economic expansion. The process of postwar reconstruction became in effect the reconstitution of the Japanese nation. That process was aided by a cheap yen, by cheap oil, by free access to the US market and by a prolonged export boom. It gave a major stimulus to the capital goods industries, to building, to chemical manufacture and, above all, to the textile industries. During the decade of 1946–55 the cotton industry played a role of supreme importance. Its expansion of production and employment helped in the revival of economic activity. A new clutch of small spinning companies was established, South Osaka enjoyed a great weaving boom and the share of textiles in manufacturing output increased (1946– 51). Trade associations were re-established from 1946, private merchants resumed export from 1947 and trading companies reappeared in the 1950s. The boom strengthened links with the USA, which were consolidated during the Korean War (1950–53). It re-established the position of Japan in international trade. By 1951 Japan had become the world’s leading exporter of cotton piece-goods, by value as well as by volume, for the first time in history. So extensive did its exports become that the British Empire restricted imports from 1952. Textile exports nevertheless remained Japan’s principal export from 1946 to 1960, averaging some 60 per cent of production. The remoulding of management, especially the decentralisation of costcontrol to the shop-floor and the establishment of techniques of quality-control over exports, was carried further than in the USA and was recognised by the award of the new Deming Prize to leading textile and chemical firms from 1951.68 Osaka undoubtedly expanded more rapidly in population than Tokyo (1951– 61). The relative status of textiles and of Kansai within the nation was, however, gravely weakened, first by the loss of the China market and then by the saturation of the domestic market for cotton goods, and remained much lower than in the 1930s.69 Then in 1955 national policy shifted decisively against textile interests. The industry was precluded from any further expansion without a licence and was advised to develop the manufacture of man-made fibre. The share of the textile industry in manufacturing output had begun to decline from 1952. Its share in exports followed a similar course from 1956. The industry responded to competition from the new tiger economies of East Asia by developing increasingly capital-intensive modes of production, by undertaking large-scale investment in the manufacture of man-made fibre, wherein Japan ranked by 1956 second only to the USA, by re-establishing Japanese factories overseas from 1955 and by undertaking diversification of its product-range, following the example set by Kanebo from 1961.

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From 1957 the industry was forced to accept voluntary export restraints and thereafter began a slow and painful process of contraction. During the 1950s machinery became the dynamic element in industrial expansion and enabled Japan to regain by 1960 its 1937 share, 6.9 per cent, of world exports of manufactures. Machinery replaced textiles as the staple industry of the Osaka Prefecture and generated by 1975 fourfold the value of textiles. The engineering industry developed in response to a rapidly expanding domestic demand which preferred consumer durables to household dry goods. A sharp increase in the purchasing-power of ordinary consumers in metropolitan Osaka began in the 1950s and accelerated during the 1960s, generating an expanding popular demand for a widening range of domestic appliances. In the countryside the demand for agricultural machinery increased as labour was attracted to the cities and was supplied by Kubota and Yanmar, diversifying their production under the stimulus of the depression of 1952–53. To meet such a demand an abundant supply of entrepreneurs existed to hand in the small and medium enterprises of the region, eager to progress further up the ladder of opportunity. An abundant supply of manual labour was also available for the labour-intensive and capital-saving process of assembly, using either the established traditional work bench or a conveyor belt. The labour force was expanded in size by increasing the employment of women from 1966 and by reviving the practice of domestic piece-work. High technical capacity and considerable engineering skills had been developed in the wartime munitions industries and were released for peacetime pursuits after 1945. Subcontractors were skilfully incorporated into the production-process of firms because their managers had developed a high level of technical competence and maintained quasi-familial links with their suppliers. The expansion of sub-contracting drastically reduced the average size of manufacturing firms in the Osaka Prefecture (1965–75). Electrical machinery replaced textiles as the staple product of the region and replicated the identical features characteristic of the textile industry during its golden age, i.e. labour-intensity, a low capital-output ratio and mass-production technology. Thus Osaka avoided the social problems arising from the long-term depression of the staple trade of Lancashire and entered upon a new era of hi-tech industrial expansion. The dominant entrepreneur of the age was Konosuke Matsushita (1895–1989), whose achievements are surveyed by Tetsuro Nakaoka and JohnWilson in the sixth chapter of this book. The success of Matsushita paved the way for the achievements of his two followers, Sharp (established in 1924) and Sanyo (established in 1950).70 Another group of firms successfully exploited from the 1960s onward other niche markets neglected by the large engineering conglomerates. Those niches were found in the manufacture of small automobiles (Daihatsu), ball-bearings (Koyo Seiko), agricultural machinery (Kubota), tractors (Komatsu), cycles (Shimano), refrigerators and air-conditioners (Daikin Industries) and material-handling equipment (Tsubakimoto Chain). Other firms adapted to the challenge of competition, emanating either from within Japan or from the mainland of Asia. Thus Daihatsu responded to the declining demand for autotricycles by concluding a contract with Toyota in 1967, strengthening its

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sales network and rationalising its production-lines by using the same components as Toyota. The cycle industry recovered rapidly during the period of reconstruction (1945–50) and then adjusted to the newly emergent demand for cycles for sporting and leisure pursuits. It also responded to competition by Taiwan in foreign markets by developing precision-machined, high-performance parts for sale at home and abroad.71 Thus the range of products of manufacturing industry was greatly extended. The structure of industry was transformed from a dual pattern into a hierarchy, with many rungs on the ladder for emerging entrepreneurs. Not only did the new staple industries facilitate the capture of export markets and evoke a progressively more favourable response abroad. They also fulfilled a function of supreme national importance because technological supremacy had since 1945 become identified, as it had been in the 1860s, with national survival. The postwar renaissance of Kansai provides a remarkable contrast to the experience of Lancashire after its Indian summer of 1946–51. The business elite of Lancashire, in sharp contrast to that of Kansai, increasingly sought State subsidies, especially from 1958 onwards. The decade of the 1960s proved to be one of seismic change in British history and in Anglo-Japanese relations. During ‘that decade of wrath for historic England’72 the UK was surpassed in terms of per capita GNP by eight different states. During the year 1967 the GDP of Japan first surpassed that of the UK and the GDP of the Osaka Prefecture first surpassed that of North-west England. During the preceding year, 1966, the population of the Osaka Prefecture, at 6.8 million, had first surpassed the combined population of Lancashire and Cheshire.73 The labour force of that prefecture generated a higher per capita GDP than that of the rest of Japan. The wages of labour remained above the national average, which had become by the early 1970s the highest in the world. In England however the phrase, ‘the North-South divide’, coined by J.B Priestley in 1934, had come once more into circulation from 1962. ‘Of the problems of the Northwest there appears to be no end.’74 A new era for Kansai began from 1955, as other regions expanded faster during the age of high-speed growth and as economic planning spread throughout the rest of the nation and was embodied in six regional development acts (1950–60). The region paid the price for having served as the pioneer of the Industrial Revolution in Japan. Expansion in production had reached its physical limits, leaving Osaka City with few sites for the establishment of new industries and established firms with no room for the extension of their plant. The progress of ground-subsidence encouraged factories to migrate from the innermost industrial district. Indices of relative regional decline appeared first in the sphere of foreign trade and stock transactions. The share of the Hanshin ports in national trade declined sharply in 1952–58, as other regions developed their own littoral industrial zones and their exports to the USA and to SE Asia at the expense of Kobe. That port was surpassed by Nagoya in population during the 1950s and by Yokohama in the value of its imports in 1959. The share of the Hanshin ports of Kobe and Osaka was surpassed by that of the Keihin ports of Tokyo Bay, first in imports in 1962 and then in exports in 1969.75 The share of the Osaka Stock Exchange in transactions in

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securities declined from 1951 as operations expanded in Tokyo.76 The potential hollowing-out of the regional economy and its ‘sinking down’ in relation to other regions was reflected in a decline in the share of textiles in exports from the peak proportion of 1955 and in the publication of a sombre vision of ‘Osaka under the Hammer’, replicating the ‘terrible years’ suffered by Manchester in the 1920s.77 That prophecy seemed to be on the verge of realisation as cotton spindleage reached a peak in 1963, followed by loomage in 1969. The share of the Osaka Prefecture in national manufacturing output declined anew, after peaking at 13.4 per cent in 1961. The Comprehensive National Development Plan (1962) aimed at the dispersal of industry throughout the Pacific Coastal Belt.78 The Kinki Region Development Act of 1963 was followed by the elaboration of the Kinki Region Master Plan in 1965. The Osaka Chamber of Commerce gave its full support to the plan while the Kansai Economic Federation, founded in 1946, established the West Japan Economic Conference. The integrated and publicly-funded plan sought to reverse the relative decline in the economic status of Osaka, especially in relation to Tokyo. Its five main points comprised: 1. The redevelopment of the Osaka city centre and the exclusion of future industrial development from the city. 2. The relocation and modernisation of small and medium enterprises. 3. The construction of a new port to the south of the city. 4. The creation of a littoral industrial zone for the large-scale manufacture of steel, ships, machinery and petrochemicals. 5. The holding of an international exhibition in 1970. Those aims reflected a fixed determination to retain manufacturing industry as the core of the economy and, to that end, to develop a large-scale integrated steel and petrochemical complex on the pattern successfully pioneered elsewhere in Japan. Such a reorientation from consumer goods to producer goods would, it was hoped, liberate Osaka from dependence upon the markets of Asia and would revive its trade as well as its industry. It may well be that Osaka in 1965 should have rather aspired to develop the tertiary sector and so to become the Tokyo of West Japan rather than its Nagoya. In the event three of the five policies were successfully implemented. The exhibition proved a great success, a new container port was created and the city centre was redeveloped so that population receded from the maximum figure of 1965. The other two plans suffered shipwreck, even before the oil-price shock of 1973. Relocation of the small and medium enterprises to a ‘suburban balanced development area’ would have deprived them of all their established connections and economies of location. The littoral industrial zone was recognised by 1969 as a certain recipe for environmental pollution. Thus the plan failed to achieve its intended aim. The share of the Kinki region in the national shipment of manufactures declined from 23.5 per cent in 1965 to 20.7 per cent in 1975.79 Kansai reached a climacteric

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in the years 1969–70. Expo 70 attracted some 65 million visitors to Osaka, or more than double the number expected. The government then imposed export ceilings upon the textile industry from 1971, in return for the retrocession of Okinawa in 1969. The share of Kansai in NDP reached the peak proportion of 19.5 per cent in 1969, with 10.2 per cent supplied by Osaka and another 4.7 per cent by Hyogo.80 The share of manufacturing industry in the total income of the Osaka Prefecture also reached its peak in 1970.81 Employment in manufacturing in the prefecture reached a maximum in 1969–70, six years after the corresponding maximum in 1963 in Osaka City and in Tokyo City.82 The Kanto region had proved more successful during the decade 1955–65 in developing the heavy and chemical industries. The share of manufacturing industry in the prefectural income of Tokyo Prefecture began, however, to decline from 1965, five years ahead of the Osaka prefecture. A comprehensive survey in 1972 of economic power, embracing industry, commerce and finance revealed that Osaka’s position in relation to Tokyo had declined from 67.3 per cent in 1960 to 61.1 per cent in 1972.83 In 1973 the population of the Osaka Prefecture reached its peak proportion of national population, at 7.4 per cent, so ending a full century of expansion.84 The repercussions of the oil-price shocks, 1973–80 A fourfold increase in the price of oil in 1973–74 was detonated by the Arab-Israeli War. It brought to an end the great postwar boom in both east and west and precipitated in 1975 the first decline in the volume of world exports since 1958. The crisis affected Japan more than any other state.85 Japan had enjoyed the fastest rate of economic expansion in the world and anticipated continued expansion under the optimistic assumptions of the Tanaka Plan. It had increased its consumption of oil (1968–73) at treble the British rate, had become the world’s largest importer of oil and was more dependent on Middle East oil than any other state. Thus the repercussions of the price-rise brought to an end the era of high-speed growth. Numbers employed in manufacturing reached a national peak in 1973.86 The year 1974 became a year of negative economic growth for the first time since 1955 as the excess of imports over exports quintupled. For Kansai the crisis proved more severe than elsewhere and ushered in the real decline of the Osaka economy, especially of the textile industry. The Osaka Stock Exchange suffered a major slump in trading volume in 1973–75. Manufacturing industry in the Osaka Prefecture suffered the loss of 156,000 jobs (1973–79), or 14. 3 per cent of the total.87 The man-made fibre industry was much larger than that of the UK and was doubly afflicted by the rise in the price of its raw material in oil and by the trebling in the import of textiles during 1973. The textile industries of South Osaka were severely afflicted as their export markets collapsed and secured little relief through the passage of the Textile Industry Restructuring Act in 1974. No further increase in the relative share of the Osaka Prefecture in the national population took place from the peak reached in 1973. The share of the Hanshin ports in imports sank by one-third (1973–76) while their share of exports sank in

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1975 to half that of 1960.88 The share of the Osaka Prefecture in manufacturing output declined (1973–78) even more than its share in GDP. Complaints about the decline in the economy of Osaka became louder than ever before, although its economic expansion was continuing at a fast pace in apparent disregard of government policy. Both of the National Development Plans of 1969 and 1977 proposed to reduce the share of both Kanto and Kinki in industrial shipments.89 Japanese industry coped very well with the oil-price shock by concentrating effort upon three interrelated targets, a general reduction in the use of energy, a rationalisation of high-energy consuming industries and an expansion of low-energy consuming industries. The capital-goods industries were however affected more than the textile industry, especially the non-ferrous metal industries. Rationalisation adversely affected local industry, especially steel and shipbuilding. The shipyards were not large-scale consumers of energy but they were adversely affected by the shrinkage of demand for super-tankers in 1974 and by its total collapse in 1975–76 after the two years of orders on hand in 1973 had been completed. The shipbuilding industry was surpassed in output from 1980 by the cycle industry of Sakai. Hitachi Zosen therefore closed its Sakai shipyard and concentrated production at Ariake, north of Kumamoto, on the western shore of Kyushu and facing the Ariake sea. Nippon Steel closed down its blast furnace at Sakai, which had been established in 1966, as demand for its products shrank and concentrated on the manufacture of pig iron at its new Kimitsu Iron Works in Chiba Prefecture in Kanto. Thus both the iron and steel industries and shipbuilding in Kansai experienced a rapid decline in their importance. The new petro-chemical complex developed in Osaka from 1970 failed to play its expected role in restoring the vitality of manufacturing industry. The planned development of a littoral industrial zone failed to achieve the size necessary to secure external economies and to become a pole of growth. The continued expansion of the automobile, machine-tool, electronic and computer industries benefited other regions of Japan, as the Osaka Economic Year Book had complained in 1973. Moreover, the drastic transformation of the world automobile market, caused by the flight of consumers from Americanstyle ‘gas-guzzlers’ towards small, fuel-efficient cars, proved of immense benefit to Japan, at the expense of the USA. Its benefits were however reaped by Aichi Prefecture rather than by Osaka Prefecture. Nagoya was more advantageously placed than Osaka, as the home of Toyota and as a leading centre of aircraft production during the war. The decline of light industry in the Osaka Prefecture was not a direct result of the oil-price shock but an indirect result of the rapid appreciation in the value of the yen, by 34 per cent (1976–78), consequent on the rapid increase in the export of machinery. That appreciation improved the competitive position of the little tigers of East Asia. Those late-developing states built up the very same industries which had been central to the development of Osaka, competed with Japan in the export of textiles and of light machinery and thus brought about the decline of a complex of export-industries in Osaka, i.e., the manufacture of wire, umbrellas, spectacle frames, tools, cycles and even electronic appliances. Osaka did however benefit from

40 DOUGLAS A.FARNIE AND TETSURO NAKAOKA

the new demand for producer-goods emanating from those states. It expanded substantially its exports of automobile parts, cycle parts and work tools in a dynamic response powered by the development of precision engineering.90 The textile industry was adversely affected, although the clothing industry maintained its relative but limited share in manufacturing production. Some manufacturers, such as Shimano, survived however by devising more sophisticated products, such as fishing rods as well as cycle parts, and by raising the technical level of manufacture. Thus the three makers of domestic electrical appliances made every effort to automate their assembly lines. They shifted their domestic products towards videotape recorders, electronic calculators, liquid crystal panels, solar panels, etc., and strengthened their production activities abroad. In so doing they gradually transformed themselves into multinational electronic engineering giants. Industry in general reduced the costs of labour and of capital: from 1976–77 it made increasing use of female part-time workers and reduced the degree of its dependence upon bank loans. On the whole Japan staged an impressive recovery during what became perhaps the most remarkable decade in its long history. It shifted production towards hi-tech manufactures, launched a new series of export booms and so averted any shift, such as had occurred during the 1930s, towards international autarky. Japan reduced the import of oil by 6 per cent (1973–78) but raised its real GNP by 22 per cent. It surpassed the USSR in GDP in 1974 and permanently from 1976 to rank second in the world only to the USA.91 In the UK the impact of the oil-price shock proved much more serious than in Kansai. For Britain as a whole the shock ushered in eight years of deindustrialisation (1974–82). The region of the North-west suffered more than elsewhere. It had already been afflicted by a recession in 1971–72 and by a decline in manufacturing employment by 15 per cent in the wake of the US recession of 1970. From 1971 the level of unemployment rose above the national average and the region began to experience an absolute loss of population. The repercussions of the oil-price rise on manufacturing industry proved to be grave in the extreme. They reduced the share of industry in the region’s GDP and in its labour force, permanently reducing the share of manufacturing industry in the labour force, especially as productivity in manufacturing increased in 1975–76. The loss of employment in industry (1973– 79) was 50 per cent greater for women than for men, reflecting perhaps the strength of the trade unions. Unemployment rose above the EC average from 1975 and prophecies of doom were heard once more in the land, reviving interest in ‘the regional problem’.92 The second oil-price shock tripled oil prices in 1979–80 and inflicted even graver damage on the North-west than the first shock of 1973. It did so because it coincided with the emergence from 1980 of the UK as an oil producer, with the transformation of sterling into a hard petro-currency and with the upward revaluation of the pound, so pricing British exports out of their established markets. The results were to usher in a severe national recession in 1981–82, the gravest in forty years, to reduce manufacturing capacity by one-fifth (1980–83) and to precipitate a debate about the national value of manufacturing industry.93 For the North-west

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the depression proved to be more severe and longer-lasting than elsewhere. It reduced manufacturing employment by 41 per cent (1980–85), especially as productivity experienced a long-term rise from 1978. The share of the labour force employed in manufacturing industry was reduced more sharply than ever before and the burden was borne more heavily by men than by women, as new anti-union laws became effective. Extensive government help reached a peak proportion of national expenditure in 1981–82 and an absolute peak sum in 1986– 87. Such aid failed to halt the decline in the region’s share of national industrial output or to prevent a long-term decline in per capita GDP (1979–85). Japan entered upon a new stage in its economic development under the influence of the second oil-price shock. It was well-prepared for the advent of such a shock by virtue of its earlier intensive efforts to economise on fuel consumption. The stability in the exchange-rate of the yen, which may have been kept artificially low, enhanced the competitive-capacity of its newly-rationalised industries in the world market and especially in the markets of the USA. That competition was felt acutely in the West as the USA became a net importer of manufactures from 1982 and the UK followed suit from 1983. Japan had been the world’s third largest exporter of manufactures since 1973: it rose in rank to become the second in 1983 and the first in 1984. Above all, it became from 1983 the leading exporter of machinery94 while the UK became a net importer of machinery. Thus Japan became a fourth well-spring of machine technology. The transformation in the international trading position of Japan imbued bureaucrats and intellectuals with immense confidence. They abandoned what had been for 110 years their stock belief in the backwardness of Japan in favour of a belief in its superiority. They were reinforced in that outlook by the forebodings expressed by some Western doomsayers. Then the parameters of the export trade were transformed after the Plaza Hotel Accord by the doubling in value of the yen in twenty-six months (September 1985–November 1987). That appreciation in the value of the yen seriously weakened the competitive capacity of Japanese manufacturers in the world market, especially in the field of shipbuilding. It inspired many export-oriented manufacturers to transfer their production plants abroad. As a result the role of manufactures in Japanese exports declined from the peak proportion of 96 per cent reached in 1983. Japan’s share of world exports of manufactures also sank from 15 per cent in 1985 to 11.6 per cent in 1990 and its share of world merchandise exports receded from 10.1 per cent in 1986 to 8.4 per cent in 1990, as its manufactures flowed increasingly into world trade from offshore outlets. The shock also encouraged many manufacturers further to rationalise their domestic production-processes by adopting the latest techniques of the flexible manufacturing system of batch-production. Thus they learned from the example of Germany, increased their reliance upon their ever-flexible suppliers and enhanced their own talents for the synchronisation of operations. They also increased their investment in R&D, especially in technology-intensive industries. The beneficial effects of that process of re-adjustment were felt most fully outside Kansai. The Osaka Prefecture did experience a temporary recovery in its share of NDP in 1976 and again in 1979–81 but it also suffered between 1970 and 1980 from a decline in

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the number of new factories established, a reduction in the number of innovationbased industries and a decline of employment in manufacturing by 15.6 per cent. From 1982 its share in manufacturing production was surpassed by that of Aichi Prefecture, where Nagoya fulfilled the promise, shown in the 1920s, of being ‘in many ways another Osaka’95 and became a real boom town. The constraints upon business strategy in Lancashire Three factors inhibited local enterprise and especially export-oriented ventures in the North-west. First, the region lost its mercantile elite in the foreign merchants of Manchester. Those merchants had supplied since the 1820s the essential link between industrial Lancashire and the world market and had served as the primary agents in the expansion of exports. Their presence had compensated for the lack of trained commercial intelligence in the mill towns of the region as well as for the absence of any local understanding of either foreign languages or foreign markets. Those alien merchants had never been replaced by native traders. They reached the zenith of their influence in 1913 and suffered from the shrinkage of marketing opportunities during the 1914–18 war. Their disappearance was reflected in the abandonment of their villas, which were scattered throughout the residential suburbs of Liverpool as well as Manchester and which were colonised by local educational institutions. Their decline was primarily responsible for the decay of the region’s export trade and represented a loss which was never offset by any influx of comparable talent from outside. Indeed the postwar influx of a new generation of Asian traders contributed to a marked expansion of the import trade in textiles and clothing rather than to any resuscitation of the export trade. The disappearance of the Manchester merchants removed the lynch-pin from the region’s economy. It annihilated the demand for a range of business services, extinguished a vast number of ancillary firms and precipitated a collapse of the commercial property market in central Manchester. Secondly, the incorporation of the region into the national structure of big business undermined the roots of local enterprise. From the 1960s large firms came to dominate the economic life of the region (see pages 88–9). Their strategy was determined outside the region by their multi-plant structure and often by a multinational agenda. Thus an uncreative branch-plant economy replaced what had formerly been a quasi-independent regional economy.96 The dominance of such large firms tended, as Graham Gudgin noted in 1995, to raise costs and to reduce rates of growth in their host-regions. That trend was carried further in the Northwest and especially on Merseyside, with its American-owned car plants, than in any other region of the UK. It contrasted sharply with the continuing vitality of native enterprise in Kansai and with the continuing location in Osaka of the head offices of business firms. Such branch plants were not only managed by outsiders but usually remained subject to a high degree of external control from head office, which would normally be located in the south-east of England.97 Inevitably they made financial criteria into the main determinant of policy at the expense of other

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factors. In the division of labour elaborated by such firms key operations were internalised and head office reserved to itself functions relating to management, marketing, R&D, and, above all, finance.98 The labour recruited within the region tended to be low-paid manual labour, employed in routine assembly or subassembly operations. Such firms tended to create unskilled blue-collar jobs rather than white-collar jobs,99 so effecting a relative de-skilling of the labour force. That policy led to a large decline in hi-tech manufacturing employment during the 1980s, a below-average rate of growth in computer services, a notable loss of employment in the field of R&D, and a decline in the proportion of innovations generated within the region.100 Such giant corporations became part of an enclave economy and remained ‘cathedrals in a desert’. They offered no model for effective local emulation and failed to serve the region as a ‘pole of growth’, such as François Perroux had postulated in 1955 as vital to effective economic development. Such influence as they did exert may well have proved pernicious rather than beneficial. Their purchasing policies inhibited the development of productive linkages with their locality, since they neither bought nor sold locally. Such a strategy minimised the role played by local ancillary trades and sub-contractors, in sharp contrast to the position in Japan. Thus the region lost the dense clusters of subsidiary industries which had characterised it during the nineteenth century. Few beneficial spin-off effects flowed from the presence of big business. Positive harm might be inflicted during a downturn in business-activity. Branch plants remained highly vulnerable to closure during recession or rationalisation, so transferring the burden of job losses from head office to the dependent region.101 The region may not have suffered, between 1973 and 1981, from deindustrialisation to the same extent as the West Midlands or as Scotland.102 It failed markedly however to live up to its high industrial potential as estimated in 1966 by Colin Clark (1905–89).103 A continuous proliferation of new initiatives designed to ‘market the region’ achieved few concrete results. The degree of success in attracting either venture capital or inward investment remained very low. The performance of business remained at levels below the national average. New firms were formed and survived between 1980 and 1989 at only half the national rate. The stock of business units reached a peak of 156,900 in December 1991, with the decline in numbers affecting especially small and medium-sized enterprises. Membership of the Manchester Chamber of Commerce declined by one-quarter between 1921 and 1991.104 The incidence of self-employment sank to a lower level than in any other region and, where it did develop, confined itself to the service sector. By the 1980s the region’s proportion of business firms, in relation to its population and to its GDP had sunk below the national average. Thirdly, the negative image of the region served as the most powerful of deterrents to outside entrepreneurs. That image originated in the association of ‘Darkshire’ with ‘satanic’ mills and dated back at least to the 1790s, darkening in hue throughout the century. It was accentuated by the malign influence of a wretched climate, polluted atmosphere, waterways and beaches, and a lethal

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incidence of bronchial complaints.105 Manchester remained not only ‘the ugliest place on earth’ but also ‘a quintessential England, the spot where all the worst features are concentrated in a permanent exhibit’ a display of ‘forlorn, protracted, wilful ugliness’.106 Its satellite cotton towns appeared as ‘great black concentration camps.’107 That entrenched legacy from the past proved impossible to dispel, frustrating the constantly renewed efforts of civic boosters. It was reinforced by the steady migration of successful businessmen to more salubrious climes and remained unaffected by the establishment in 1952 of a smokeless zone in Manchester. The image was diffused throughout the world by means of the massmedia. In particular the teaching of English literature, at home and abroad, portrayed the same gloomy picture through the medium of at least nine classic texts. Thus publishers had in print in 1996 some fifty-four reprints to serve the growing market for school-books, all with an identical sub-text.108 Those books included three editions of Disraeli’s Sybil (1845), four editions of Charlotte Brontë’s Shirley (1849), six editions of Elizabeth Gaskell’s Mary Barton (1848), five editions of Cranford (1853), six editions of North and South (1855), seven editions of Matthew Arnold’s Culture and Anarchy (1869), two editions of Orwell’s The Road to Wigan Pier (1937) and one reprint of J.B.Priestley, English Journey (1934). Above all, Dickens’s Hard Times (1854) was available in twenty different editions, all suffused by what Macaulay had recognised as the ‘sullen socialism’ of the author and all diffusing the same gloomy image of ‘Coketown’. Such highly readable works ran through countless editions, unchecked by the appearance of any contrary interpretation: they spread their message through translations around the world but made their greatest impact upon the Anglo-Saxon reading public. Their influence would have been even greater if they had assumed the form of poetry: fortunately after the publication of Blake’s immortal lines in 1804 they remained restricted to prose. It was nevertheless powerfully reinforced by the relentless diffusion of similar images on stage, screen, radio and television. The image became more deeply entrenched through the medium of a popular soap opera, Coronation Street (1960) and of the Granada Studios Tour, which became upon its inauguration in 1988 the most popular of all the heritage trails within the region. It was reinforced through the creation of such institutions as the Museum of Labour History in Manchester and the Lowry Centre in Salford. Its powerful influence upon the business world was reflected in the low pay earned by chief executive officers and in the declining status of the Manchester Business School, established in 1965.109 The interest of outside investors and entrepreneurs was diverted to more congenial locations. In the case of Merseyside, flanked by the filthiest river in the kingdom, the deterrent effect reached its very maximum, accentuated by the creation of such bizarre institutions as a History of the Slave Trade Museum. Within the region a distinct preference had existed since the 1850s for leafy Cheshire over sooty Lancashire. That negative image was singled out in 1992 by a representative sample of 135 CBI members as the main weakness of the region and as one far more important than such factors as the ageing road infrastructure and the lack of support from the public sector of the economy.110

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The collapse of the export markets of Lancashire, 1926–90 The fate of the export trade of the two regions remained more important to Britain than to Japan because exports represented in 1990 21 per cent of GDP in the UK but only 10 per cent thereof in Japan. In 1890 the exporting industries of the Northwest region had served a world market, shipping abroad not only the bulk of production of cotton textiles but also one-third of the total exports of machinery. Together the ports of Liverpool and Manchester carried on nearly half of the export trade, handling together in 1917 the peak proportion of 44.4 per cent of exports. That trade included shipments from the Midlands and Yorkshire, a proportion which may be estimated at 9 per cent, leaving some 35 per cent as the approximate share originating in Lancashire and Cheshire. The proportion of total business turnover exported from the region may well have been more than half. The loss of the export markets of the cotton industry was the primary cause of the ensuing catastrophe. The staple trade of the region lost all of its temporary advantages and was compelled to surrender its hold upon foreign markets. No alternative staple developed to replace the cotton industry. The expansion of higher education undoubtedly created employment, generated export-earnings and added value to human capital but it exported its products outside the region and increased regional GDP by only a small amount. No new era of invention and innovation dawned. No new products emerged to capture a world market. Businessmen became more insular in outlook than before and remained profoundly ignorant of foreign markets, languages and cultures. They faced fierce competition abroad from foreign firms, which had mastered foreign languages, including English. The region lost all of its advantages of geographical location for international trade. In particular transatlantic trade experienced after 1929 a long-term decline, severing contact between Liverpool and its markets in Latin America as well as its sources of supply in North America. During the 1970s the ports of the east coast regained their former superiority, as the UK entered the EEC in 1973, as trade with Europe expanded and as oil production began in the North Sea in 1975. By 1989–92 only 4.5 per cent of the region’s turnover was being exported.111 Those exports generated 11 per cent of the region’s GDP but supplied only 9.3 per cent of the nation’s exports while Kansai provided 20 per cent of the exports of Japan. Individual firms indeed maintained the proud tradition of the past. The top ten exporting firms shipped abroad in 1992 57 per cent of their turnover while the top ten manufacturers exported 31 per cent of their turnover.112 Some six sectors of the regional economy supplied the export trade with its main pillars, i.e., armaments, chemicals, engineering, motor vehicles, paper and textiles. The manufacture of defence equipment had expanded during every war since the Crimean and continued in peacetime to serve a world-wide market. The trade was carried on by private firms such as Interarms, established in 1932 as well as by the Royal Ordnance factories and by British Aerospace, which recruited as its chairman (1987–91) a local professor of management in the person of Roland Smith.113 The industry employed a host of sub-contractors and exported at its peak in the 1980s

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about one-fifth of its output: details of production and shipments abroad remained state secrets. It did not however develop the hi-tech branches of the industry to the same extent as the South-east.114 It remained subject to acute competition in foreign markets115 and was undermined by the end of the Cold War in 1989 and by the world-wide slump in military expenditure (1991–93), long before the advent of an ethical foreign policy. The marked fall in orders from 1990 led to the closure of factories and the contraction of employment. The chemical industry filled the gap left by the decline in arms production, having developed a petro-chemical base in the 1950s. The industry expanded operations, supplying on average a quarter of national exports of chemicals and exporting in 1989–91 one-fifth of total production but two-thirds of its output of pharmaceuticals.116 It dominated the large capital-intensive consumer-goods sector within the region and generated in 1961 a high value of GDP per employee as well as the highest earnings in the industry.117 It faced however a growing threat in the field of speciality chemicals from competitors based on the North Sea axis, extending from Teeside and Humberside to the Scheldt.118 Of the four remaining sectors, engineering firms exported 10 per cent of their turnover, motor vehicle manufacturers and makers of automotive components 6 per cent, paper makers 6 per cent and textile manufacturers 5 per cent. The chemical, paper and engineering industries may all be ranked as residuary legatees of the cotton industry. The coincidence of British entry into the EEC with the oil-price shock of 1973 damaged the exports of the North-west region much more than those of Kansai. The fortunes of the respective air terminals of Manchester and Osaka provide an instructive insight into the business history of the two regions. The volume of freight handled at the Osaka International Airport increased fivefold as fast (1962–83) as that handled at Manchester Airport. The volume of its international freight cargo increased nearly sevenfold (1970–83) while that at Manchester was halved.119 Manchester suffered a decline in its domestic freight from 1967 and in its international freight from 1971. The total revenues of its airport plunged into deficit in 1973–74, after seventeen years of continuous expansion since 1957–58. Passenger traffic slumped for the first time in its history, in 1974 and by 22 per cent. During 1975 air freight sank in volume by 20 per cent while the cargo traffic of the Port of Manchester declined by 14 per cent.120 The airport nevertheless achieved its goal in securing in 1978 the coveted gateway status as ‘Manchester International Airport’. From 1980 its international freight traffic revived, expanding twice as fast as that of Osaka (1980–93). The port of Liverpool however entered upon a stage of terminal decline. Traffic had receded since 1962 but the port still ranked third in 1974. In 1977, together with the Port of Manchester, it registered the peak value of its trade. Thereafter its decline in status to that of the ninth port in 1979 proved very rapid. The second oil-price shock of 1979 accelerated its decline to the rank of tenth in 1982. The Manchester Ship Canal also entered on an era of terminal decline, which culminated in the announcement in 1984 of the company’s decision to close the upper reaches of the waterway. The news sent a shock wave

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throughout the region because the Ship Canal had assumed immense symbolic importance since its inauguration ninety years earlier. Efforts were made to offset the unfavourable location of the region for exports to the EEC by various means, such as the construction of container terminals, Eurorailheads and a trans-Pennine motorway. Those efforts had little lasting success. Service on the main rail line deteriorated to deplorable levels. The construction of the Channel Tunnel (1987–93) made the position even worse, offering to the South-east fivefold the benefits that it did to the North-west.121 A rail link to the Tunnel was promised for 1995 but failed to materialise and came to be deemed unviable by 1998. A series of successive initiatives designed to tap various world markets produced little effect. In the 1970s Britain as a whole had risked becoming one vast zone of industrial dereliction, ‘the Merseyside of Europe’.122 In 1989 the EC relegated the North-west region to the peripheral western arc of its super-zones, ranking it together with Scotland, Ireland, the Celtic fringes of France and the Iberian peninsula and isolating it from the vital axis of Europe in the Rhineland and from the ‘golden triangle’ formed by Frankfurt, Munich and Milan. In contrast Kansai retained a most advantageous location upon the booming Pacific Rim. The number of foreign consulates in Manchester may have declined by only a third from thirty-six in 1914 to twenty-four in 1988. The links between the region and the outside world dwindled in much greater degree. The decay in export performance exerted a profound influence upon the fortunes of the region. Export potential had become the main determinant of industrial expansion and of inward investment. The loss of such potential deterred foreign firms and investors from considering local investment.123 Even old-established firms like Pilkington’s shifted their head office in 1991 from St Helens to Brussels. Potential entrepreneurs were still born and reared in the region but migrated to the South-east or even emigrated, so passing implicit judgement upon its future prospects. The economic involution of Lancashire The decline in exports and in staple industries was accompanied by a collapse of ancillary trades and services. In that process two sectors alone prospered, machinebroking and property-dealing as they handled the surplus plant and the vacant sites and buildings. Unemployment increased from 1957 and again from 1971 when it surpassed the national rate. It exceeded the average EC rate from 1975 to 1989 and rose by 1984 to the highest level in England after the North, reaching an absolute peak in 1987. The rate declined from 15.9 per cent in 1984 to 7.9 per cent in 1990, compared to a national rate of 6.8 per cent. The new secular trend remained different from earlier bouts of cyclical unemployment. It transformed the opportunities, the expectations and the life-style of an immense body of workfolk by shattering a value-system centring around the dignity of labour. The loss of employment in the North-west was massive and had no real parallel in Kansai (Table 2.2). By 1990 the North-west ranked as the ninth lowest of eleven regions by the proportion of its population in employment. The decline and disappearance of

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Table 2.2 Employment in the North-west region of England 1911–90

Source: C.H.Lee, British Regional Employment Statistics, 1841–1971 (Cambridge, 1979), using Series B of the Census figures for 1911–51 Regional Trends 27, (1992) 88. Note: The figures in brackets indicate the percentage of the national total.

the labour-aristocracy, personified in the respectable artisan, entailed disastrous consequences. Increasing reliance for income was placed upon welfare payments rather than upon gainful employment. Most of the associations established for mutual aid disappeared from the local scene. The erosion of traditional family life and the narrowing of opportunities for juvenile employment encouraged the rise of nihilism amongst the young, the spread of juvenile vandalism, the resort to drugs and to drug-induced crime and the spread of inner-city decay and of ‘sink estates’ with such horrors as ‘neighbours from hell’. In a profoundly impoverished region the two former cotton towns of Salford and Blackburn were singled out as centres of multiple deprivation.124 For women the position was different but equally grave. Female employment in the mills had served as a powerful means of liberation from the servitude of domestic employment, developing to a higher degree in Lancashire than anywhere else.125 Between 1967 and 1982 the region of the North-west became however the sole region not to register any increase in female employment, in sharp contrast to

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the strong national trend. The female participation-ratio declined more rapidly than in any other region, sinking below the national average from the highest of eleven regions in 1981 to the seventh in 1990.126 In absolute terms total female employment did increase (1983–90), especially in the service sector and upon a parttime basis: exceptionally, in 1993 and 1994, the number of women in employment first surpassed the number of males. The numbers employed in manufacturing sank however by 344,000 (1911–90), by 57 per cent whilst the share of the female labour force employed in manufacturing was halved (1965–90), to 21 per cent. A new source of division emerged between educated and uneducated women. The expansion of higher education supplied female recruits to ‘the caring professions’. Uneducated women on the other hand reverted to domestic pursuits as the opportunities for industrial employment shrank, making an apparently rational choice for single motherhood from a restricted range of opportunities. The proportion of girls leaving school without any qualification thus rose from 1978 to reach the highest level in the kingdom. The rate of live births outside marriage sextupled (1961–91) to 36 per cent, ranking from 1981 as the highest proportion in the UK. The proportion of loneparent households also rose by 1983 to the highest level in the UK. Expenditure per head upon supplementary benefits rose 22-fold between 1968 and 1990, in harmony with the new trend to reach from 1980–81 the highest level in the UK. Thus the region became the cradle of a new breed of womenfolk, divided into three categories. The casualties of economic change eked out an existence in single blessedness. Others made a professional career out of caring for such casualties and so earned double the average salary of the clergy. A third group comprised mature women who were often married and who cared for their aged parents without thought of recompense. The contrast between Lancashire and Kansai is especially marked in the field of demographic history. Between 1891 and 1971 the population of the North-west increased at a rate of only 0.45 per cent or one-fifth of the annual rate of 2.2 per cent simultaneously achieved in the Osaka Prefecture, where population-density had become by 1951 treble that in the North-west. Emigration from the 1920s restricted the rate of growth of population, was renewed during the 1960s127 and affected even ethnic minorities in 1984–89. In the 1950s economists had identified a shortage of labour as the primary constraint upon economic growth: they were utterly confounded by the emergence of a persistent labour-surplus. In 1969 official statisticians forecast that the region’s population would increase by 12 per cent by 1991 to 7.556 millions: in the event it sank by 6 per cent to 6.377 millions. In fact population reached its absolute peak during 1971 and thereafter began to decline. The year 1971 marked a turning-point in the history of the region, which thence forward supplied more migrants than any other region. By 1990 the population had declined by 400,000, or by 5.9 per cent of its level in 1970. The influence exerted by that new trend was both quantitative and qualitative, affecting almost every sphere of life and entailing a recasting of plans for the future. First, it set in motion a slow reduction in the density of population, especially in the cities of Liverpool

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and Manchester. The Central Lancashire New Town, selected in 1964 and approved in 1970, was quietly abandoned in 1986.128 Secondly, migration changed the age-distribution of the remaining population by removing ‘the most active, alert and healthiest from the young age groups’.129 It deprived the region of potential parents, consumers, producers and entrepreneurs. It reduced the size of the most experienced industrial population, who were in the very prime of their working life and who served as a main attraction to inward investment. Thus it tended to increase local reliance upon state aid. Thirdly, it reduced local purchasing-power, rateable values and rateable incomes whilst raising the level of local rates. Paradoxically the stock of dwellings within the region rose (1971–90) by 9.5 per cent and the number of households increased by 12 per cent, because of a sharp fall in the average size of a household. The increased proportion of households dependent upon benefits reduced the taxable base available to local authorities. The county of Cheshire remained a striking exception to the general trend of regional decline. From a congeries of dormitory-suburbs, it was transformed into a busy hive of hi-tech industry and services, especially in Macclesfield, Warrington and Chester. The range of its advantages comprised excellent communications and educational facilities, cheap electric power, co-operative relations between unions and management, highly efficient local government and an attractive rural image. In two important respects it had been a pioneer, acquiring the world’s first industrial estate laid out in 1885 by the Earl of Stamford at Broadheath, Altrincham, to the north of the Bridgewater Canal and the first model garden suburb designed by W.H.Lever in 1888 for his workfolk at Port Sunlight.130 Unlike Lancashire, Cheshire continued to increase its population, its industry and its productivity: it increased its population fourfold as fast as Lancashire (1901–71) and made intensive use of its labour force. As the Surrey of the North, Cheshire attracted the head offices of firms from Manchester and became by 1993 the seat of more of the region’s leading firms than the former Cottonopolis.131 Its industries generated one of the highest levels of value-added in the country, specialising in chemicals, pharmaceuticals, foodstuffs, cars, electronics, fibre optics and robotics. Chester acquired a business park in 1984, developed its financial services and extended its influence deep into North Wales. The county generated one of the highest levels of GDP in the country and paid amongst the highest average wages. Prestbury, ‘the Byzantium of the North’ remained the home of more millionaires per square mile than any other place in the UK.132 At the other end of the spectrum from Cheshire lay Merseyside, the decay of whose economy supplied the sharpest possible contrast between the Victorian era and the later twentieth century. During the 1960s town planning tore the heart out of Liverpool and devitalised the whole community so that it failed to experience even the limited renaissance undergone during the 1980s by Manchester. It became a veritable by word for civic disintegration and for an entrenched incapacity to provide its citizens with minimal subsistence. Its great merchant dynasties were succeeded by a business elite with a small-village mentality, largely impervious to outside advice.133 Merseyside was chosen for two ill-starred ventures in social

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engineering and became the archetype of a branch-plant economy. A new automobile industry was established in 1960: it was intended to serve the markets of Europe and to transform the whole region into a major pole of growth, animated by ‘the white heat’ of modern technology.134 A state-of-the-art textile industry was founded in the new town of Skelmersdale (1967–76). The first venture was a partial failure, the second a complete failure. The local economy remained burdened with high rates, high transport costs, high labour costs, a high degree of unionisation, low educational attainments, low labour productivity and high welfare payments.135 The inhabitants remained addicted to gambling, a propensity induced by ‘the allpervading atmosphere of football pools, greyhounds and horses’.136 They impressed unsympathetic observers as a true lumpenproletariat, cocooned within a siegementality, manifest in a truculent chauvinism. In 1963 its youth had become pioneers of football hooliganism.137 During the winter of discontent in 1979 its grave-diggers had denied burial to the dead. The city remained captive to the collectivist tradition of the past and developed a culture of dependency to the highest degree: it enjoyed the highest rate of long-term unemployment, especially among low-paid manual workers, in the country and the highest rate of mortality as well as the highest level of council tax. With a birth-rate of ‘almost oriental proportions’,138 the city had one of the highest proportions of its population upon income-support, of illegitimacy, of one-parent families and of children in the care of the local authority. By 1991 per capita GDP was one-half that of Hamburg, which had been its great rival in the nineteenth century but which had become the wealthiest city-state in the whole of the EC. The income of Merseyside declined so far below the EC average that it was ranked with Calabria, Sicily and Sardinia as one of the four most deprived areas in Europe. Thus it became eligible for EC charity in the form of successive grants made in 1989 and 1993. During the 1970s and 1980s Liverpool suffered the largest fall in population of any British city. In 1989 the gloomiest of forecasts for any British city projected a continuing decrease in its population until at least the year 2011. The entrenched unfavourable image of the city was further darkened in hue by the pervasive influence of a drugs culture,139 whose global reach embraced Blackpool and Manchester. No coherent strategy to stem the tide of decline in the North-west was devised at either regional or national level. Three obstacles precluded any such action. First, the assimilation of the region into the global network of multinational enterprises effectively removed it from the sphere of influence of any local agency. In any case the channelling of state grants to capital-intensive industry served only to exacerbate the weakness of the regional economy.140 Secondly, the age-old centralisation of government and the indifference of Whitehall to regional interests141 precluded the creation of any separate regional development association, such as was conceded to Scotland in 1975 and to Wales in 1976. Only in 1992 was the NorthWest Regional Association established, the last regional planning conference to be created in England, thirty years after the formation of the first. Thirdly, the internecine rivalry between local authorities was accentuated by the reform of local government areas in 1974 and frustrated every effort at regional co-operation.142 Kansai in contrast

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developed a coherent strategy for economic renewal, even if its orientation, its details and its mode of implementation may be criticised. Lancashire however was transformed from one vast and vibrant enterprise zone into a stagnant economic backwater. Both within the UK and within the EC the region of the North-west experienced a major decline in status. From the 1980s the proportion of its population employed in manufacturing sank below the EC average. From 1982 the North-west ranked fifth out of eleven regions in gross value added in manufacturing industry; by 1989 it also ranked fifth in total employment in manufacturing industry. Its share in the country’s total industrial production declined from 14.4 per cent in 1973 to 12.7 per cent in 1986, recovering to 13.2 per cent in 1990. The share of industry in the region’s GDP sank even more sharply, from 38.0 per cent in 1971 to 28.8 per cent in 1989. The index of GDP per head, as a proportion of national GDP (with the UK=100) declined steadily from 97.6 per cent in 1978 to 90.5 per cent in 1990.143 Per capita GDP in 1977 was second only to that of the South-east but was surpassed between 1977 and 1988 by five other regions, by the East Midlands from 1978, by Scotland from 1979 under the influence of North Sea oil, by East Anglia from 1981, by the South-west from 1982 and by the West Midlands from 1988.144 Thus the North-west came to rank eighth out of eleven regions being ahead of only the North, Northern Ireland and Wales. In 1974 the region suffered a reduction in its parliamentary representation. From 1987 the ominous phrase of ‘the North-South Divide’ came once more into currency. Within the EC league the per capita GDP of the region sank below the EC average in 1985. In 1977 the same criterion ranked the North-west above only twenty-two out of fifty-five regions in the EC and in 1990 above only twenty-four out of 70 regions.145 The region’s strong sense of identity was eroded by the socio-economic changes of the age, by the decay of Nonconformity from 1906, by the decline of the whole gamut of social activity centred around the chapel, by the disintegration of the dense network of voluntary associations, especially the friendly societies after 1911 and the retail co-operative societies after 1960, by the reduced importance of the Whit-walks and the brass band and by the disappearance of the wakes-week as well as of the ‘going-off clubs’ of the mill-towns. Blackpool lost its traditional clientele of mill-workers. Local diet became homogenised, under the influence of package holidays to Mediterranean resorts and of ethnic cuisine, retaining only a vestigial preference for dietary bread and fruit loaves. The historic administrative unity of the county of Lancaster was destroyed by the reforms of 1974. The construction of the trans-Pennine motorway, the M62, opened in 1971, threatened to merge Lancashire with Yorkshire in an ever closer union. Manchester also lost its own historic status as a world-city. In the nineteenth century it had created an enterpriseculture of the first order and had become a ‘cradle of the affluent society.’146 Then the cotton industry was relegated to what Delacroix in 1833 termed ‘the scrap heap of the centuries’ and Trotsky in 1933 ‘the rubbish heap of history’. Manchester became simply a town much like any other: it was denied the status of sub-capital conferred by devolution upon Cardiff and Edinburgh and remained a city in

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desperate search of a role upon the world stage. ‘Manchester has yet to emerge as the Osaka of Britain.’147 The repercussions of the emergence of Tokyo as a world city, 1920–90 The urban hierarchy of the world was transformed by a financial revolution during the economic crises of the 1970s. In the wake of the inauguration of satellite communications in 1965 global financial markets emerged. During the years 1971– 74 an efflorescence of new book-titles seemed to portend the advent of a new ‘global age’, i.e. ‘Global Community’, ‘Global Corporations’, ‘Global Mission’, ‘Global Reach’, ‘Global Power’, ‘Global System’, ‘World System’ and ‘Globalism’. Such phrases seemed to encompass a virtual commercial revolution.148 In fact the transformation of daily life proved to be much more limited than such visionary titles implied, focusing simply upon the main financial markets serving the new multinational enterprises. Three cities emerged at the summit of a new global hierarchy, so reducing the relative importance of all other cities such as Osaka or Manchester (Table 2.3) World cities fulfilled a wide range of functions. The three super-cities stood apart from and above all other levels in the hierarchy by virtue of their monopoly of three interrelated functions.149 They became the centres of the most advanced systems of communication, the suppliers of an unparalleled variety of business services and the most efficient of all financial markets, specialising especially in operations in the field of derivatives. Their operations in the financial sphere achieved that degree of critical mass which eliminated all hope of competition from rivals elsewhere. They became the main beneficiaries by the revolution in information technology and so became potential players in any market whatsoever. Their facilities exerted a magnetic attraction upon all types of business firms. Those three cities became the favoured location for the head offices of major corporations. They also became the headquarters of summit trade and professional associations and of the leading NGOs and IGOs. To their elites they offered the prospect of fortunes beyond the dreams of avarice. Thus they became the preferred destination for shoals of migrants, such as Manchester and Osaka had once been. Tokyo and London therefore ranked with New York as super-cities, serving as nodal centres of the new world economy.150 Tokyo had experienced a population explosion after it replaced Kyoto as the seat of the Emperor: it increased the number of its inhabitants almost fivefold as fast (1870–80) as did the city of Osaka. During the forty years 1880–1920 Tokyo Prefecture increased faster in population than did the Osaka Prefecture. The seven prefectures of Kanto similarly expanded faster than the six prefectures of Kansai. From 1892 Tokyo began, under the impetus provided by Mitsubishi, to develop the business district of Marunouchi in Western style. By 1910 the turnover of the Tokyo Stock Exchange had surpassed that of the Osaka Stock Exchange. The capital had benefited enormously from three successive wars between 1894 and 1918 but became a true primate city, as defined by G.K. Zipf in 1941, only after its

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reconstruction (1923–27) in the wake of the Great Kanto Earthquake. Its population began to expand faster than that of Osaka and mustered by 1930 double that of Osaka, even before the creation in 1932 of Greater Tokyo. The capital became the focus of all national networks of transportation and communication, from the completion of the Tokaido Railway in 1887 to that of the Shinkansen in 1964. Its industrial development benefited from the foundation from the mid-1880s of cotton spinning companies and from the building-up of the largest electrical engineering industry in the country. Its primary functions nevertheless remained political and financial. The prospect of financial favours attracted businessmen to the capital, in the hope of establishing a working relationship with the key ministries of finance and trade. Thus they followed the example set by Mitsubishi in 1874. After the commercial crisis of 1920 Kansai began to face competition from other prefectures. Manufacturing output continued to expand but its rate of growth slumped (1922–47) below that in the rest of Japan, despite three revivals in its share of national output during the years 1927–28, 1932–34 and 1936–37. Nagoya expanded its population (1920–70) almost twice as fast as Osaka City. From 1940 the Kanto region became the leading industrial region of Japan, bringing to an end the historic primacy therein of Kansai.151 From 1960 Tokyo, city and prefecture,152 began to expand in population faster than Osaka, city and prefecture, as the plan for doubling national income was implemented. Tokyo became increasingly a global metropolis and the hub of ‘the largest and densest city-region in the world today’.153 Its financial and commercial functions expanded as it became the preferred location for foreign firms. After 1965 the share of the tertiary sector in the income of the Tokyo Prefecture increased at the expense of the share of manufacturing industry. The new information services gravitated to the capital and expanded their sales aggressively, at the expense of Osaka. Accountants, lawyers, designers and even journalists were also attracted from Osaka to Tokyo. The oil-price shocks of the 1970s left the capital, in contrast to Osaka, virtually unscathed. The business elite of Kansai maintained its strong regional loyalty and favoured a different policy from that elaborated in Tokyo. It believed that Kansai owed its prosperity to private enterprise and to private investment. It became concerned by the apparent partnership forged between bureaucrats and businessmen which has been identified as the core relationship within ‘the capitalist developmental state.’154 It preferred markets to be free from administrative or political manipulation upon non-economic grounds. It believed that State policy had become neglectful and indeed positively harmful to the interests of Kansai. That opinion became widely diffused in Osaka but was discounted elsewhere. Kansai tended to consider itself almost unique in so far as its taxes made a positive contribution to the national budget. Its taxpayers therefore deplored the use of their own tax-revenues to subsidise competitive manufactures elsewhere in Japan. The national government had perforce to adopt a supra-regional perspective in fulfilling its functions and, in any case, controlled a smaller share of GDP than did the British government. Tokyo

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Table 2.3 John Friedmann’s hierarchy of thirty world cities, 1990

Sources: R.J.Johnston, Peter J.Taylor, Michael J.Watts (eds), Geographies of Global Change. Remapping the World in the Late Twentieth Century (Oxford, 1995) 240, citing Friedmann’s own table; UN Demographic Year Book, 1990–94; UN Statistical Year Book, 1990–94, for GDP. Notes: * national capital # major immigration target John Friedmann pioneered from 1966 the formulation of the classical theory of regional growth, based upon the interdependence of heartland and hinterland. From 1986 he elaborated, in functional terms, his theory of world cities. The list of thirty not only excludes Manchester, but also Shanghai, with a population of 8.2 million or 11.5 per cent more than that of Beijing, and Rotterdam with a population of one million and, as the world’s leading seaport, an annual cargo tonnage of 288 m. in 1990. Of the seven states where cities appear in the third class, five had in 1990 an average GDP of $240 b. while Switzerland had one of $491 b. and France one of $1,191 b.

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remained the seat of the largest market in the world, of the most highly developed service industries and of the most innovative manufacturing industries. It fulfilled global as well as national functions, especially in the economic sphere.155 Its business firms undertook the task of corporate restructuring earlier and more effectively than those of Osaka. The magnetic attraction exerted by the megalopolis of Tokyo upon all forty prefectures outside Kanto may well have been exaggerated. The population of Kanto nevertheless expanded some 35 per cent faster (1920–90) than that of Kansai. The population of Tokyo itself increased 80 per cent faster (1920–90) than that of Osaka, which mustered by 1990 only 32 per cent of the population of Tokyo. Osaka was surpassed in population by Yokohama from 1979 and shrank in size by 17 per cent (1965–90). The population of the Osaka Prefecture ceased to increase in number after 1988. The population of Wakayama, city and prefecture, reached a peak level in 1983 as did that of Kyoto City in 1984, after the consumption of silk fabrics declined by 44 per cent (1975–84). By contrast the other three prefectural capitals of Kansai, Nara, Otsu and, above all, Kobe continued to expand their populations.156 A comparable shift occurred in the balance of economic power. Kansai continued to experience a long-term decline in its share of national GDP. Its elite became obsessed by its ranking in the national economic league table. The decline of Osaka was however relative rather than absolute and could not have been prevented, given the immense advantages enjoyed by Tokyo. By 1985 the share of the Tokyo Prefecture alone in GDP had surpassed that of all Kansai, with its six constituent prefectures.157 The disparity appeared irremediable, although per capita income in Osaka City had regularly surpassed that of Tokyo since 1977.158 Perhaps the most significant indicator of all was the Osaka Prefecture’s share of manufacturing production, which had sunk by 1991 to 7.5 per cent or to almost onethird the proportion of 1922. Kansai had identified itself completely with the world of modern industry, with the establishment of technological pre-eminence and with the large-scale export of manufactures to Asia. Osaka aspired to regain its position as ‘the Manchester of the Orient’. The injury to its pride should not be underestimated because the region cherished a deep-rooted sense of its own identity.159 Even its own past achievements tended to be overshadowed by the cultural preeminence of Tokyo. Thus the English-language edition of the Kodansha Encyclopaedia of Japan, published in Tokyo in nine volumes in 1983, made not even a passing reference to Takeo Yamanobe (1851–1920), the founder of the modern Japanese cotton industry, ‘the father of Japanese industry’ and the Arkwright of the modern Orient. The same blinkered vision characterised the Nineteenth Century volume of the Cambridge History of Japan, published after almost twenty years of preparation in 1989.

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Figure 2.2 Takeo Yamanobe (1851–1920) in Manchester in 1879. He served Osaka Spinning Company (Osakabo) for thirty-two years and its successor, Toyo Spinning Company (Toyobo), for two more years, rising to the status of president (1898– 1916). He acquired the technology of cotton spinning and weaving in Lancashire in 1879–80, and became a leading engineer in the modern Japanese cotton industry (Courtesy Boshoku Zasshisha of Osaka, publisher of Yonekichi Uno, Yamanobe Takeo Kun Sho Den (A Short Biography of Mr Takeo Yamanobe), 1918).

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The transition from a manufacturing economy to a service economy In both Lancashire and Kansai the economy became increasingly based upon services rather than upon manufacturing industry. That transition marked the advent of a new phase in the history of economic development.160 The demand for services expanded faster than the demand for manufactures as incomes increased, productivity in industry rose and the working week was shortened. Service industries were by their nature more labour-intensive than manufacturing. This expansion shifted the balance of employment in their favour, especially as the balance of world trade in manufactures shifted from the 1980s in favour of Asia. The reduction in the relative importance of secondary industry within the world economy would not have been expected by observers in the nineteenth century, who believed industrial society to be the ultimate stage in human evolution. Its significance was however grasped by Colin Clark, who undertook a global analysis based upon the tripartite division of economic activity into primary, secondary and tertiary production devised in 1935 by A.G.B.Fisher. In the category of secondary production Clark included mining, building and public works as well as manufacture proper.161 Clark also resurrected Petty’s Law of 1691 which affirmed the superior productivity of tertiary employment. ‘There is much more to be gained by Manufacture than Husbandry and by Merchandise than Manufacture’.162 He emphasised the fundamental peculiarity of tertiary employment in so far as its products, being consumer-oriented, were not normally transportable like the products of primary and secondary activity and did not therefore enter into international trade. That feature was to disappear with the emergence of specialised business services. The transition to a service economy became much more marked in the case of Lancashire than in that of Kansai. In the UK the proportion of the labour force employed in manufacturing industry had reached its peak in the Census of 1851. The proportion of the population employed in tertiary occupations first surpassed that of those employed in manufacturing during the later 1870s.163 In the Northwest the transition occurred some ninety years later, after manufacturing employment reached its all-time historic regional peak in the Census of 1921, fortyfive years before the corresponding national peak in 1966. The process of transition accelerated during the 1980s as regional employment in services expanded (1978– 90) 86 per cent faster than elsewhere in Britain and at a rate surpassed only in East Anglia.164 The region raised the proportion of its firms in the service sector (though not in financial services) above the national average and increased the proportion of its labour force employed in the sector from 50 per cent in 1961 to 67 per cent in 1990, ranking it sixth out of eleven regions.165 Service industries were attracted, as if by a magnet, to prospering capital cities, where they generated rising per capita real incomes. Thus their development reinforced the geographical concentration of population, purchasing power and light industry. Those industries serving producers became even more profitable than

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those serving consumers. Business services expanded their range to comprise commercial information and, above all, financial services. They differed from traditional service industries in so far as their products were intermediate, transportable and highly remunerative. Their explosive growth from the 1970s made them into the fastest growing sector of the world economy. That new trend benefited London even more than Tokyo, reinforcing its dominant national position in office employment and in the use of computers. The power and influence of the City of London was nowhere more closely demonstrated than in its control of financial operations at home and abroad. Its income was undoubtedly enhanced by a steady flow of transfer payments from the rest of the country, including the North-west.166 Its custody of the immense volume of pension funds enabled it to control the venture capital necessary to fund any new initiative. Thus it became able to determine the fate of the historic regions of England.167 Above all, its foreign business became increasingly important, as the domestic economy subsided into stagnation. That sector benefited enormously from the advent of the Eurobond in 1963, from the abolition of exchange controls in 1979, from the creation in 1982 of an international financial futures exchange and, most of all, from the admission of foreign firms in the ‘Big Bang’ of 1986. London developed the world’s largest market in foreign exchange and acquired the world’s largest concentration of foreign banks.168 Its financial services remained unaffected by fluctuations in the value of sterling and became increasingly export-oriented as the information revolution reduced the degree of uncertainty and risk and as the trade in derivatives adapted to a 24-hour cycle of operations. Thus England acquired its own tiger economy in the form of a virtual off-shore financial centre, sited upon the Thames. The GDP of London swelled in value to surpass that of such states as Belgium or Sweden.169 The traditional pattern of what Giffen in 1882 had termed ‘invisible exports’ was transformed as Britain ceased to be the carrier of the world, transferred its trade to foreign flags and became a net exporter of tourist revenue and shipping freights from 1981, and of land-transport revenues and civil-aviation revenues from 1986. The UK acquired a much stronger position in the export of commercial services than in the export of merchandise where as Japan became a net importer of business services and the largest such importer in the world. The service industries developed in the North-west region were quite different from those of the London region and pertained to a lower order. They remained unsophisticated and lacked any export-potential, catering instead for a mass urban market with a preference for leisure rather than work and with a propensity to seek distraction in recreation or in entertainment. The traditional service industries of the region, trade, transportation, distribution and business services, had developed to a higher degree in the North-west than elsewhere.170 The sector was transformed in the twentieth century as new services ousted the old. Thus, employment in transportation, especially on the railways and the docks, declined. Retail trade had served as the traditional palladium of small business and had supplied the very core

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of the service sector. Shopping had become a pastime more highly developed than any where else. By 1932 the region supported four times as many shops per capita as London.171 It had become a fertile seed-bed of innovation, pioneering consumers’ co-operation (1844, the Rochdale Pioneers), direct marketing (1870, John Noble), the mailorder trade (1883, J.D.Williams), the one-price store (1909 F.W. Woolworth), the chain store (1937, Littlewood’s) and from 1950 the six-day shopping week. John Moores (1896–1993) of Liverpool created a retailing conglomerate, expanding from football pools (1924) into mail order (1932), and into chain stores (1937). The number of shopkeepers sank however by 39 per cent (1932–71). Their trade was captured by multiple retailers, especially after the abolition, in 1964, of resale price maintenance. Such supermarkets were controlled from outside the region and often retailed imported goods. Only the Co-operative Wholesale Society, established in 1864, survived, despite a meagre return upon its vast capital, It had undertaken operations abroad since 1876 and transformed itself, especially from 1984–85 into the largest of co-operative retailers. By means of the printed catalogue ‘home shopping’ carried business into houses devoid of any other reading material. Great Universal Stores became the market leader in the field: established in 1900 and expanded by Isaac Wolfson (1897–1991) it became the region’s largest firm but, like Woolworths, had transferred in 1932 its head office to London. New branches of retailing continued to spring up, in order to supply an ever-buoyant demand. The trade in sporting goods was developed by JJB Sports, established in 1983. Computer games captured from 1983 a valuable niche market of the electronics industry for the region. The combination of retail and leisure parks was pioneered from 1985 by Carl Lewis of Chester. The North-west lagged behind Sheffield and Gateshead in the development of an out-of-town shopping centre until John Whittaker secured control of the Manchester Ship Canal Company in 1987 and gained the authority in 1993 to develop the Trafford Centre on the Dumplington Estate. In the sphere of communications the once-influential provincial press disappeared, as Liverpool lost four of its daily papers (1899–1940) and Manchester lost another four (1916–63).172 The Manchester Guardian changed its name in 1959 and moved south to London in 1961–64. Finally, the most popular of all the region’s papers, the Sporting Chronicle (1871–1983) ceased publication. In the sphere of the new mass-media Granada TV became the most successful of all the independent television stations, but had to import all of its talent into the cultural desert of Manchester: it proved unable to compete with the output of the metropolis173 and was driven from 1988 to diversify its operations, becoming in 1995 a conglomerate. In the supply of business services the North-west became increasingly unable to compete with London. It suffered the loss of a complex of quasi-independent institutions, such as banks, insurance companies, stock exchanges, accountants, patent agents and advertising agencies. Lancashire had never developed a stock market comparable to that of London or Osaka. All of the provincial stock exchanges were however absorbed after 1973 by the London Stock Exchange. The

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Figure 2.3 John Whittaker in 1996, the chairman of Peel Holdings plc and the pre-eminent entrepreneur of the Lancashire region (Courtesy Peel Holdings plc).

disappearance of the region’s independent banks had begun during the decade 1888–98 but took seventy years to complete: Manchester lost its last independent

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bank in 1930, Liverpool in 1969. After 1980 the Bankers’ Clearing House ceased to collect and publish data for the provincial bank clearing houses. That loss was never offset by the advent of the financial institutions central to the economy of the late twentieth century. Manchester was slow to follow the example set by Scotland in 1873 in the establishment of an investment trust: the Manchester Trust Ltd (1889– 1921) proved to be short-lived. The city never acquired a merchant bank or any pension-fund managers. Nor did it develop a building-society movement comparable to that of Yorkshire. The region retained from the 1860s only five small-town building societies. Local savings were thus diverted across the Pennines as well as to London, which imported the bulk of the pension funds generated within the region.174 Thus Manchester sank into financial dependence upon the City of London. It lost the head offices of five of its seven insurance companies. It did however, retain the Co-operative Bank (1872) and, above all, the Co-operative Insurance Society (CIS) (1867) which transformed themselves into giant corporations and retained only a vestige of their Owenite origins. Insurance remained the largest employer within the business services sector, reflecting a general retreat from the culture of risk taking. Inevitably, Manchester was surpassed as a financial centre, first by Birmingham in 1982–84, and then by Leeds in the 1990s. In 1904 the CIS had pioneered the introduction of collective or ‘group life’ assurance. The development of the Isle of Man as a tax-haven from 1961 and the expansion of financial services in Chester from the 1980s, represented however, the region’s sole achievements in the supply of modern financial services. In numbers employed in financial services it ranked eleventh out of twelve regions by 1989. Employment expanded in the fields of local government, the social services, the NHS, education, the utilities and in a range of new leisure industries. The expansion of higher education transformed much of central Manchester and Liverpool into education precincts and confirmed the cosmopolitan style of local life but supplied little direct benefit to their neighbourhoods and contrasted sharply with the decline of standards in primary education. Commercialised entertainment had proved highly popular since the inauguration in 1836 of Belle Vue Gardens. Libraries, museums and art galleries proved to be much less attractive than such spectator sports as were provided by the football clubs founded from 1872 onwards. Mass recreation for mill workers was especially catered for from the 1890s by Blackpool. Manchester first introduced into England such spectator-sports as greyhound-racing in 1926 and motor-cycle racing in 1928. The whole pattern of leisure-provision was revolutionised from the 1960s as the holiday resorts of the Mediterranean region, with their guaranteed summer sunshine, proved to be more attractive alternatives to the English seaside town. The expansion of the travel and tourist industries generated revenue for new firms as well as for Manchester Airport. That airport became largely dependent upon tourist traffic as international passenger flights exceeded from 1969 domestic flights, supplying Heathrow with a valuable safetyvalve. Airtours Ltd was founded at Helmshore in 1973 and profited from the central location of Manchester and the rise of the package holiday in order to become a major provider of charter flights to

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Mediterranean resorts. Blackpool was transformed from ‘Oldham by the Sea’ into ‘the Las Vegas of the North’. Despite increasing competition from Benidorm and Palma, it remained Europe’s leading holiday resort in terms of the number of visitors. The revolution in the field of sport was even more important as it became a popular year-round preoccupation. Soccer in particular had become an increasingly obsessive interest since the years 1883–86, when teams from Blackburn won the FA Cup four times in succession. That sport catered to a strong propensity for gambling and spawned from the 1920s the football pools industry. After 1950 it experienced a total transformation as the decline of county cricket (1950–62) was followed by that of local soccer clubs (1959–81), eclipsed by the teams of Liverpool and Manchester. Football became the leading spectator sport and was commercialised as never before. It attracted investment by businessmen in search of status and developed a special appeal to gambling syndicates in Malaysia. Manchester United was founded in 1878 as the works team of the Lancashire & Yorkshire Railway. It developed the closest of ties with its fans and sponsors, pioneering a range of novel publicity techniques. It became the focus of unparalleled global interest by setting an example of sustained excellence and perpetual peak performance. Other business firms failed however, to emulate its inspiring example. As the richest football club in the world, Manchester United aspired to become a trading conglomerate and was floated in 1991 as a limited company. The lure of the profits available from viewing on satellite TV transformed the club into a willing captive of big business. The success of Manchester United in capitalising upon the new global opportunities made a powerful impression upon local councillors. The great discovery made by Manchester was that leisure could offer profitable avenues for investment and could even attract state subsidies, as in the Olympic bids made in 1989 and 1993. Leisure had formerly been ‘the best of all possessions’ to Socrates, the source of wisdom to the author of the Book of Ecclesiasticus, the mother of philosophy to Hobbes in 1651 and an agent of civilisation to Disraeli in 1872. Manchester however, came to realise that leisure could be a business and that sport could generate profit. The city council therefore, pinned its faith for the future upon the leisure trade and especially upon sport, so offering to the local population the pleasure of circuses as well as bread. Finally, clubs and clubbing became part of the region’s night-life as popular music was reborn in Liverpool in the 1960s and born anew in Manchester in close association with the Hacienda Club (1982–97),175 so sharply raising the number of applications to local universities. A new era in the commercialisation of leisure may have dawned with the advent in Bolton in 1996, of the 24-hour society, ‘open all hours’. The multiplication in the number of institutions of higher education inspired Bolton to hope for its very own university. The transmutation of an industrial society into a campus city, suffused by the soul-destroying vulgarity of popular youth culture, would have been wholly unthinkable to acute observers in the nineteenth century.

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The bubble economy in Kansai, 1984–90 In Kansai commerce in all its variety had always supplied the mainstay of daily life. The proportion of the population employed in tertiary occupations was already higher in 1872 than that employed in manufacturing industry, a proportion which impressed Colin Clark in his pioneering comparative study as ‘inexplicably high’.176 The tertiary sector expanded the value of its product until it represented by 1975 more than double the share of manufacturing industry in the NDP of Osaka Prefecture.177 The service industries expanded the number of their employees by 107 per cent (1972–91), so enabling population to continue to increase until 1988 and raising total employment to a peak in 1993. Conversely the proportion of GDP generated by manufacture in the prefecture sank from 1986 below the national average and was surpassed from 1990 by the proportion generated by commerce. Unlike the north-west of England, Kansai preserved a thriving financial sector. That branch of its economy benefited from the entrenchment of the world’s highest propensity to save178 and then from the general ageing of the population. A host of institutions emerged in order to absorb the swelling volume of savings and in turn supplied, through bank credit, the essential support for an expanding economy and export trade. Such bodies included credit associations, credit co-operatives, mutual loan and savings banks, regional banks, trust banks and, above all, city banks which became the recognised leaders of the financial world. Osaka remained the seat of three of the top ten city banks as well as of Nippon Life Assurance, which had been founded in 1889 and had become Japan’s largest life insurance company. It retained the head offices of twelve other banks as well as of 126 agricultural co-operatives. Unlike Manchester, it remained an international financial centre and doubled the number of its branches of foreign banks (1980–87). During the 1980s the business carried on by insurance companies, regional banks, city banks and mutual loan associations expanded markedly. The defining feature of the decade became the boom in urban land values and even more in stock-market quotations. The increase in activity within the tertiary sector took place at the expense of manufacturing industry and reflected a new-born confidence amongst investors. The boom may well have been initiated by government action in liberalising the financial markets after the mid-1970s, by its abolition of restrictions on foreign exchange in the early 1980s by its deregulation of interest rates (1985–93) as the yen doubled in value (1985– 87) on the foreign exchange market and by its maintenance of a lax monetary policy. Another contributory influence may be found in a change in financial policy on the part of business firms. Corporations increased their reliance upon equity finance (1987–89) in preference to bank loans while banks increased their investment in real estate. The rapid rise in land and stock prices so discouraged saving that Japan was surpassed from 1983 by China in its ratio of savings to GNI. The rise in business profits (1986–90) and the inflation of stock prices tempted new investors into the market, in quest of immediate gains, so further accelerating the rise in prices. The stock market had begun to rise during 1984 and rose even faster after the crisis of 1987, a year during which exceptionally

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the Osaka Prefecture increased its share in national GDP. The mania for speculation became increasingly reminiscent of the South Sea Bubble of 1720. During the year 1988 Japan first surpassed the USA in both per capita GNP and per capita GNI.179 The stock market reached its peak on 29 December 1989, at a level fourfold that of 1984.180 The over-expansion of confidence in the future had inspired an ill-fated transformation of a project intended to regenerate Kansai. In 1980 the Osaka Prefecture published its Visions of Osaka Industry in the 1980s, following the example of MITI in 1974 and the failure of the projected littoral industrial zone in Osaka Bay. Therein it analysed the decline of local industry since 1973 and identified the causes in the bias of the economy towards materialprocessing and in its weakness in such growing sectors as the manufacture of automobiles and large computers. Its vision of future trends centred around the internationalisation of the Japanese economy and its reconstitution upon a hi-tech basis, the influence on the labour force of the progressive ageing of the population and the diversification of consumer needs, especially in favour of travel, education and recreation. It therefore recommended that manufacturing industry should be reconstructed upon a knowledge-intensive basis and that ‘daily-life culture industries’ should be promoted. The provisional recommendations included: • the construction of a large international trade centre and a large international airport; • the creation of a variety of information-centres and an R&D institute for future living; • the reconstruction of the whole area of South Osaka upon a hi-tech basis. Such a restructuring of the locality between the new airport and the new Science City on the model of Silicon Valley in California would, it was hoped, fill the void left by the demise of the vast textile industry of Sennan. Both the analysis and the recommendations were positive and sensible. In 1981 the title of the new airport, ‘Kansai International Airport’, was approved, embodying the hope for a greater degree of regional unity. A similar style of title was adopted in the foundation of the Kansai Research Institute in 1986 and the Center for the Industrial Renovation of Kansai in 1987. Unfortunately the original recommendations were progressively inflated after construction of the airport began in 1987 under the influence of two factors. The first was the euphoria induced by the bubble economy. The second was the rivalry between the business elite and bureaucrats of Osaka and their compeers in Tokyo and Nagoya. That elite wished to loosen the grip of the central government upon regional development and to secure the devolution of more fiscal power to the regions. In particular it aspired to rival Nagoya in the automobile and aerospace industries, to compete with Tokyo and Kanagawa in the computer and telecommunication industries and to transform Osaka into ‘the Tokyo of West Japan’. Under such expansive influences the vast Pleiades plan was developed in 1988, embracing eight prefectures. It provided for the future construction of a Kansai Science City spanning three prefectures, with

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nine satellite technopolises and nine new airports and of road and telecommunication networks, linking all of the technopolises, airports and major towns. The cost was to be met by equal contributions from the private, local government and central government sectors. Thus a combination of R&D emerging from the Science City and creating new leading-sector industries, with international exchange channelled through the new airport would, it was hoped, effect the salvation of Osaka, transforming it into a cosmopolitan hi-tech city. The bursting of the bubble precipitated catastrophe, as buyers’ markets were transformed into sellers’ markets. Stock prices had been expected to rise by 10 per cent during 1990,181 in the expectation of a recovery comparable to that following the crisis of 1987. In fact they sank by 48 per cent during the first nine months of 1990. Land prices remained buoyed up by the insistent pressure of population upon living space and continued to rise until March 1991, reaching a level 168 per cent above that of March 1986. The boom had been most intense in two great cities, engulfing Tokyo during 1987 and Osaka during 1988. Speculation had become more rampant in Kansai than elsewhere, infecting the general trading companies, city banks and credit associations. Fuelled by loans from credit associations, speculation in Osaka focused upon derivatives and upon land, raising property prices more than elsewhere. The depression consequently afflicted Osaka even more than the rest of Japan, proving unparalleled in duration, in extent and in severity. During the year 1990 the GDP of Kansai slumped by a full 5 per cent while in Kyoto Prefecture it declined by 6.4 per cent and in Osaka Prefecture by 5.4 per cent but in Aichi Prefecture by only 4.6 per cent and in Hyogo Prefecture by only 4 per cent, a proportion identical to the decline in national GDP.182 The rise in land prices in Tokyo had slowed down after the inflation of 1987–88 and the capital remained relatively immune from the after-effects of the collapse in asset-prices. In Osaka land prices continued to rise until 1990 and began to decline only from 1991 while elsewhere they continued to rise until 1992. They receded much less than stock prices but much more rapidly than the national average and affected especially the market in commercial property. The economy of Osaka remained burdened with a large number of unoccupied buildings, a vast area of unusable land and extensive idle capacity in hi-tech production processes. Above all, the increase in bad debts due to banks and business corporations became the equivalent of an enormous time-bomb. From 1990 bankruptcies began to occur with increasing frequency while financial scandals erupted, involving firms of the highest rank. Banks were most affected as the spread of economic stagnation left Kansai ‘seriously over banked’.183 The financial sector experienced a continuing series of failures and liquidations amongst credit associations and local banks. Ultimately banks were compelled to restrict credit and so increased the pressure upon the small and medium enterprises which generated the very life-blood of the region’s economy. Employment in the service sector in the Osaka Prefecture was maintained until 1994, when it began to decline. In the construction industry employment was maintained through expenditure on public works until 1995.

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The clutch of projects for the redevelopment of Kansai was brought to a halt by the collapse of the bubble economy and by the continuing decline in land prices. The inauguration of the Kansai International Airport in 1994 was followed by that of the Asia Pacific Trade Center in 1994 and of the World Trade Center in 1995. The completion of those projects marked the end of the sustained boom in public works. Unemployment began to increase, affecting first, from 1996, the construction industry which had benefited so much from the boom. The airport embodied its hopes for the future in a cargo-capacity twelvefold that of Manchester and in the construction of a third runway which was scheduled for inauguration in the year 2007, in time for the hoped-for Osaka Olympic Games of 2008. In order to meet the costs of construction the airport was forced however to raise its landing fees to such a level as to discourage its use by major foreign carriers. The airport failed to serve as a pole of growth and as a magnetic attraction to new business, new investment and tourist revenues. All of the associated projects failed to materialise. The World Trade Center proved unable to lease more than 60 per cent of its space and its deficit increased remorselessly.184 Not a single building was ever erected in the planned Cosmopolis of Izumisano. The Izumisano Cosmopolis Corporation established in 1987 became bankrupt and was finally dissolved in 1998. The projected bayside Rinku Town (or Town in Front of the Airport) failed to attract tenants as land prices continued to decline and sites elsewhere earmarked for development remained unsold. The expected regional renaissance failed to occur and the business climate was transformed, restraining the launch of new ventures and especially dampening enthusiasm for large futuristic projects. The Osaka Prefecture was left in the worst financial plight it had known since the war, with debts exceeding three thousand billion yen. Those debts had to be met from a shrinking tax-base, from declining corporate tax-revenues and from a population declining in numbers from 1989. The prefecture was faced with an immense challenge, the prospect of bankruptcy in either the year 2002 or 2003. The importance of regional control over an economy The long-term decline of a great industrial complex will always be a phenomenon of more than local significance. The responses made by the two regions to the challenge of change was inevitably moulded by different cultural traditions. Kansai had been the very heartland of Old Japan, but had also become the cradle of modern industrial Japan, whereas Lancashire had never been part of the British heartland. Both regions developed in divergent modes: Lancashire experienced an industrial revolution while Kansai underwent what Akira Hayami has recognised as a labour-intensive ‘industrious revolution’. Both regions became industrial powerhouses and dominated the world economy, in large part through the creative agency of small and middling enterprises. Kansai however forged ahead of Lancashire from the 1890s, especially on the technical and commercial fronts. For both regions the decade of the 1960s proved to be a watershed in their fortunes. For Lancashire it was the last decade wherein the region controlled its own destiny. For

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Kansai it became a decade of growth and transition, bringing to an end a remarkable era in its long history. From 1955 the index of industrial production in Kanto had exceeded the national average while in Kansai it sank below that average and in the Osaka Prefecture just equalled it. The doubling of the national income within a decade, projected in 1960, was nevertheless achieved in Kansai (as in the rest of Japan), within five years, but within four years by the Osaka Prefecture as well as by the Kanagawa Prefecture. Both regions shifted the basis of their economy from manufacturing to services, a transition which probably benefited the large cities at the expense of the smaller towns. Both regions developed knowledge-based industries and acquired a growing interest in leisure pursuits, sporting activity and the environment. Ecological issues became more important in Kansai than in Lancashire, because the rapidity of economic growth and the concentration of population in vast conurbations had made such issues more acute. Kansai proved much more successful in maintaining the local levels of employment. The operatives displaced from the textile industry were re-employed in other developing firms. Thus population began to decline in the Osaka Prefecture only from 1989, but from 1961 in Lancashire, where big firms controlled from outside, shed jobs upon a very large scale and transferred the social cost to the taxpayers. Manchester was progressively weakened by its distance from the new heartland of the EC and may well have suffered from the concentration of state aid upon Merseyside, which in effect transferred tax revenues from the rest of the region to the area around the Prime Minister’s own constituency.185 The city lost all of the constituent elements of its formerly quasiindependent economy, including the head offices of leading firms which were attracted to nearby Cheshire. Unlike Osaka, it retained the headquarters of only a small number of large companies but it did succeed in attracting Asian importers of textiles as well as Asian clothing manufacturers.186 Kansai retained one great advantage over Lancashire in the revenue generated by the tourist traffic to Kyoto, Nara and Lake Biwa. Kyoto itself remained primarily a political, religious and educational centre, as the cultural capital of the country, and as a unique combination of Athens, Florence and Paris. The north-west of England in contrast, contained only two tourist attractions, Blackpool for the masses and Chester for the elite. Osaka moreover remained the commercial heart of Japan, especially in the wholesale trade, and ranked second only to Tokyo in economic importance, despite having been surpassed in the size of its population by Yokohama. In both regions the range of sub-regional variation remained immense. In Kansai the contrast remained enormous between its three great cities, between the three commercial prefectures of Osaka, Hyogo and Kyoto, and the three semirural prefectures of Shiga, Nara and Wakayama, and between the large factories of Kobe City and Shiga Prefecture and the small and medium-sized enterprises of Osaka and Koyoto. The best of both worlds was enjoyed by Kyoto. That city retained its high-class craft industries and its high-class retail trade, but had also become since 1945 a modern industrial city, specialising in precision engineering, bio-technology and hi-tech electrical equipment. In the north-west of England the

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contrast remained marked between east and west Cheshire, between east and west Lancashire, between north and south Lancashire, between the large conurbations and the smaller towns and between Liverpool and Manchester. The contrast between prosperous Cheshire and industrial Lancashire was age-old but sharpened after 1911, and even more after 1961 as town-planners devastated the centre of Liverpool but were excluded from Chester’s historic Rows and from its 400 listed buildings. Increasingly Cheshire became the new heartland of the whole region, profiting especially from its proximity to the motorways and to the airport. The contrast between Liverpool and Manchester had always been great, but deepened into a vast gulf during the decade of Militant’s influence over the town council (1983–92). Liverpool acquired the very worst of reputations, both at home and abroad: it never acquired small businesses in sufficient numbers to counterbalance its giant foreign firms and it never regained its status as a world port, unlike Kobe. At the other end of the spectrum from both Liverpool and Kyoto, Kobe remained a thriving and cosmopolitan port. It had been rejected in 1974 as the site for the new airport, but it expanded its trade anew from 1976 and became increasingly an international as well as a national port. It surpassed Yokohama in the value of its imports in 1993 and increased its share of exports (1987–92) as well as of imports (1991–94). By 1990 Kobe mustered treble the population of Liverpool and handled sevenfold its tonnage, ranking as the world’s third seaport after Rotterdam and Singapore.187 Its population had increased faster than that of any other city in Japan (1870–1994) and twice as fast as that of Tokyo.188 Both its history and its prospects provided a broad beam of hope for the future of Kansai. Acknowledgements The authors gratefully acknowledge the helpful comments made upon early drafts of this chapter by Professors Clive H.Lee, David J.Jeremy and Takeshi Abe. Sections of the chapter have been read by Professors Tetsuya Kuwahara and Kenneth D.Warren, whose critical comments have helped greatly to improve the text. We are especially indebted to Mrs Hanne T.Gardner and Professor Takeshi Abe not only for their constructive suggestions but also for their generous supply of relevant data. A fundamental British source for this chapter is the invaluable compendium of employment statistics published by Clive Lee in 1979, and cited in note 33. Professor Lee’s statistics have been supplemented by those published in Regional Trends (1965–98). The extensive Japanese statistics have most helpfully been made available by Professor Takeshi Abe. Notes The place of publication of all English language sources cited is London, unless otherwise indicated.

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1 Colin Clark, The Conditions of Economic Progress (second edition, 1951), viii. 2 J.R.Huber, ‘Effect on Prices of Japan’s Entry into World Commerce after 1858’, Journal of Political Economy, 79, 1971, 614–28. 3 A.Michie, The Englishman in China during the Victorian Era as Illustrated in the Career of Sir Rutherford Alcock (Edinburgh, 1900), ii, 84. D.A.Farnie, East and West of Suez. The Suez Canal in History, 1854–1956 (Oxford, 1969), 193–4, citing the onceinfluential interpretation of Egerton H.Norman (1909–57). 4 Tetsuro Nakaoka, ‘From Shipbuilding to Automobile Manufacturing’ in The Introduction of Modern Science and Technology to Turkey and Japan. International Symposium 1996 (Kyoto International Research Centre for Japanese Studies, 1996), 37, 46, 54. 5 Tetsuro Nakaoka et al (eds), Kindai Nippon no Gijutsu to Gijutsu Seisaku [Technology and Technology Policy in Modern Japan] (Tokyo, 1986), 214. 6 Jane Jacobs, Cities and the Wealth of Nations. Principles of Economic Life (New York, 1985), 29, 32. 7 J.E.Orchard, Japan’s Economic Position. The Progress of Industrialisation (New York, 1930), 137. C.E.Montague, A Hind Let Loose (1910), 3. Glenn T.Trewartha, Japan, A Geography (1965), 518, described Osaka, with its 1,300 bridges, as ‘a veritable Venice, but a smoky, grimy one.’ The city was also called ‘the Metropolis of Water’ until the 1950s. 8 Jane Jacobs, op. cit, 57. 9 A.Shadwell, Industrial Efficiency. A Comparative Study (1906), 1,227. Maxine Berg, A Woman in History. Eileen Power 1889–1940 (Cambridge, 1996), 104, 30 July 1921. 10 L.S.Marshall, ‘The Emergence of the First Industrial City: Manchester, 1780– 1850’ in Caroline F.Ware (ed), The Cultural Approach to History (New York, 1940), 140–61. Peter Hall, Cities in Civilisation (1998). Asa Briggs, Victorian Cities (1963), 92. 11 Kelly’s Directory of Manchester and Salford, 1899, 809. Slater’s Directory of Manchester, 1906, 1712. J.Warrilow Ltd, Review of Commerce (Manchester, 1915), 81–82. The Kansai Trading Company was listed in directories from 1899 to 1901 but disappeared in 1902. 12 M.T.Hodgen, Change and History: A Study of the Dated Distributions of Technological Innovations in England (New York, Viking Fund Publications in Anthropology 18, 1952), 217, 233, based upon the Victoria County Histories. 13 J.E.Orchard, op. cit., 284–5. 14 W.B.Hauser, Economic Institutional Change in Tokugawa Japan. Osaka and the Kinai Cotton Trade (Cambridge, 1974), 15. A.P.Wadsworth and Julia de Lacy Mann, The CottonTrade and Industrial Lancashire 1600–1780 (Manchester, 1931), 509. 15 W.B.Hauser, op. cit., 37. 16 Alan Macfarlane, ‘Some Comparisons of England and Japan’ in Penelope Gouk (ed), Wellsprings of Achievement, Cultural and Economic Dynamics in Early Modern England and Japan (Aldershot 1995), 201–20. Alan Macfarlane ‘On Individualism’, Proceedings of the British Academy, 82, 1992, 182–99. 17 Matao Miyamoto, ‘The Management Systems of Edo Period Merchant Houses’. Japanese Yearbook on Business History, 13, 1996, 131–2. 18 Matao Miyamoto, ‘Emergence of National Market and Commercial Activities in Tokugawa Japan, with special reference to the Development of the Rice Market’, Osaka Economic Papers, 36, I, Sept 1986, 301–7. W.B.Hauser, op. cit., 80.

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19 W.D.Hoover, ‘Godai Tomoatsu (1836–85). An Economic Statesman of Early Meiji Japan’ (University of Michigan PhD thesis, 1973), 144–16. 20 W.E.A.Axon, Lancashire Gleanings, (Manchester, 1883), 177–79, ‘Lancashire Beyond the Sea’. 21 W.H.Mills, ‘Manchester of Today’, in H.M.McKechnie (ed), Manchester in 1915 (Manchester, 1915), 9. 22 Henry Shaw, Manchester Pioneers of the Cross (Manchester, 1907). 23 D.Read, The English Provinces, c.1760–1960. A Study in Influence (1964), 228. 24 Janet Hunter (ed) Concise Dictionary of Modern Japanese History (Berkeley, 1984), 217. 25 W.B.Hauser, op. cit., 60. 26 B.G.Orchard, Liverpool’s Legion of Honour (Birkenhead, 1893), 32. 27 W.D.Rubinstein, Men of Property (1981), 131. 28 J.E.Orchard, op. cit, 148. 29 Tetsuro Nakaoka, op. cit. (1996), 43. Olive Checkland, Britain’s Encounter with Meiji Japan, 1868–1912 (1989), 49. The Engineer, 83, 19 March 1897, 283, ‘Locomotive Building and Purchasing’. 30 Bureau of the Minister of Agriculture and Commerce, Kojo Tokeihyo [Census of Factories], 1909. 31 J.E.Orchard, op. cit, 148–51, 446. 32 P.Gaskell, The Manufacturing Population of England (1833), 229. 33 C.H.Lee, British Regional Employment Statistics, 1841–1971 (Cambridge, 1979). 34 C.H.Lee, The British Economy since 1700 (Cambridge, 1986), 131. W.D Rubinstein, ‘Cultural Explanations for Britain’s Economic Decline: How True?’ in B.Collins and K.Robbins (eds), British Culture and Economic Decline (1990), 65–67. 35 S.D.Chapman, ‘The Commercial Sector’ in M.B.Rose (ed), The Lancashire Cotton Industry (Preston, 1996), 72–73. 36 R.W.Emerson, English Traits (1856), 194. A.W.Silver, Manchester Men and Indian Cotton, 1847–72 (Manchester, 1966), 82–84. 37 C.H.Feinstein, Statistical Tables of National Income,ExpenditureandOutput of the U.K., 1855–1965 (Cambridge, 1972) T4. 38 C.H.Lee, ‘Regional Growth and Structural Change in Victorian Britain’, Economic History Review, Second Series, 34, 3, Aug 1981, 439. 39 A.Shadwell, op. cit, I, 58. 40 C.H.Lee, ‘Regional Structural Change in the Long Run: Great Britain 1841– 1971’ in S.Pollard (ed), Region und Industrialisierung (Göttingen, 1980), 267. 41 C.H.Feinstein, op. cit., T8, T31, T33. 42 H.J.Mackinder, Britain and the British Isles (Oxford, 1906, 1925), 258, ‘Metropolitan England’. 43 Manchester Guardian, 10 August 1868, 3iii, M.E.Grant Duff. 44 Manchester Guardian Commercial, 23 Feb, 1922, 289, Samuel Lamb. W.H.Mills, Trafford Park (Manchester, 1921), 12. 45 C.H.Lee, Regional Economic Growth in the U.K. since the 1880s (1971), 245. 46 R.Martin, ‘The Political Economy of Britain’s North-South Divide’, Transactions of the Institute of British Geographers, New Series, 13:4, 1988, 392, 400. 47 Kenji Ishii, Wasen [Japanese Traditional Ships] (Tokyo, 1995), 114–18. Kenji Imazu ‘Coal Transportation to Industrial Area’ in O.Saito and Y.Yasuba (eds), Puroto-

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59 60 61 62

63 64 65 66

Kogyokaki no Keizai toShakai [Society and the Economy in Japan’s ProtoIndustrialization] (Tokyo, 1983). Jun Suzuki, Meiji no Kikaikogyo [The Machinery Manufacture in Meiji] (Kyoto, 1996), 52–53, 60. Tomoo Kanda (ed), Osaka Shosen Kabushikaisha 50 Nenshi [Fifty Years History of Osaka Shosen Kaisha] (Osaka, 1934), 5. Tetsuro Nakaoka, ‘The Transfer of Cotton Manufacturing Technology from Britain to Japan’ in D.J.Jeremy (ed), International Technology Transfer. Europe, Japan and the U.S.A., 1700–1914 (Aldershot, 1991), 186. Matao Miyamoto, ‘The Products and Market Strategies of the Osaka Cotton Spinning Company: 1883–1914’, Japanese Yearbook on Business History 5, 1988, 118. Tetsuro Nakaoka, op. cit. (1991), 191. T.Kanda (ed), op. cit, 41–46. Tetsuro Nakaoka ‘From Shipbuilding to Automobile Manufacturing’, op. cit. (1996), 39–47. Olive Checkland, op. cit, 70. Amagasaki City, Amagasaki Shi-shi [A History of Amagasaki City], vol 3 (Amagasaki, 1970), 270–73. Osaka-fu Tokeisho Meiji 26nen [Book of Statistics on Osaka Prefecture 1893] (Osaka, 1894). Ibid; Meiji 27nen [1894] (Osaka, 1895). Ministry of Agriculture and Commerce: Noshomu Tokeihyo: 12-ji [12th Statistical Book on Agriculture and Commerce] (Tokyo, 1897). Osaka Shakaiundo Kyokai (eds), Osaka Shakai-rodo Undoshi [A History of Socio-Labour Movement in Osaka] vol 1 (Osaka, 1986), 34, 85, 165– 67. Meiji-Taisho Osaka-shi-shi [The History of the City of Osaka during the Meiji and Taisho Period] (Osaka, 1933), ii, 118–21. J.E.Orchard, op. cit., 16. Tetsuro Nakaoka, ‘From Shipbuilding to Automobile Manufacturing’, op. cit., (1996), 50–52. Minoru Sawai, Nippon Tetsudosharyo Kogyo-shi [A History of the Japanese Rolling Stock Industry] (Tokyo, 1998), 55–66. Gotaro Ogawa, The Effect of the World War upon the Commerce and Industry of Japan (New Haven, 1929), 266–67. Nippon Boeki Seiran [The Trade of Japan: a Statistical Review] (Tokyo, 1935), 330. Kaoru Sugihara and Kingo Tamai (eds), Taisho, Osaka, Suram [Taisho, Osaka and the Slums] (Tokyo, 1986). Osaka Shakaiundo Kyokai, op. cit, 397–408, 515–22. Kojo Tokeihyo [The Census of Factories] 1929 (Tokyo, 1930). Takeshi Abe and Osamu Saito, ‘From Putting-out to the Factory: A Cotton-Weaving District in Late-Meiji Japan’, Textile History, 9:2, 1988, 143–58. Takeshi Abe, ‘The Development of the Producing-Center CottonTextile Industry in Japan between the Two World Wars’, Japanese Yearbook on Business History, 9, 1992, 3–27. Trans-Pacific (Tokyo), 21, 30 Nov 1933, 21, ‘Japan takes Lead in Bicycle Export’. Kawasaki Jukogyo [Kawasaki Heavy Industries], Gifukojo 50nen-shi [Fifty Years’ History of Gifu-factory] (Kakamigahara, 1987), 17–42. Colin Clark, The Conditions of Economic Progress (1940), 125. Ibid. (third edn, 1957) 618, 623. W.A.Lewis, Economic Survey 1919–39 (1949). Tsusho Sangyo Daijin Kanbo Chosa Tokei Bu (ed), Kogyo Tokei 50 Nen Shi Shiryo Hen 1 [Fifty Years’ History of the Census of Industries vol. 1], (1961). J.E.Orchard, op. cit., 15, 136. The first citation of the oft-repeated phrase ‘the Manchester of the Orient’ remains to be located.

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67 Takafusa Nakamura, Lectures on Modern Japanese Economic History 1926–94 (Tokyo, 1994), 125–28. 68 Tetsuro Nakaoka, ‘Production Management in Japan before the Period of High Economic Growth’, Osaka City University, Economic Review 17, 1981, 18–19. 69 Kiyoji Murata and Isamu Ota (eds), An Industrial Geography of Japan (1980), 85, J. Fujimori, ‘Hanshin Region’. 70 Yasuo Okamoto, Hitachi to Matsushita [Hitachi and Matsushita] (Tokyo, 1979), ii, 17. Atsushi Hiramoto, Nippon no Terebi Sangyo [The Japanese Television Industry] (Kyoto, 1994), 55, 79, 114. 71 Osaka Shakaiundo Kyokai, op. cit. (1994,1996), vols 5 and 6. 72 Richard West, An English Journey (1981), 164. 73 D.J.Jeremy, ‘Osaka seen from Manchester in the 1920s and 1930s: Two Cotton Industries Compared,’ Osaka Keidai Ronshu 47:6, March 1997, 133. 74 T.W.Freeman, H.B.Rodgers and R.H.Kinvig, Lancashire, Cheshire and the Isle of Man (1966), 288, H.B.Rodgers. 75 Nippon Kanzei Kyokai [Japan Tariff Association] (eds), Gaikoku Boeki Gaikyo 1960– 94 [A Summary Report of the Trade of Japan]. 76 Osaka Shiritsu Daigaku Keizai Kenkyujo [Institute for Economic Research, Osaka City University] (eds), Deta de miru Osaka Keizai 60 Nen [60 Years of the Osaka Economy in Statistics] (Tokyo, 1989), 182. 77 A translation of B.Bowker, Lancashire under the Hammer (1928, 127 pp) under the title of Rankasha no Ayunda Michi [The Route Taken by Lancashire] by Toyosaburo Taniguchi (Osaka, 1956, 208 pp) with an introduction of 21 pp and a sixty-two-page appendix, including a lecture given in 1955 to the Osaka branch of the Bank of Japan entitled ‘The British Cotton Industry and the Japanese Cotton Industry’, five graphs and thirty pages of statistics. 78 K.Murata and I.Ota (eds), op. cit, 178. 79 Ibid., 186. 80 Keizai Kikaku-cho Keizai Kenkyujo (ed), Kenmin Shotoku Tokei, Showa 30–46 Nendo [Economic Research Institute, Economic Planning Agency (ed), Prefectural Accounts, 1955–1971, Fiscal Year] (Tokyo, 1974). 81 Osaka Prefecture (ed), Heisei 6 Nen Fumin Keizai Keisan [Osaka’s Prefectural Economic Account in 1994] (Osaka). 82 Osaka Shiritsu Daigaku Keizai Kenkyujo (eds), op. cit., 87. 83 K.Murata and I.Ota (eds), op. cit., 90. 84 Osaka Prefecture (ed), Osaka-fuTokeiNenkan [Statistical Yearbook of OsakaPrefecture] (Osaka). Nippon Tokei Kyokai [Japan Statistical Association] (eds), Nippon Choki Tokei Soran [Historical Statistics of Japan], vol 1 (Tokyo, 1987). 85 Kaoru Sugihara, ‘Japan, the Middle East and the World Economy: a Note on the Oil Triangle’, Japan Forum, 4:1, April 1992, 21–31. Tetsuro Nakaoka, ‘Changes in the Attitude of Major Japanese Corporations towards R&D’, idem, 121–22. 86 Osaka Shiritsu Daigaku Keizai Kenkyujo (eds), op. cit, 87. 87 Osaka Prefecture (ed), Heisei 6 Nen Fumin Keizai Keisan, op. cit. 88 Nippon Kanzei Kyokai (eds), op. cit. 89 K.Murata and I.Ota (eds), op. cit., 183–84, 187–88. 90 Tetsuro Nakaoka, ‘The Decline of Osaka’s Economy and the Regional Policies to Counteract it’ (Osaka University of Economics, mimeo, 1992), 28–30. 91 U.N. Statistical Year Book (1982), 109, 111.

74 DOUGLAS A.FARNIE AND TETSURO NAKAOKA

92 L.Needleman (ed), Regional Analysis: Selected Readings (Harmondsworth, 1968). G. McCrone, Regional Policy in Britain (1969). C.H.Lee, Regional Economic Growth in the U.K. since the 1880s (1971). H.W.Richardson, Regional Economics (1969), Regional Growth Theory (1972). A.J.Brown, The Framework of Regional Economics in the U.K. (Cambridge, 1972). S.Holland, Capital versus the Regions (1976). S.Holland, The Regional Problem (1976). C.M.Law, British Regional Development since World War I (1980). K.R.Manners and K.Warren, Regional Development in Britain (Newton Abbot, 1980). 93 R.Bacon and W.A.Eltis, Britain’s Economic Problem: Too Few Producers (1976). 94 The Verband Deutscher Maschinen- und Anlagenbau (VDMA) had replaced the UK by Japan after 1979 in its annual Statistisches Handbuch für den Maschinenbau but steadfastly refused throughout the 1980s to recognise the superiority of Japan to Germany in its exports of machinery. 95 J.E.Orchard, op. cit., 161. 96 P.M.Townroe, ‘Branch Plants and Regional Development’, Town Planning Review 46:i, Jan 1975, 47–62. G.Gudgin, ‘Regional Problems and Policy in the United Kingdom’, Oxford Review of Economic Policy, 11:2, 1995, 45. 97 R.I.D.Harris, The Growth and Structure of the U.K. Regional Economy, 1963–85 (Aldershot, 1989), 43–45, 164, 197, 239. 98 Ibid., 94. 99 Ibid., 38. 100 Ibid., 82. 101 Ibid., 31–32. 102 J.S.Wabe, ‘The Regional Impact of De-Industrialisation in the European Community’, Regional Studies, 20:i, Feb. 1986, 32. 103 A.J.Brown, The Framework of Regional Economics in the U.K. (Cambridge, 1972), 160– 63, 323. 104 North West Business Insider, Sept 1992, 44. 105 Edwin Hammond, An Analysis of Regional Economic and Social Statistics (Durham, second edition, 1968), Table 5.1.2., ‘Main causes of death, 1962–4’. 106 George Moore, Evelyn Innes (1898), 122. Marcus Cunliffe, ‘Life in the Industrial North’, Encounter, 19:6, Dec 1962, 17; 20:4, May 1963, 70–71, reviewing C.F.Carter (ed). Manchester and its Region (British Association, 1962). The author was Professor of American History (1960–64) in the University of Manchester. 107 G.Moorhouse, Britain in the Sixties (Harmondsworth, 1964), 115. 108 Whitaker Bibliographic Services, Whitaker’s Books in Print. The Reference Catalogue of Current Literature 1997, 5 vols. 109 North West Business Insider, June 1998, 26; J.F.Wilson, ‘The Manchester Experiment’: a History of Manchester Business School, 1965–90 (1992). 110 North West Business Insider, Nov, 1992, 16, 19; July 1993, 10–12. 111 Ibid., Nov 1992, 6; Nov 1993, 24. 112 Ibid, Nov 1992, 6; April 1995, 13. 113 David Jeremy and Geoffrey Tweedale, Dictionary of Twentieth Century British Business Leaders (1994), 195. 114 J.Lovering, ‘The Changing Geography of the Military Industry in Britain’, Regional Studies, 25:4, July 1991, 279–93. 115 North West Business Insider, Oct 1992, 6–11. 116 Ibid., Nov 1992, 10.

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117 118 119 120 121 122 123 124

125 126 127 128 129 130

131 132

133 134 135

136 137 138 139 140 141 142 143 144 145 146 147 148

R.I.D.Harris, op. cit, 30. A.J.Brown, op. cit., 58–60. North West Business Insider, May 1998, 16–21. Osaka Shiritsu Daigaki Keizai Kenkyujo (eds), op. cit, 198. Viv Caruana and Colin Simmons, ‘Municipal Enterprise in Pursuit of Profit: Manchester Airport, 1945–78’, Manchester Region History Review 10, 1996, 62–69. R.W.Vickerman, ‘The Channel Tunnel: Consequences for Regional Growth and Development’, Regional Studies, 21:3, June 1987, 190. Paul Barker, ‘Europe’s Merseyside’, New Society, 46, 14 Dec 1978, 623. North West Business Insider, Nov 1992, 20. Peter Townsend, Poverty in the United Kingdom. A Survey of Household Resources and Standards of Living (Harmondsworth, 1979), 284, 951–52. A.G.Champion, Contemporary Britain: a Geographical Perspective (1990). A.J.Brown, op. cit, 56, 210–11. Regional Trends, 30, 1995, 79. Ibid., 6. 1971. 9. North West Business Insider, June 1991, 10–13. R.M.Titmuss, Poverty and Population. A Factual Study of Contemporary Social Waste (1938), 288. M.Nevell, The Archaeology of Trafford (Trafford, 1997), 126. David J.Jeremy, ‘The Enlightened Paternalist in Action: William Hesketh Lever at Port Sunlight before 1914; Business History, 33, Jan 1991, 336–43. North West Business Insider Jan 1994, 10–11. S.S.Montefiore, ‘State of the Nation’, Sunday Times Style Supplement, 1 Oct 1995, 8. G. Turner, The North Country (1967), 51–59, ‘Prestbury’. North West Business Insider, Dec 1991, 62. North West Business Insider, Sept 1991, 5; Sept 1993, 20–22; Nov 1993, 8; June 1995, 24– 26. C.P.Snow (1905–80), the true heir of H.G.Wells, drafted the famous passage in the speech made by Harold Wilson at Scarborough on 1 October 1963. P.Stoney, ‘Charting G.D.P. and Productivity in Merseyside, the NorthWest and the U.K. 1979–87’, Merseyside Economic and Business Prospect, Liverpool Macro-Economic Research Ltd, 5: I, May 1990, 42–45. P.Minford, P.Stoney, J.Riley and B.Webb, ‘An Econometric Model of Merseyside: Validation and Policy Simulations’, Regional Studies, 28:6, Sept 1994, 564–65. The Pilgrim Trust, Men Without Work (1938), 98, 124. G.Moorhouse, op. cit, 135. H.B.Rodgers, op. cit., 153. North West Business Insider, Aug 1997, 15–17. A.J.Brown, op. cit, 311. R.I.D.Harris, op. cit, 245–46. E.Hammond, op. cit. 13. North West Business Insider, July 1993, 10–12; Nov 1993, 8–10. Regional Trends, 17, 1982, 146; 27, 1992, 133. Ibid., 17, 1982, 146; 30, 1995, 164. Ibid., 28, 1993, 31. M.Muggeridge, Chronicles of Wasted Time, Part 1, The Green Stick (1972), 203. The Guardian, 25 June 1996, 29, Martyn Halsall, ‘Grim Lessons in this Tale of Two Cities’, a reference for which we remain indebted to Dr Geoffrey Tweedale. Theodore Levitt, ‘The Globalisation of Markets’, Harvard Business Review (1983).

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149 R.J.Johnston, P.J.Taylor, M.J.Watts (eds), Geographies of Global Change. Remapping the World in the Late Twentieth Century (Oxford, 1995), 236–41. 150 Peter Dicken, Global Shift. Industrial Change in a Turbulent World (third edition, 1998), 413. 151 K.Murata and I.Ota, op. cit., 51. 152 Osaka-fuTokei Nenkan, op. cit. Tokyo Prefecture (ed), Tokyo-to Tokei Nenkan [Statistical Yearbook of Tokyo Prefecture] (Tokyo). 153 Jane Jacobs, op. cit., 45. 154 Chalmers A.Johnson, MITl and the Japanese Miracle. The Growth of Industrial Policy 1925–1975 (Stanford, 1982). 155 R.J.Johnston, op. cit, 238–40. 156 Nippon Choki Tokei Soran, op. cit, vol 1. Dai Toshi Tokei Kyogi-Kai (ed), Dai Toshi Hikaku Tokei Nempyo [Statistical Tables for Comparison among the Main Japanese Cities] (Tokyo, 1997). 157 Keizai Kikaku-cho Keizai Kenkyujo (ed), Kenmin Keizai Keisan Nempo Heisei 5 Nen Ban [Annual Report on Prefectural Accounts, 1993] (Tokyo, 1993). Nippon Ginko Chosa Tokei-kyoku (ed), Keizai Tokei Nempo Heisei 7 Nen [Bank of Japan, Research and Statistics Department (ed), Economic Statistics Annual, 1995] (Tokyo, 1996). 158 Osaka Shiritsu Daigaku Keizai Kenkyujo (eds), op. cit, 28. 159 G.T.Kurian, The Illustrated Book of World Rankings (Armonk, New York, 1997), 373– 76. 160 P.Dicken, op. cit, 283–315, ‘Textiles and Clothing’. Michael Carr, New Patterns: Process and Change in Human Geography (1997), 269, ‘Relative Decline of Manufacturing’. C.H.Lee, ‘The Service Sector, Regional Specialisation and Economic Growth in the Victorian Economy’, Journal of Historical Geography, 10:2, 1984, 139– 55. 161 C.Clark, op. cit. (first edition, 1940), 182, 337. 162 Ibid., 176. 163 Ibid., 187. 164 K.Button and E.Pentecost, ‘Regional Service Sector Convergence’, Regional Studies, 27: 7, 1993 ii, 627. 165 Regional Trends 28, 1993, 31. 166 A.J.Brown, op. cit., 61–67. 167 R.Martin, ‘The Growth and Geographical Anatomy of Venture Capital in the U.K.; Regional Studies, 23:5, Oct 1989, 395–401. 168 P.Dicken, op. cit., 416. 169 Sunday Telegraph, 12 Oct 1997, B5, ‘The Golden City’. 170 E.Hammond, op. cit., Table 2.1.6, ‘Services’. 171 P.E.P. Planning 7, 18 July 1933, 9. Abstract of Regional Statistics, 172 North West Business Insider, Dec 1991, 28–30. 173 Ibid., Dec 1991, 64, Phil Redmond. 174 D.G.McKillop and R.W.Hutchinson, ‘Financial Intermediaries and Financial Markets: a United Kingdom Regional Perspective’, Regional Studies, 25:6, Dec 1991, 547–49. R.Martin and R.Minns, ‘Undermining the Financial Basis of Regions: the Spatial Structure and Implications of the U.K. Pension Fund System’, ibid., 29:2, Feb 1995, 134. 175 North West Business Insider, Feb 1993, 14–15. Financial Times, 19 Feb 1998, Reporting the Regions Supplement, 5, Patrick Harverson, ‘Manchester. Sport is Key

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176 177 178 179 180

181 182 183 184 185 186

187 188

to Regeneration’. Leon Kreitzman, ‘The 24-hour Society’, Sunday Times, 14 Feb 1999. C.Clark, op. cit. (1940), 182, 192–93, 373. Osaka Shiritsu Daigaku Keizai Kenkyujo (eds), op. cit, 43. C.Clark, op. cit., 13. World Bank, World Tables 1995 (Baltimore, 1995), 5, 9, Tables 1 and 2, measuring income in 1987 US dollars. Takamitsu Sawa, Heisei Kyoko no Seiji Keizagaku [The Political Economy of the Heisei Depression] (Tokyo, 1994). Giichi Miyazaki, Fukugo Fukyo [The Double Depression] (Tokyo, 1992). Asahi Shimbun, 30 Dec 1989, citing a forecast current amongst traders on the stock market. Keizai Kikaku-cho Keizai Kenkyujo (ed), op. cit. (1993). Nippon Ginko Chosa Tokeikyoku (ed), op. cit. Financial Times, 8 Oct 1997, Survey of Kansai, 4, C.Smith. Asahi Shimbun, 4 Sept 1997. Harold Wilson (1916–95) was MP for Huyton from 1950 to 1983. Shirley Skeel, ‘Asian Majors’, Management Today, Sept 1990, 56–62. Eastern Eye, Britain’s Richest Asian 200 1998, the second of two annual surveys compiled by Dr Philip Beresford. Panorama of EU Industry 97 (Brussels, 1997), ii, 23–67. B.R.Mitchell, International Historical Statistics Africa, Asia and Oceania 1750–1993 (third edition, 1998), 41, 43.

3 Comparisons between the development of big business in the north-west of England and in Osaka, 1900–1990s David J.Jeremy1, Takeshi Abe, Jun Sasaki

Businesses, as the basic units of industrial activity, have been collectively instrumental in powering the economic performance of any modern capitalist economy. The breakdown of regional markets in the nineteenth century and the geographical spread of business enterprise naturally diminished the reliance of any single business upon its regional base and, conversely, the reliance of any single region upon relatively few businesses. On the other hand, the concentration of industry in the twentieth century has allowed a fewer number of firms to dominate many regions in the UK, as retailing illustrates. What follows is an attempt to expose the nature of the relationship between big businesses, more precisely big employers, and the regions over the course of the twentieth century, the age of giant firms. The two regions under scrutiny have had a similar and finite reliance on cotton textiles (as outlined in Chapters 1 and 2). So one aim of this exercise was to try to discover how quickly and in what directions entrepreneurs and firms took their region into new industries and markets. The bulk of the research centres on the firms identified as largest employers, as measured by employees within the region. Their names and sizes are recorded in Tables 3.10 and 3.11 and summarised in Tables 3.1 to 3.9. Many questions are left unanswered. However, it is hoped that the groundwork laid here will lead to other work on regional business behaviour. Size of firm In comparing the sizes of the fifty largest (by regional employment measure) companies in the North-west and Osaka (hereafter NW50 and Osaka50), several things are clear. First, as Table 3.1 shows, the regional workforces of the Osaka50 remained, in general, smaller than those of the NW50. Many large regional firms appeared in the north-west of England partly as a result of the UK’s first merger wave of the 1890s–1900s which especially affected textiles (the North-west’s dominant industry and the UK’s prime export industry), partly as a result of the earlier growth of the railway companies. Nationalisation in the late-1940s increased business concentration in the North-west especially in coal and transport. Only after the respective privatisations of the 1980s did the very largest of the Osaka50 overtake the very largest of the NW50. Even so, across the two groups of fifty firms the

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 79

Table 3.1 Employment sizes of the fifty largest business firms in the North-west and Osaka c. 1907, 1935, 1955, and 1992

Source: Tables 3.10 and 3.11.

Osaka set experienced catch-up with the north-west of England group. This is apparent in the reduction of the differential between the median sizes of NW50 and Osaka50, from six times to just under three times. The national large-firm picture, as in Table 3.2, reveals another aspect of the relative size of the two regions’ big firms, namely their early twentieth-century importance, and their later twentieth-century decline in importance, as regional centres of big business employment. Japanese big business, in terms of the top fifty by employment measure (J50), was catching up with the UK’s top fifty (UK50), as may be seen by comparing the aggregate sizes of the two sets between the 1900s and the 1990s. However, the aggregate employment size of the the two regions’ fifty largest business employers dramatically fell in the middle decades of the century. In the UK the NW50 share of the UK50 fell from over a quarter to 17 per cent in the mid-1950s and then to under 12 per cent in the 1990s. In Japan the Osaka50 share fell from a fifth before the 1940s to around 10 per cent thereafter. Big business was clearly spreading out from its regional base. Yet the region was not deserted. Regional shares of national top-fifty firm employment in both countries consistently exceeded the regional shares of the national population. In the UK, as Table 3.3 suggests, this was due to the spread of business activity elsewhere in the country (and, at the end of the century, abroad), not to the collapse of big business as a phenomenon of western capitalism. The table compares the regional and national sizes of the top fifty employers. In the north-west of England fifteen firms were large enough within the region to qualify for inclusion in the UK50. By the 1950s this was down to seven and thereafter nil. On the other hand, an increasing number of the NW50 had a total UK workforce which put them into the UK50. A similar picture, with lower numbers of firms, pertained in Osaka.

Sources: Tables 3.10 and 3.11; David J.Jeremy, A Business History of Britain, 1900–1990s (Oxford University Press, 1998), pp. 569–75; B. R.Mitchell, British Historical Statistics (Cambridge University Press, 1988), pp. 9–10, 33; Takeshi Abe, ‘20 Seiki no Nippon ni okeru Jugyosha SuJunJoi 200 Kigyo ni kansuru Shiryo (1): 1902 nen, 1931 nen, 1954 nen’ (‘Lists of the 200 Largest Enterprises in Japan in the Twentieth Century’); Osaka Daigaku Keizaigaku (Osaka Economic Papers), 48–1, August 1998, pp. 145–173; Norimichi Oka (ed.), 1995 Nen-ban Kaisha Nenkan (Annual Corporation Reports, 1995) (2 vols., Tokyo: Nippon Keizai Shimbunsha, 1994); Harubumi Ozawa (ed.), 1995 Nen-ban Kaisha Sokan (Annual Corporation Reports (Unlisted) 1995) (2 vols., Tokyo: Nippon Keizai Shimbunsha, 1995); Mataji Umemura et al. (eds.), Choki Keizai Tokei 2 Rodoryoku (Estimates of Long term Economic Statistics of Japan since 1868, vol.2 Manpower) (Tokyo: Toyo Keizai Shimposha, 1988), pp. 199, 210.; Somucho Tokei-kyoku (Statistics Bureau, Management and Coordination Agency) (ed.), Nippon Choki Tokei Soran (Historical Statistics of Japan), vol. 1 (Tokyo: Nippon Tokei Kyokai, 1987), p. 390; Somucho Tokei-kyoku, Nippon Tokei Nenkan (Japan Statistical Yearbook); Osaka-fu Tokei Kyokai (Statistics Association of Osaka Prefecture) (ed.), Osaka-fu Tokei Nenkan (Osaka Statistical Yearbook).

Table 3.2 Aggregate North-west employment of NW50 compared to UK employment of UK50 and aggregate Osaka employment of Osaka50 compared to Japanese employment of Japan 50.

80 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

Sources: Tables 3.10 and 3.11; David J.Jeremy, A Business History of Britain, 1900–1990s (Oxford: OUP, 1998), pp. 569–76; Takeshi Abe, ‘20 Seiki no Nippon ni okeru Jugyosha Su Jun Joi 200 Kigyo ni kansuru Shiryo (1): 1902 nen, 1931 nen, 1954 nen’ (‘Lists of the 200 Largest Enterprises in Japan in the Twentieth Century’), Osaka Daigaku Keizaigaku (Osaka Economic Papers), 48–1, August 1998, pp. 145–73.

Table 3.3 Minimum sizes of the fifty largest employers in the UK and Japan, 1900–1990s, showing North-west firms qualifying for inclusion on the strength of (a) employee numbers in the North-west; and (b) UK employees; and showing Osaka firms qualifying for inclusion on the strength of (a) employee numbers in Osaka; and (b) Japan employees

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 81

82 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

In the UK the middle decades of the century saw a restructuring of industry, with the relative decline of ‘old’ manufacturing industries and the relative growth in ‘new’ manufacturing and service industries. All contributed to a net dispersion of big business employment out of the North-west region. By 1992, 28 of the NW50 were in the top 50 employers in the UK, but none had a North-west workforce size which alone would qualify them for inclusion in the UK.50. In Japan the war economy (Sino-Japanese War of 1937–45 and the Pacific War of 1941–45), postwar reform by the American GHQ and the Korean War (1950–53), help to explain the growth of big business at a national level and, with it, dispersion out of the originating region. Industrial activity The data in Table 3.4 must be used with caution. Even before 1914 some large companies were diversified, such as coal, iron and steel firms in the NW and one or two railway companies in Osaka, which moved into property dealing and the provision of leisure facilities. Secondly the data on Osaka are incomplete in certain respects. There are no estimates at all of regional size for construction firms. Also, before 1940 Osaka data on much of the service sector is missing, in particular for distribution, financial, professional and miscellaneous services.

Figure 3.1 The Hartford New Works of Platt Bros. at Werneth, Oldham, c. 1900. The ‘New Works’, equipped with labour-saving machine tools, were built adjacent to the railway from 1845 onwards. At their apogee they comprised 38 blocks of buildings extending over 60 acres and employing over 12,000 people (Courtesy Oldham Local Studies Centre).

Table 3.4 Industrial activity of the fifty largest employers in the North-west by firms and numbers (%) employed in the North-west; compared to industrial activity of the fifty largest employers in Osaka by firms and numbers (%) employed in Osaka, c. 1907, 1935, 1955, and 1992 (using UK Standard Industrial Classification, 1968) (a) Pre-1914

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 83

(b) 1930s

84 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

(c) 1950s

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 85

(d) early 1990s

86 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

Source: Tables 3.10 and 3.11.

(e) Summary

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 87

88 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

Before the First World War three industries preponderated among the NW50: mechanical engineering, textile manufacturing and transportation/ communication. Between the wars rationalisation (the pursuit of economic efficiency via merger, reducing capacity and installing modern technology) led to the disappearance of some firms. Textile companies remained significant until1955 when they accounted for nine of fifty firms and just over 10 per cent of theaggregate employment of the NW50. By 1992 textiles had only two firms and 3.3per cent of the aggregate employment of the NW50. What is remarkable is that until the last decades of the century it was employers in transport andcommunications which led the NW50, when regional employees are aggregatedindustry by industry. In 1992 transport and communications was exceeded by thedistributive trades, that other major services industry. The growth of the giantretail chains since the 1960s illustrate this latter development. In the Osaka50 there was a similar shift out of textiles, predominant before the 1950s. However, in Osaka’s case textile companies accounted for 40 per cent and more of the Osaka50 before the China/Pacific Wars. What is more, they persisted as much as their counterparts in the NW50. After 1950 the picture changes considerably. Textiles diminished drastically, from nearly 11 per cent of the Osaka50’s aggregate employment in 1954 to zero in 1993. Outstanding is the growth in numbers of large firms in chemical manufacturing, mechanical and electrical engineering, and in the production of metal goods. The other big feature is the increase in the number of large electric railways, which originated before 1914. Location of head office The locations of headquarters are not necessarily the same as locations of operating units. An extra-regional perspective nevertheless may weaken regional loyalties. Evidence of the migration of big businesses out of their originating region emerges from a scrutiny of headquarters locations, as seen in Table 3.5. Before the 1940s 80 per cent of the NW50’s headquarters were in the North-west. This dropped to 52 per cent in 1955 and 42 per cent in 1992. Since the 1950s, 40 per cent of the NW50 have been headquartered in London. Within the North-west Liverpool has been the main loser of large employers’ headquarters in the forty years since 1960. Until that date seven or eight of the NW50 were located in Liverpool; by 1992 only two were there (Littlewoods and Merseyside Transport). Manchester, too, suffered from the exodus south: hosting sixteen or seventeen of the NW50 before the 1940s but only nine since. In Osaka a very different experience prevailed (Table 3.5). Never more than 20 per cent of the Osaka50 had their headquarters outside Osaka Prefecture. However, Tokyo’s share of that 20 per cent progressively tripled between 1902 and 1993. There is another way of plotting the movement of big businesses into or out of the region, namely by tracing their regionally-based workforces. Table 3.6 shows the number of NW50 and Osaka50 firms with 100 per cent of their workforces within

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 89

Table 3.5 Headquarters locations of the fifty largest business employers in the North-west and Osaka c. 1907, 1935, 1955 and 1992 (%)

Source: Tables 3.10 and 3.11. Table 3.6 Numbers of firms among the fifty largest with 100 per cent of their workforces within the region

Source: Tables 3.10 and 3.11. Note These figures may be slight over-estimates.

their respective regions. For the NW50 there is some inexactitude because, unrecorded in available sources, some firms may have had offices and employees outside the region. The trend is nevertheless clear. For the Osaka50 the shift is magnified. Strategies and structures Expansion from the single site Of the NW50 at the beginning of the century few were single plant firms (Table 3.7). Absence of relevant data on some of the firms denies precision about numbers. Expansion beyond the single site marked the arrival of the modern business enterprise in the Chandlerian sense. Such an expansion invariably signalled the pursuit of economies of scale. As Japan was a developing country in the early twentieth century, thirty-two of the largest fifty firms had only single plants in 1902. However, thereafter Osaka rapidly caught up with the North-west of England. While thirty-eight of the Osaka50 are known to have been multi-plant firms in 1993, this figure under-

90 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

Table 3.7 Organisational forms of the fifty largest employers in the North-west and Osaka

Source: Data collected for Tables 3.10 and 3.11. Note The NW and Osaka multiplant figures are almost certainly under-estimates.

estimates the situation. Just two of the Osaka50 were single-plant businesses that year. Horizontal integration These economies were most swiftly (if not always enduringly) achieved by a strategy of horizontal integration (taking over rival firms in the same industrial field). This was a major motive and strategy behind the mergers at the turn of the century. Another powerful motive in merger was to increase market share, reduce competition, and reach a position in which prices (and hence profits) could be propped up. These hopes motivated mergers among the leading firms in the region’s dominant industry, cotton manufacturing, and also in railway transportation. Their early realisation was impeded by the continuation of family firms in the managerial structures of the new amalgamations of the 1890s and 1900s, like the Fine Cotton Spinners & Doublers, the Calico Printers’ Association and the Bleachers’ Association. On the railway companies salaried managers, recruited through internal labour markets, nursed more bureaucratic motives in supporting mergers, such as promotion, higher salaries and increased opportunities for free railway travel. The nationalisation programme of the late-1940s imposed long-needed horizontal integration on the coal, gas, electricity and transport industries. Privatisation in the 1980s and early-1990s broke up these state-owned industries into smaller units in the hope of improving competitiveness, efficiency and profitability. Most UK firms appear to have been functional in the 1930s and 1950s. That is, they used a ‘series of specialised hierarchical functions culminating in the office of the chief executive who performed the role of coordinator and general manager’2 to manage the enterprise, a structure associated with a low degree of product diversity. The situation in Osaka was similar, though it is difficult to confirm. Among the Osaka50 horizontal integration was a striking feature of the large cotton spinning companies at the beginning of the twentieth century. Kanebo,

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 91

Toyobo, Dainipponbo, Osaka Godobo exemplified the trend (bo meaning spinning company in English). Osaka Godobo (Osaka Merger Spinning, in English) was established in 1900 by Fusazo Taniguchi, formerly a monpa or traditional cotton textile merchant. He subsequently expanded Osaka Godobo by further mergers.3 Vertical integration Vertical integration (mergers between firms in adjacent industrial activities and sectors, designed to reduce transaction costs by cutting out intermediaries) was most clearly and earliest seen on the railways where manufacturing (locomotives and rolling stock) was combined with transportation services. In the NW50 in 1907 the London & North Western Railway’s works at Crewe and the Lancashire & Yorkshire Railway’s works at Horwich exemplified this trend of the future. So, too, did the Co-operative Wholesale Society which had integrated backwards into manufacturing from distribution since the 1870s. Likewise, William Lever integrated manufacturing with plantations (abroad) and distribution networks. Several of the big textile firms (like Rylands and the Calico Printers’ Association) likewise had wholesale distribution networks at the beginning of the century. Few other firms in the NW50 before the 1950s attempted vertical integration which bridged industrial sectors (mining, manufacturing, services). A couple of textile firms were attempting to integrate all manufacturing branches, but only abroad (see below). From the 1950s there was more evidence of vertical integration, but not as much as there was for diversification. In Osaka some vertical integration occurred in the shipbuilding and cotton spinning industries at the beginning of the century. The larger shipyards such as Fujinagata Shipyard and Osaka Ironworks (later Hitachi Zosen) manufactured not only ships but also accessory machinery such as engines and pumps (as did other large Japanese shipyards like Mitsubishi’s yard at Nagasaki or Kawasaki’s yard at Kobe). Cotton spinning companies integrated with weaving firms, beginning in the 1890s. Osakabo, for example, moved into weaving, and away from spinning, around 1910. Further vertical integration occurred during and after the First World War when the large cotton spinning companies extensively entered the finishing branch. Kanebo’s Yodogawa factory in Osaka, completed in 1924 at the instigation of Shingo Tsuda (later president of Kanebo), became the largest finishing plant in the Orient. As in the UK, the railways pursued strategies of vertical integration. From their early days in the 1870s and 1880s railway firms had their own workshops for repair. By 1914 the electric railway companies, like Nankai and the Minoo Arima Electric Railway (Hankyu), had their own electricity generating stations. Co-operative societies, formed in Japan from the late-1870s, likewise followed the example of the North West’s CWS and integrated activities along the supply chain. Unfortunately not enough is known about the location of the 129 co-operative associations (with 119,946 members) existing in Japan in 1925 to determine the size of those in Osaka Prefecture or the Kansai region.

92 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

A counter trend of vertical disintegration can also be traced in the big business structures in Japan. In the Osaka50 in 1935 Matsushita Electric Industrial (whose major brand in the late-1950s was Panasonic) was separated from the Matsushita organisation. Vertical disintegration came most extensively with the post-1945 break-up of the zaibatsu (a group of family-controlled and diversified businesses) under the Allied Occupation. Matsushita and a few other examples of disintegration in the 1930s are exceptional, however. After 1945 not only Matsushita but also some electrical equipment manufacturers such as Hitachi, Toshiba and Toyota generally promoted vertical disintegration (bunsha). Bunsha should be distinguished from the dissolution of the zaibatsu because it was an aggressive strategy aimed at maximising profits for corporate groupings. Diversification Pioneers of diversification in the UK seem to have been the railway companies. Not only did they build model towns like Swindon and, in the North-west, Crewe but also they moved from property development into leisure markets. Large city-centre hotels were built by the railway companies for businessmen, commercial travellers and the like. Other hotels built by the railways, at seaside resorts or in Scotland, were designed to attract tourists. In the NW50 in 1907 the London & North Western Railway had nine hotels, three in the North-west (at Crewe, Liverpool and Preston); only its hotel at Greenore on Carlingford Loch in Ireland seems to have been sited for the tourist. The Lancashire & Yorkshire Railway had only two hotels, one in Liverpool, the other at Preston shared with the LNWR. The holding company, by which a business family or families might retain their interests in ownership and management, controlled a federation of operating subsidiaries. This found increasing favour between the 1930s and 1950s since it allowed a degree of diversification with which the functional form could not cope. In the North-west some of the biggest employers adopting the holding company form had a hundred or more operating subsidiaries, many in other parts of the country of course. Good examples of this were GUS, British Electric Traction (with 140 subsidiaries in 1955, most in buses, road transport and television), and Home & Colonial Stores (with 42 by 1963). The growth of international competition in the 1950s, however, exposed the wasteful duplication, rivalry and inefficiency between holding company subsidiaries acting without strong central direction. Many big British businesses called in American consultants and the multidivisional form (M-form), closely associated with strategies of diversification, spread in the late-1950s and the 1960s. Of the four multidivisional firms among the NW50 in 1955, ICI was the pioneer by which this American organisational innovation was introduced to Britain in the late-1920s. By the 1950s in the NW50, Shell, Vickers, Dunlops and Littlewoods had adopted this form. In Osaka diversification evidently coincided with that in the North West of England. Again the railway companies were the models of what could be done. The

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 93

Minoo Arima Electric Railway (renamed the Hankyu in 1918), established in 1907, was financed mainly by banks. Among the bankers involved was Ichizo Kobayashi who worked for the Mitsui Bank, a subsidiary of Mitsui, one of the zaibatsu. He promoted a series of pioneering diversifications. He bought land adjacent to the railway line from peasant owners and sold land and house to the salaried men who worked in Osaka city. He developed a number of amusement facilities, like Minoo safari park (not a success), Takarazuka spa, and Takarazuka Girls’ Opera. And he was responsible for the construction of the first railway terminal department store, near Umeda (Osaka) station, opened in 1925. Other railway companies, in Osaka and Tokyo, soon imitated him. Diversification within the Japanese textile industry was conspicuously demonstrated by Kanebo which had energetically promoted diversification from cotton into other fibres and textile products, such as raw silk, silk fabrics, woollen yarns and fabrics, rayon, etc., before the Second World War. In wartime the company quickly shifted from textile manufacturing into armaments production, led by its aggressive president Shingo Tsuda. After 1945 Kanebo collapsed and was obliged to separate its chemical department as a new company, Kanegafuchi Chemical Industry Co. in 1949. Kanebo itself moved further into man-made fibres including Nylon, and also cosmetics, food and real estate. One aim of diversification in these postwar years was the utilisation of vacant cotton factories. The prevalent structure by which diversification strategies were implemented before 1945 was the holding company. This was used by the zaibatsu around the First World War period in order to reduce tax liability, to monopolise subsidiaries’ profits and to promote diversification. Of the four major zaibatsu—Mitsui, Mitsubishi, Sumitomo and Yasuda—one was headquartered in Osaka: Sumitomo. In 1921 Sumitomo had about 220 persons employed in its headquarters. After the Second World War the pure holding company structure was strictly prohibited by the Antitrust Act of 1947. However, corporate shareholding in other companies was allowed and this permitted the growth of sogo shosha (general trading company). Only in the 1990s have the Japanese authorities permitted the controlled formation of holding companies. In contrast, the multidivisional structure has been widely adopted by the electrical equipment manufacturers. The pioneer in Japan was Matsushita Electric Industrial which adopted a divisional structure in 1933 (see Chapter 6). In this respect Matsushita was exceptional until the late-1960s when other firms began to adopt the structure. By 1980, when 94.4 per cent of 227 leading American corporations had adopted the M-form, only 59.8 per cent of 291 large Japanese corporations had done so.4 In 1993 at least eighteen firms among the Osaka50 were structured on M-form lines. Multinational activity Multinational enterprise (MNE) activity in any particular country is either homebased or foreign-based (incoming). In 1907 all the MNEs in the NW50 bar one

94 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

were home-based. Thereafter two-to-four were foreign-based. MNE strategies were adopted for a variety of reasons. For MNEs based in the North West, more empirical work needs to be done on motivations for setting up foreign plants. At any rate, the NW50’s engagement in multinational activities was surprisingly longlived but did not grow rapidly until after the Second World War (Table 3.7). First into multinational activity was the CWS which set up its first overseas depot in 1876, bought its first Danish bacon factory in 1900, and purchased its first tea estates in Ceylon in 1902. In 1907 five of the NW50 were parent MNEs (Armstrong, Whitworth, with an Italian shipyard; the CWS; Fine Cotton Spinners & Doublers, with an operating subsidiary in France; Lever Brothers, with soapworks in Australia, Canada, the USA, Germany, Switzerland and Belgium; and Vickers, with armament works in Spain and Italy, and joint ventures with Armstrong, Whitworth in Austro-Hungary and Japan). In addition, one company, British Westinghouse, was the subsidiary of an American multinational. The thirteen MNEs among the NW50 of 1935 included two subsidiaries of United States parents (Automatic Telephone & Electric Co. and F.W.Woolworth). All but two of the other eleven were in ‘new technology’ industries: Associated Electrical Industries; British Insulated Cables; Dunlop; Ferranti; ICI; Pilkington; Turner & Newall; Unilever; and Vickers. The CWS and the Calico Printers’ Association were the exceptions. By the mid-1950s the proportion of the NW50 with MNE involvement was rising rapidly. In 1955 at least twenty-five (including two subsidiaries of foreign parents, Mullard and Woolworth) of the NW50 were MNEs. Another two firms, GEC and Tootal, had numbers of overseas marketing or trading companies. By 1992 some thirty-two of the NW50 had overseas subsidiaries while another four (Ford, ICL, Kellogg, and Leyland DAF) were themselves subsidiaries of overseas parents. In part the pattern reflected the decline of the region’s staple industry, cotton; in part, the shift into new technologies and service industries; in part, the internationalisation and globalisation of business which proceeded apace after 1950. Clearly much work waits to be done on the regional impact of MNEs. No foreign MNEs appeared in the Osaka50 (although General Motors built a knockdown factory at Minato-ku in Osaka city; automobile production began in 1927 and by 1931 it employed 484 workers). After the First World War some Japanese cotton spinning companies had their own spinning and weaving companies in mainland China. In the Osaka50 for 1931 these zaikabo (spinning factories in China) included Dainipponbo, Toyobo, Kanebo, Nagasaki Boshoku and Fukushimabo. Post-1945 reconstruction and recovery explain the absence of MNEs from the Osaka50 for 1954. By 1993 MNE strategies and structures were prevalent among the group.

Source: Data collected for Tables 3.10 and 3.11.

Table 3.8 Chairmen as entrepreneurial types (%) DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 95

96 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

Chairmen As Table 3.8 indicates, there were some similarities in corporate ownership and control, as hinted at by the relationship of the chairman to management. Founders, those who participated in the formation of the firm, were more numerous in the NW50 than in the Osaka50 in the 1900s and the 1990s. In the 1930s and 1950s the Osaka50 were ahead of the NW50. Even so, they never accounted for more than a quarter of either set. Inheritors were a much larger group of company chairmen in the NW50 than in the Osaka50 before the 1940s. The most striking similarity between the chairmen’s ownership backgrounds is seen in the column recording those who entered the boardroom by the managerial route. Between 1935 and 1955 in both regions the proportion of chairmen who were in post because of their management skills rose from over 40 per cent to over 60 per cent. By the 1990s the managerial revolution was effectively complete, with well over 80 per cent of chairmen in both the NW50 and the Osaka50 being professional managers. Survivors Table 3.9 suggests that members of the NW50 have been more successful as longterm survivors than members of the Osaka 50: in the ratio of 5:3. It also indicates that service industry firms have been better at surviving, in the UK at least, than manufacturing firms: the nation of shopkeepers syndrome. However, this assessment must be tempered by one or two considerations. First, in the NW50 there were some firms with a clear oligopoly or even monopoly position: Unilever, Pilkington Brothers and the General Post Office. On the other hand, several of these firms with a UK monopoly/oligopoly position were in highly competitive global markets, certainly Unilever and Pilkington Brothers. Second, this survival rate of 10 per cent is no different from the national survival rate of big firm employers. Of the largest UK business employers in 1907, five still appeared among the UK50 in 1992 (the General Post Office, Vickers, the Cooperative Wholesale Society, Coats as Coats Viyella and W.H. Smith).5 In Japan the national survival rate among the fifty largest business employers was 8 per cent: four of the 1902 Japan50 appearing in the 1993 Japan 50 (the Railway Bureau of the Ministry of Communications which became the three JR companies, East Japan Railway, West Japan Railway and Tokai Japan Railway; Mitsubishi Shipyard, later Mitsubishi Heavy Industries; the Iron & Steel Factory of the Ministry of Agriculture and Commerce, later Nippon Steel; and Kawasaki Shipyard, later Kawasaki Heavy Industries).6 These in turn are inferior survival performances when compared to the world’s largest 100 firms among which a survival rate between 1912 and 1995 of 19 per cent was achieved.7 Third, in Osaka none of these long-term survivors was in a such a secure competitive position as the General Post Office or the Mersey Docks & Harbour

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 97

Table 3.9 Survivors: firms present among the regional fifty largest employers, 1900–1990s

Source: Tables 3.10 and 3.11.

Figure 3.2 Coming from the mill, 1990: the Lily Mill, Linney Lane, Shaw, Oldham. A double mill, built in 1904 and 1917, it was purchased in 1977 by Littlewoods Ltd and converted into an ultra-modern mail-order warehouse. The conversion symbolised the transition from manufacturing to services in a leading mill-town. The workers coming from the mill may be contrasted with those depicted by Lowry in his famous painting ‘Coming from the Mill’ (1930) (Courtesy J.G. Farnie).

Board (the National Post Office in Japan also survived but the absence of employment data at a regional level precludes estimates here). The other major feature in Table 3.9 is the predominance of service industry firms in both NW50 and Osaka50: half the eight firms were in this sector. Again, it must be emphasised that there is a dearth of data about large service sector firms in Osaka.

98 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

Conclusion This comparison between the development patterns of aggregated big business in the two regions offers some insights into the place of twentieth-century big businesses in regional settings (see Tables 3.10 and 3.11) on pages 99–114. It puts individual firms in the context of regional giants. It shows that transport and communications, not textiles, led big firm employment in the North West of England in the first sixty or more years of the century. Thereafter distribution firms took the lead. A similar shift was under way in Osaka but much later. It reveals the rate at which the largest firms moved out of their respective regions, with Northwest companies moving out much more extensively than their Osaka counterparts, whether measured by headquarters locations or workforce locations. It shows that in the first half of the century the North-west’s largest firms seized multinational opportunities much more quickly than Osaka’s largest firms. It suggests that in the chairmanship of big firms, inheritors have played a larger role in the North-west than in Osaka—implying, perhaps, the importance of the family in large firms. And it reveals that the survival rate of large firms in the North-west was exactly the same as it was in the rest of the UK. In sum it seems that services attracted and retained big businesses in the Northwest while, unsurprisingly, multinational interests pulled them out. A lagged but similar pattern seems to occur in Osaka. Before drawing too many conclusions, it must again be emphasised that the Japanese data are weak on firms in the service sector. Even with this data we should still like to know more about regional business behaviour relating to big firms: their regional links with SMEs; the regional dimensions and impact of the nationalised industries; the parts played by local business communities; and the role of networks of business leaders8 in developing and sustaining a regional presence for large firms. Only then will we be able to assess whether the concept of the region has explanatory power in modern business development. Notes 1 In the preparation of the data on businesses in the North-west of England, David Jeremy would like to record his gratitude for research funding from the Economic and Social Research Council (grant no. R000231348) and the Leverhulme Trust (grant no. A/85/43), and for institutional support from the Faculty of Management and Business in The Manchester Metropolitan University. 2 Derek Channon, The Strategy and Structure of British Enterprise (London: Macmillan, 1973), p. 14. 3 His son Toyosaburo Taniguchi was president of Toyobo in 1946–47 and 1959–66 (as well as translator of Ben Bowker’s Lancashire under the Hammer (1928) and generous sponsor of the Fuji Conference). 4 Tadao Kagono, Ikujiro Nonaka, Kiyonori Sakakibara and Akihiro Okumura, ‘Nippon Kigyo no Senryaku to Soshiki’ [‘Strategy and Structure of Japanese Firms’] in Hiroyuki

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 99

5 6

7

8

Itami, Tadao Kagono and Motoshige Ito (eds.), Nippon no Kigyo Shisutemu [The Company System in Japan] vol. 2 (Tokyo: Yuhikaku, 1993), pp. 108, 127. David J.Jeremy, A Business History of Britain, 1900–1990s (Oxford University Press, 1998), pp. 569–74. Takeshi Abe, ‘20 Seiki no Nippon ni okeru Jugyosha Su Jun Joi 200 Kigyo ni kansuru Shiryo (1): 1902 nen, 1931 nen, 1954 nen’ [‘Lists of the 200 Largest Enterprises in Japan in the Twentieth Century’], Osaka Daigaku Keizaigaku [Osaka Economic Papers], 48–1, August 1998, pp. 145–73. Leslie Hannah, ‘Marshall’s “Trees” and the Global “Forest”: Were “Giant Redwoods” Different?’ in Naomi R.Lamoreaux, Daniel M.G.Raff, and Peter Temin (eds.), Learning by Doing in Markets, Firms, and Countries (University of Chicago Press, 1999). An examination, funded by the Leverhulme Trust, of the networks of the heads of these fifty North-west firms has been undertaken by David Jeremy and Francis Goodall and will be published.

199 2

(a) 1907

Table 3.10 The fifty largest companies in Cheshire and Lancashire, as measured by employment within the region, in 1907, 1935, 1955 and

100 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 101

(b) 1935

102 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 103

(c) 1955

104 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 105

(d) 1992

106 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

Sources: David J.Jeremy, ‘The Hundred Largest Employers in the United Kingdom, in Manufacturing and Non-Manufacturing Industries, in 1907, 1935 and 1955 in Barry Supple (ed.), The Rise of Big Business (Aldershot: Edward Elgar Publishing, 1992), pp. 414–35; David J.Jeremy, A Business History of Britain, 1900– 1990s (Oxford: Oxford University Press, 1998), pp. 569–76; Stock Exchange Year Book for benchmark years; Red Book of Commerce for benchmark years; Times 1000 for 1992–93; annual reports and accounts of firms, 1992–93; individual company histories; archival sources.

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 107

Table 3.11 The fifty largest companies in Osaka Prefecture, as measured by employment within the region, in 1902, 1931, 1954 and 1993 (a) 1902

108 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

Sources: Noshomu-sho [the Ministry of Agriculture and Commerce] (ed.), Kojo Tsuran, the Directory of Japanese Factories/ (Noshomu-sho, Tokyo, 1904); Motoyoshi Makino fed.), Nippon Zenkoku Sho-gaisha Yakuinroku Dai 10 Kai [the Directory of Executives of Japanese Companies: the 10th Edition] (Shogyo Koshinjo, Osaka, 1902); Teishin-sho [the Ministry of Transport & Communication] (ed.), Meiji 35 Nendo Tetsudo-kyoku Nempo [Annual Report of Railway Bureau in 1902 Fiscal Year] (Teishin-sho, Tokyo, 1903); Naikaku Tokei-kyoku [the Statistic Bureau of Cabinet] (ed.), Nippon TeikokuTokei Nenkan Annual Data Book of Japanese Empire, (Tokyo Tokei Kyokai Shuppan-bu, Tokyo, 1904); Tomoo Kanda (ed.), Osaka Shosen Kabushiki Kaisha 50 Nen-shi (50 Years’ History of Osaka Shown Karsha) (OSK, Osaka, 1934). Notes The data of the railway companies and the national Osaka Military Arsenal are those at the end of March 1903; the others are data for the end of 1902. * data include employees of the adjacent prefectures. CO means the city of Osaka. Nishinari-gun and Higashinari-gun were incorporated into CO later in 1925.

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 109

(b) 1931

110 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

Sources: Tatsujiro Machida (ed.), Zenkoku Kojo Kozan Meibo [the Directory of Japanese Factories and Mines] (Kyochokai, Tokyo, 1932); Jinryu Ando (ed), Ginko Kaisha Yoroku [the Directory of Japanese Companies and Banks] (the 35th edition & the 36th edition, Tokyo Koshinjo, Tokyo, 1931, 1932); Masao Noda et al. (eds.), Showa-ki Tetsudo-shi Shiryo[the Materials on the History of Japanese Railway Industry in the Showa Period], Vol.17 (Nippon Keizai Hyoron-sha, Tokyo, 1984); Teishin-sho Denki-kyoku [the Electricity Bureau of the Ministry of Transport & Communication] (ed.), [Dai 23 Kai Denki Jigyo Yoran] the 23rd Annual Data Book of Electric Power Supply Business/(Denki Kyokai, Tokyo, 1932); Kuranosuke Hanamoto, Osaka-shi Denki-kyoku 40 Nen-shi, Unyu-hen [40 Years’ History of Bureau of Electricity of C.O., the Part of Transportation/ (Bureau of Electricity of C.O, Osaka, 1943); Tomoo Kanda (ed.), Osaka Shosen Kabushiki Kaisha 50 Nenshi (50 Years’ History of Osaka Shosen Kaisha) (OSK, Osaka, 1934). Notes The number of workers of Japan National Railway is that at the end of March 1932. The numbers of workers of the firms of the order 2, 7, 9, 12, 15, 18 and 21 are those at the end of June 1931; the others are the data on 1st October 1931. * data include employees of the adjacent prefectures. CO means the city of Osaka

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 111

(c) 1954

112 COMPARISONS BETWEEN THE DEVELOPMENT OF BIG BUSINESS IN NW ENGLAND AND OSAKA

Sources: Yoshikuni Sato (ed.), 1955 Nen-banKaisha Nenkan [Annual Corporation Reports: 1955] (Nippon Keizai Shinbunsha, Tokyo. 1954); ibid., 1956 edition (1955); Nippon Kokuyu Tetsudo [Japan National Railway] (ed.), Showa 29 Nendo Tetsudo Tokei Nempo [Annual Data Book of Japan National Railway: 1954] (Nippon Kokuyu Tetsudo, Tokyo, 1955); Sorifu Tokei-kyoku [Statistic Bureau, Management and Coordination Agency] (ed.), Dai 7 Kai Nippon Tokei Nenkan/ [the 7th Japan StatisticalYearbook] (NipponTokei Kyokai & Mainichi Shimbunsha.Tokyo, 1957). The number of employees of Kansai Electric Power in Osaka Prefecture was given by the company. The data of Matsushita and Sumitomo Chemical were gained from their bi-annual reports. Notes The data are those for the end of September or March 1954. * data include employees of the adjacent prefectures. The data with ** are obtained from 1956 Nen-ban kaisha Nenkan and are those for 1955. CO means the city of Osaka.

DAVID J.JEREMY, TAKESHI ABE, JUN SASAKI 113

(c) 1954

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Sources: Norimichi Okai (ed.), 1995 Nen-ban Kaisha Nenkan [Annual Corporation Reports: 1995] (2 volumes, Nippon Keizai Shimbunsha, Tokyo, 1994); Harubumi Ozawa (ed.), 1995 Nen-ban Kaisha Sokan [Annual Corporation Reports (Unlisted):1995] (2 volumes, Nippon Keizai Shimbunsha, Tokyo, 1995). The number of employees of Kansai Electric Power in Osaka Prefecture was given by the company. Notes The data are those for the end of March 1994. * data include employees of the adjacent prefectures. CO means the city of Osaka.

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4 Japan, Lancashire and the Asian market for cotton manufactures, 1890–1990 Douglas A.Farnie and Takeshi Abe

The Lazonick revolution in historiography ‘There is one thing stronger than all the armies in the world; and that is an idea whose time has come.’ The Nation, 15 April 1943 It is impossible to exaggerate the influence exerted upon research into the history of the cotton industry by the work of William Lazonick, which began to appear in 1979.1 Until the publication of the work of Lars Sandberg in 1974 the historiography of the British cotton industry centred inevitably around the period of the Industrial Revolution. In contrast the era of decline was comparatively neglected not only in the West but also in Japan, despite its inherent interest. The Canadian economist Lazonick followed Sandberg in adopting a comparative approach and also emulated Alfred Du Pont Chandler in singling out the structure of industry as the key variable in his analysis. Chandler had created a model of corporate evolution in order to explain the success of US industry. Lazonick used a similar approach in order to explain the decline and fall of the British cotton industry. He focused upon its atomistic structure as the reason for its failure to adapt to a changing world market. Above all, he sought to develop a theory of the impact on economic development of organisational structure. The cogency of his analysis was early recognised in Japan by Shin-ichi Yonekawa. In the wider world his distinctive approach struck a major chord in the minds of a new generation of scholars. The influence exerted by his work proved to be immense, ushering in an era of creative debate, as researchers sought to confirm, to extend and occasionally to question the Lazonick thesis. Chandler had galvanised the study of business history into new life from 1959. Even Chandler himself never exerted so dynamic an influence as Lazonick upon the interpretation of economic history. It is a fitting tribute to him that the historiography of the cotton industry may now be sharply divided into two distinct eras which may be designated respectively ‘Before Lazonick’ and ‘After Lazonick’.

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Barriers to understanding: the difference in business culture The Lancashire tradition of individualism was flatly opposed to the Japanese tradition which merged the individual within the group. The British cotton industry supported far fewer firms than did that of Japan. The firms of Lancashire nevertheless remained fiercely competitive rather than co-operative. The pattern of small-scale units of enterprise was created by the founders of industry. Family firms and partnerships profited from a broadening range of external economies generated from the 1830s within the world of ‘Cottonia’. Such firms remained intensely jealous of their own independence and positively thrived upon internecine competition. The advent of joint-stock companies simply reinforced established patterns of behaviour.2 Such patterns were shared by both masters and men. The number of firms increased to a maximum in 1914, the number of merchants to a maximum in 1920 and the number of separate trade unions to a maximum in 1924. The industry thus supplied economists with a classic example of perfect competition, a mode wherein no single firm could influence the market-price and wherein all were compelled to undergo what Marshall in 1907 termed ‘the ordeal of economic freedom’. The primary aim of firms became under such pressure one of short-term survival, even at the expense of profits or dividends. Such firms were characterised by limited capital-resources, by a restricted core-competence, by a short-term approach to marketing and, above all, by a deep distrust of rivals. All attempts to form associations, cartels or amalgamations were therefore for long frustrated because individual employers detested any monopoly and resisted any bid to create one. Employers’ associations were formed only in 1889–90 and then upon a sectional basis, with separate associations for spinning and for manufacturing, as weaving was termed in Lancashire. No joint association was formed until 1925. Voluntary amalgamations were first formed in 1898–1900 mainly in the finishing trades. They were introduced, at the insistence of the Bank of England, to the spinning trade in 1929 but never to weaving or to merchanting. No association for parliamentary purposes was created until 1899. No research institute was established until 1919 and then only under pressure from the State. Nor was the compilation of industry-wide statistics undertaken until 1926. Schemes mooted in 1898 and in 1922 for the regular compilation of trade statistics foundered. The fiercest resistance to proposals for the rationalisation of the industry’s structure was encountered by Keynes when he paid three visits to Manchester in 1926–27. He urged upon the assembled cotton magnates the need for co-operation in order to reduce capacity within the industry. The curt rejection of his proposals left him profoundly disillusioned. He became convinced that such short-sighted individualism was a certain recipe for industrial suicide. In 1928 he favoured the mass dismissal of most of the industry’s 6,000 directors as the essential preliminary to any re-organisation. In 1944 he lamented that German bombers had proved unable to destroy every factory in Lancashire ‘at an hour when the directors were sitting there and no one else’.3

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The industry had in fact failed to accumulate the reserves necessary for any largescale re-equipment. It had indeed suffered from a positive haemorrhage of capital in three successive stages, as the Oldham limiteds reduced their capital between 1890 and 1914, as the company-reflotation boom of 1919–20 withdrew even more capital and as loan-capital flowed out of the coffers of the limiteds on a massive scale in 1926–27.4 Thus the freedom of action of firms became dangerously restricted. Outside Oldham joint-stock companies tended to separate ownership from management, leading ultimately to the loss of local control over operations. Family firms often however retained their identity within amalgamations and maintained higher profit-margins than limited companies. Such concerns pioneered the introduction of the ring frame in the 1870s and of the automatic loom in the 1890s. In the most favourable of circumstances they solved the problem of management-succession and retained family-control of a business for three and even for six generations.5 For their part trade unions developed summit associations earlier than employers, forming amalgamations for spinning in 1870 and for weaving in 1884 as well as an association for parliamentary purposes in 1889. Those initiatives spurred on the employers to found their own associations in 1889–90 and 1899. The amalgamations resembled however the federations of master spinners and manufacturers in so far as they were really federations of autonomous local societies.6 Their power resided in their deep local roots. Conferences held in Manchester did indeed establish summit organisations with broader functions, such as the Trades Union Congress in 1868 and the International Textile Workers Association in 1894. The cotton unions of Lancashire nevertheless remained essentially emanations of local society and profoundly particularistic in policy, dismaying the Webbs by their consistent conservatism. Until 1893 those unions resisted all proposals for the establishment of formal procedures for the settlement of trade disputes. The Brooklands agreement of 1893 introduced such machinery into the spinning trade which lasted for only twenty years, being abrogated in 1913. The United Textile Factory Workers’ Association, established in 1889, affiliated itself in 1903 to the Labour Representation Committee, founded in Bradford in 1894, but remained restricted in function until 1946 to the absolute minimum. The cotton unions took no part in the General Strike of 1926.7 They joined in 1928 the joint Committee of CottonTrade Organisations which had been established in 1925. They resisted however until 1974 any attempt to merge the separate unions of spinners and weavers. In Japan and especially in Osaka the guild tradition remained omnipotent. Associations supplied the economy with its very life-blood. Competition undoubtedly occurred but was conducted in conformity with the national preference for a harmonious process of ‘co-operating while competing’. Achievements were always credited to groups rather than to individuals. Such a culture encouraged the formation of associations in every locality and every trade. It facilitated the diffusion of best practice throughout the world of manufacturing industry. Kansai avoided ‘the gale of creative destruction’ which raged throughout Lancashire during its

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golden age. Its society found in mutual association the royal road to success in business and the secret of outdistancing foreign competitors. The Japan Cotton Spinners’ Association was thus founded in 1882, as a summit association, primarily to eliminate the poaching of operatives by member-firms and to stabilise the labour-force employed at individual mills. In 1888 it was refounded as the Greater Japan Cotton Spinners’ Association: it broadened its aims and became the indispensable intermediary between the industry and the government. The association sought in particular to secure a reduction in the imports of yarn from India and the grant of tariff concessions. It waged an eight-year campaign for the repeal of the export duty on cotton yarn and of the import duty on raw cotton, achieving success respectively in the years 1894 and 1896.8 From 1890 it also undertook the organisation of shorttime working and so embarked upon a policy of regulating production throughout the spinning industry: six more such exercises followed between 1899 and 1914.9 In Lancashire short-time working was also a traditional practice but was usually organised until 1903 upon a local basis. Speculative corners in the raw cotton market then evoked industry-wide stoppages in 1903 and 1904 and precipitated the formation in 1904 of the International Cotton Federation, with its headquarters in Manchester. The Japan Cotton Spinners’ Association played a key role in negotiating the crucial contract of 1893, for the import of raw cotton from Bombay, with the Nippon Yusen Kaisha, which had been founded in Tokyo in 1885. In return payment of the deferred rebate granted by the NYK was restricted to members of the JCSA. The association also secured the opening in 1894 of a Bombay branch of the Yokohama Specie Bank and the establishment in Osaka in 1894 of the Sampin Exchange for the yarn trade. From 1903 it published annual aggregated statistics of the industry as supplied by its member-firms. Those statistics were the most detailed in the world and helped in the formulation of business strategy and national policy. In all of its functions the association sought to enable members to achieve the maximum degree of internal efficiency. It became one of the world’s most influential trade associations and lacked any parallel in Lancashire. Peak levels of productivity were attained through association within the large multi-plant combines and, above all, within individual mills. The merger movement in Japan proved to be the most successful in any industrial state. Such mergers centred around a strong core-company and served to diffuse patterns of best practice throughout all the constituent mills in a group. Accountants became increasingly important within the developing giant firms. Standard cost-accounting for the process of cotton spinning was first introduced by Toyobo in 1921,10 comparing all counts of yarn with the single measure of a count of 20s: that practice was extended to all spinning firms and later to the weaving process. Such comparative costing raised levels of performance throughout all the mills of a group as ‘trouble shooters’ were despatched from head office to mills lagging behind in the race for productivity. Higher standards were also diffused by the use from 1912 of time and motion study on the Taylorian model: they were maintained by the

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constant monitoring of performance and by the extensive use of incentive bonus schemes. Barriers to understanding: the entrenched belief in the primacy of manufacturing The bias of traditional historiography undoubtedly stems from the technical advances made during the Industrial Revolution, from the high profile assumed in industrial production by mill and machine, from the pervasive influence of such source-material as the reports of factory inspectors, from the absence of any comparable sources pertaining to merchants, warehouses and commercial exchanges and from the contemptuous dismissal of marketing by economists as an irrelevant factor. As a result the role of commerce in both England and Japan has never been given due emphasis. The influence exerted by the Manchester merchants in particular has been sadly neglected. Manchester nevertheless always served as the commercial heart of Lancashire industry and the Manchester merchant remained its prime mover. The cotton industry of Lancashire acquired world status only during the 1820s when foreign merchants settled in Manchester in order to ‘source’ the needs of their homelands. In the 1930s the commercial success of Japan was attributed in the West mainly to low costs of manufacture, especially to low wages, rather than to its systematic marketing strategies. Such an interpretation was highly contentious but still remained influential into the 1980s.11 The role of the general trading companies in the postwar reconstruction and expansion of the Japanese economy was recognised only slowly outside Japan.12 If it is true that the supreme advantage of Japan lay in its merchanting strategy, then analysis must focus upon total costs, or market prices, rather than upon manufacturing or labour costs. For any truly comparative history a new paradigm may well be needed, one which will focus upon consumption as much as production, upon imports as much as exports and upon marketing as much as manufacture. The turning point of the 1890s The triumph of Japan over both Manchester and Bombay in its home market was achieved during the year 1890. That year represents a true landmark in the history of the Japanese cotton industry and does so to a greater degree than either the year 1867, when the Kagoshima mill began operations, or the year 1883 when the Osaka Cotton Spinning Company (Osakabo) spun its first cops of yarn. For Lancashire Japan fulfilled three functions in succession, first as a market, secondly as a competitor and thirdly as a supplier of the British home market. As a market Japan reached the peak of its relative importance for Lancashire during the year 1879, or earlier than any other state in Asia. It never supplied a market for piece-goods comparable to that offered by either India or China but consistently imported more yarn than cloth13 on the pattern typical of Europe since 1823. It increased its total imports of cotton yarn and cloth until in 1880 they formed together, at 37.0 per

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cent, their maximum share of Japanese imports. Imports of yarn from Lancashire reached their peak volume during 1880. Thereafter Bombay increased its competition, in quality and price, in the Japanese market, enlarging its shipments of yarn fourteenfold between 1880 and 1889. Local weavers preferred the Indian product to the English one because of the softness of its thread, the looseness of its twist and its receptivity to dyestuffs. The first and decisive advance made by Japan upon Bombay lay in the adoption of the ring frame. In turn the abandonment of the mule dictated a shift from the use of Japanese or Chinese cotton to that of Indian cotton because ring frames required a finer cotton than could be supplied from sources in East Asia. The consequent boom in the imports of raw cotton in 1888–89 more than doubled their share in total imports and laid the material basis for Osaka’s remarkable achievements in the markets for yarn. Imports of yarn from Bombay supplied their largest share of the Japanese market in 1887–8814 and reached their all time maximum volume during 1889. Thereafter those imports were replaced by Japanese mill-spun yarn. In the recession year of 1890 the influence of the new conjuncture in production became apparent in three respects: 1. the price of domestic yarn sank below that of imported yarn;15 2. the total value of Japanese yarn spun first surpassed that of imports and so supplied half of domestic consumption;16 3. exports of machine-spun yarn, sponsored by the Japanese Cotton Spinners Association, were first recorded in the trade statistics. From 1891 onwards the value of yarn imports was surpassed by that of raw cotton imports. The downward movement of prices proved to be of supreme importance because it first revealed to the spinners of Osaka the potential advantage available from the combination of Indian cotton, ring spinning and double-shift working, reducing the labour-cost of spinning yarn to one-eighth of the Lancashire level.17 Those spinners acquired confidence in their capacity to reconquer the domestic market. They were also inspired to enter the new world of the export market in manufactures. They made cost-reduction into a positive way of life and found therein the key to marketing success. They responded to the stimulus afforded by China, which had supplied since 1885 the world’s largest market for yarn imports. Freights upon yarn shipped to China were slashed by 40 per cent in 1892 and yarn exports increased in volume 100-fold in 1893–94 above the level of 1892. The repeal in 1894 of the export duty on yarn encouraged the foundation of the Osaka Exchange, which became the great national market for yarn. During 1894 the value of the cotton industry’s gross product first surpassed that of the silk industry, so establishing it as the country’s leading industry. The new industry was free from the disadvantages which burdened the silk trade.18 It manufactured a staple product rather than a luxury. It proved able to complete the transition from the manufacture and export of yarn to that of cloth, even at the price of becoming dependent upon imported raw material. Thus the external market was transformed from a dire threat

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into a potentially productive appanage of the economy. Japan made its most significant advances in the markets of Asia while it was importing all of its raw material, while its technology was still in the process of development, while its nonfactory industry was in full expansion and while it lacked until 1911 any tariff protection whatsoever. By 1900 the unit cost of its cotton manufactures was ranked as the lowest in the world. By 1903 Japanese yarn retailed at one-twelfth the price of Lancashire yarn. The Sino-Japanese War of 1894–95 not only generated orders for military uniforms but also inspired the spinners of Osaka with a new sense of their national destiny within the world of Asia. The Treaty of Shimonoseki authorised the establishment of cotton mills by foreigners within the treaty ports of China. That concession was soon undermined by the Chinese government.19 The ravages of plague in Bombay however paralysed the mills of India and created a boom in Japanese yarn production in 1896. During that year the volume of imports of raw cotton from India into Japan first surpassed those from China and yarn exports from Japan to China first surpassed shipments of yarn from the UK to China. Japan became a net exporter of yarn from 1897 onwards and shipped in 1899 43 per cent of its production to the China market. Osakan yarn spun from Indian cotton proved highly acceptable to Japanese as well as Chinese weavers and wholly ousted Bombay yarn from the domestic market of Japan by 1901. Japan became the new workshop of Asia and the prime mover in a vast expansion of inter-Asian trade, which introduced Japanese wares on a large scale to the rural populations of the East. Asian merchants were inspired to become the agents of the emancipation of the continent from Western economic dominance.20 The decade of the 1890s proved to be a watershed in the economic, as well as in the imperial, history of Japan. The new industry entailed the adaptation of an alien technology to the service of local needs during a decade of intensive learning. The experience vividly demonstrated the full range of advantages accruing to a second mover upon the modern industrial scene. By 1896 the Japanese had been recognised by Manchester spinners to ‘have now advanced to a stage where they surpass the Manchester people in skill’.21 ‘England is doomed so far as this trade is concerned and nothing can save her’.22 A comparison of the cotton industries in Lancashire and Japan The cotton industry played a key role in the economic development of Britain and Japan. In both states the industry had enjoyed a long era of expansion upon a domestic basis before the advent of the machine and the factory. In both states the industry became a prime mover in the process of industrialisation and of export-led economic development. Both industries were created by private enterprise and private investment rather than by State policy. Both were managed, at the summits of their respective careers, by gentlemen-capitalists, either by the top-hatted members of the Manchester Royal Exchange or by the Saville-Row besuited industrial samurai of the large spinning combines of Japan. Both developed labour-

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intensive modes of production, adding only a limited amount of value to the finished product. Both created, during their first phase of expansion, a symbiosis between machine-spinning and hand-weaving. Both undertook the task of importsubstitution. Both became seed-beds of technical innovation and guarded rigorously the secrets of their trade. In each state a great city was created by the industry, which also called into existence a vast array of ancillary industries. Those dependent trades included machine-making and chemical manufacture as well as such consumergoods industries as building, clothing manufacture, food-processing, brewing and printing. An extraordinary development in commercial, financial, transportation and communications facilities took place, including the rise of dependent ports and shipping lines. In both states the export trade generated foreign exchange in abundance. Both industries became dependent however upon the services of alien merchants. Both attracted, especially after their decline, intense interest from historians. The differences between the two industries remained immense.23 In Britain the industry had been an indigenous creation, in Japan it became, after the reverberatory furnace in the 1850s, the first Western-style industry to be introduced. The speed of expansion of the industry in Japan was however double that of Lancashire.24 Japan expanded both capacity and production (1885–1919) at double the rate of Lancashire during the years 1760–1812. It increased its consumption of raw cotton (1888–1916) at double the rate of Lancashire during the years 1780–1820. It increased its exports of yarn (1890–1915) at fivefold the rate of Lancashire during the years 1800–30 and its exports of piece-goods at double the rate. The conclusion seems inescapable, to the effect that Japan had developed an industrial capacity wholly different from that of Britain or indeed of any other state. The structure of the Japanese industry differed not only from that of Lancashire but also from that typical of Japan. The greatest difference lay in the number of units of production and especially in the contrast between the spinning and weaving branches of the industry. The British cotton industry supported far more firms than any other manufacturing industry in the country but its firms were far outnumbered by those of Japan. In 1913 the Japanese factory industry mustered, at 4, 641 to 2,011, more than twice as many firms as the British industry. Spinning firms were however, at 668 to 43, fifteenfold as numerous in Lancashire as in Japan. The average size of spinning mills in Lancashire in 1911, at 75,430 spindles to 15,617, may have been fivefold that in Japan. The financial strength of Japanese spinners proved to be however far superior to that of their Lancashire counterparts. The number of non-factory weaving units in Japan was comparable only to the weaving industry of Lancashire during the great age of the hand loom. Even so, their number in 1919, at 548,891, was 70 per cent more than the 320,000 of Lancashire at its peak in 1815.25 By 1919 Japan had 279 times as many firms, both factory and non-factory, as Lancashire and 414 times as many weaving units of production. The first factories in Japan were founded either by feudal lords or by the State and have no real parallel in England. The first successful spinning mill was one

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established upon a joint-stock basis.26 The new company was Osakabo, which began operations in 1883 with 10,500 spindles compared to the average 75,000 spindles of the new mills established in Oldham in 1883–84. It proved to be a financial success and, like the Sun Mill in Oldham, set the example followed by all others, either floated during the boom of 1887–90 or registered under the Companies Law of 1893. The spinning industry thus became dominated by the joint-stock company and by the managers of such companies. By contrast the family firm remained dominant throughout the Japanese economy and important even in the spinning industry of Lancashire. Whether social mobility was increased by the larger number of separate firms in Lancashire remains an issue for future exploration. Mergers took place much earlier in Japan than in Lancashire and, under managerial guidance between 1900 and 1914, proved much more effective, creating the most concentrated spinning industry in the world. The five leading firms raised their share of the total mule-equivalent spindleage from 23.5 per cent in 1898 to 58 per cent in 1913.27 Their executive officers, led by Sanji Muto of Kanebo, became the pioneers of ‘the managerial revolution’ in Japan. In both Britain and Japan the industry developed a dual structure, based upon the factory and upon out-work. Domestic weaving declined in Lancashire from the 1840s but in Japan only from the 1920s. In the weaving sector the pattern of industrial organisation thus reflected the Japanese norm. The producing centres (Sanchi) remained the preserve of small and middling firms. Those concerns, dating back to the seventeenth century, were both innumerable and highly productive. They had transformed the Japanese into ‘a nation of weavers.’28 The two main pillars of the out-work system were loom-renters and domestic weavers. Both benefited from the adoption of the fly-shuttle from 1873 and from the invention of the treadle loom in 1893–94. The number of hand looms increased to reach a peak during 1907, when only 9 per cent were housed in factories.29 The Russo-Japanese War stimulated technical advance within the weaving sector. The large spinning companies added power-looms to their operations, so creating an integrated mode of production. That mode may not however be contrasted with the horizontal specialisation typical of Lancashire because of the ubiquity of independent weavers in Japan. Small firms also adopted the power loom and prospered after making the transition. The hand loom weavers of Japan remained unique in their positive attitude towards new technology and, above all, in their adoption of the power loom. The number of independent clothiers reached a peak in 1906 and the number of loom-renters, together with the number of hand looms, reached peaks in 1907. A sharp fall occurred in the number of loom-renters (1909– 13), a reduction which was double the proportionate reduction in the number of domestic weavers and which might suggest an up-grading of loom-renters to the status of domestic weavers. Then the wartime boom raised the number of weaving units, factory and non-factory together, by 40 per cent (1913–19). At the 1919 peak only 7.74 per cent of hand looms were housed in factories while 46 per cent were operated by domestic weavers and 44 per cent by loom renters. Such independent weavers proved themselves to be highly responsive to emerging market-opportunities,

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expanding operations into the finishing industry and into the export trade from the 1920s. By 1933 such centres were responsible for more than half the total volume of cotton cloth exports. They established in 1928 their own summit association in the National Association of Independent Weavers. The dual structure of industry may have been modified after 1919 by the decline of domestic weaving. The outwork system nevertheless experienced a renaissance during the 1970s. In general the cotton industry became a vehicle of private enterprise and of entrepreneurship in Japan. It was shunned by the family financial cliques (zaibatsu) which for long regarded it as too risky a venture for their capital. Thus it became a secondary pole of financial capitalism, distinct from the pole of the zaibatsu,30 and even a vehicle of monopoly-capitalism, through its monopoly profits, its accumulation of capital and its systematic organisation of cartels. In two other respects the structure of the Japanese industry differed fundamentally from that of Lancashire, in the organisation of one of the most powerful trade associations in the world and in the symbiotic relationship maintained with the general trading companies. The small number of such companies contrasted sharply with the enormous number of merchants in Manchester. The turnover of firms in Lancashire remained very high but that of Japanese firms stayed at a low level as they developed their strategies for survival. The widespread diffusion of the industry in Japan contrasted with its high degree of concentration in Lancashire. The spinning industry in particular became progressively more widely distributed, especially throughout Southern Japan, where humidity was constant and both labour and sites for mills were available. During that process of diffusion the ranking of prefectures inevitably changed over time.31 Thus Aichi Prefecture acquired the first spinning mill in Japan in 1881. Okayama Prefecture declined in spindleage—ranking from second place in 1897 to fifth in 1902 while Aichi Prefecture on the other hand rose in status from fifth in 1892–97 to second in 1917–37, with 88.5 per cent as many spindles as Osaka Prefecture in 1937. Hyogo Prefecture rose in standing from sixth in 1892–97 to second in 1902 and 1917 and to third in 1907–12 and 1927–37. Tokyo Prefecture ranked second in 1892 and in 1907–12 but then declined from fourth in 1927–32 to ninth in 1937. Osaka Prefecture retained however much more productive capacity in weaving than in spinning. The wide distribution of the industry enabled it to fulfil a truly national role rather than a regional one. In Lancashire the five-storeyed mill became the representative unit for the spinning of yarn. Japan however adopted the single-storeyed mill-shed from 1888 when the Naniwa Spinning Company built its first mill.32 The universal use of flat sheds marked the abandonment of the multi-storey model, prized by the Anglophile TakeoYamanobe.That type of building provided the most appropriate vibration-free housing for ring frames and insured against potential structural damage by earthquakes but made more extensive use of land in a country where land remained in short supply. Modes of production also diverged from those employed in Lancashire. The high cost of capital in Japan was more than counterbalanced by the cheapness of local labour. It necessitated the working of double shifts and the

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operation of machinery at the highest possible speeds in order to spread overhead costs over the maximum amount of production. The use of two shifts doubled the productivity of Japanese machinery in comparison to Lancashire. where such shifts had been discontinued between 1847 and 1855. Japan benefited from ready access to state-of-the-art technology because foreign inventions could not in practice be patented in Japan.33 Its industry adopted superior technology to Lancashire in the form of the ring frame, with its capacity for continuous and high-speed production. Electric light and power were adopted earlier and upon a larger scale. Japan differed from Lancashire in so far as its spinners had access to a domestic supply of raw cotton. It increased its imports however from abroad and separated itself altogether during the 1890s from domestic agriculture, unlike the silk industry. In the blending of the raw material the Japanese developed unique cost-cutting expertise absent from both Britain and the USA. Japan also enlisted the finishing industries more fully into the service of the export trade than did Lancashire through the shipment of fully finished cloth. It moved into the man-made fibre industry earlier, more strongly and more successfully than Lancashire. In the recruitment and deployment of labour Japan developed along different lines to Lancashire. Recruiters travelled regularly into the countryside and dormitory-compounds were provided in close association with the mills. The double-shift system entailed the employment in Japanese mills of twice as much labour as in Lancashire. The proportion of female labour employed in Japan became much greater than in Lancashire,34 where the strength of the mule spinners’ union maintained a strong male presence within the mills. The turnover of labour remained however greater in Japan than in Lancashire, so precluding the introduction of any wage-seniority system. The protection of labour by an external agency authorised by a factory act was long delayed in Japan by the entrenched tradition of paternalism. In the provision of social welfare a total contrast developed between the paternal policy of Japanese firms and the absence of welfare-provision by most Lancashire firms. From the 1790s the workfolk of the region founded a broadening range of institutions independently of their employers, including friendly societies, building societies, sick and funeral clubs, permanent money clubs, penny savings banks, ‘going-off clubs’, co-operative societies, trade unions, lyceums, mutual improvement societies, sporting clubs, choirs and bands. The cotton operatives remained the proudest of people in the proudest of counties, being as individualistic as their masters. Standards of welfare in Japan were however raised by employers to the highest level in the world. The education of operatives, as much as of engineers and managers, became much more highly developed in Japan than in Lancashire. Within the domestic market the Japanese lacked the tariff protection enjoyed by Lancashire until 1846 but enjoyed the protection supplied by their cultural preference for native products. By 1913 they led all other states in Asia in per capita consumption of fibre.35 By 1929 they ranked fourth in the world in that respect.36 Japan protected its home market more effectively than Britain. It never became a market for piece-goods but only for yarn and speedily reduced its dependence upon

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such imports. It secured a higher proportion of its home market than any other state, apart from the USA. Both Lancashire and Japan remained exceptional in so far as they developed a large-scale export trade. Important differences in foreign trade became apparent. Japan freed itself from dependence upon alien merchants, as Manchester never did. Japan never exported as high a proportion of its production of cotton manufactures as the UK because Lancashire supplied the primary stimulus to world-wide import-substitution. Japan nevertheless trebled the proportion of its exports to production from 20 per cent in 1913 to 66 per cent in 1935 while the UK reduced its own corresponding proportion from 87 per cent in 1878 to 53 per cent in 1935. Britain remained a net exporter of cotton manufactures for 172 years (1788–1960), Japan for 89 years (1898–1987). Cotton manufactures dominated British exports for 140 years (1803–1942). In Japan exports were however dominated from the 1860s by raw silk, which was replaced by cotton manufactures only in 1934. Japan became the first state in Asia to join in 1898 the Western group of ten exporters and the only state ever to challenge British dominance of the world market. During 1933 it surpassed the UK in exports of piece-goods in volume, although not in value. Its peak volume of exports of piece-goods during 1935 represented the equivalent of 39 per cent of British exports during the year 1913. Only in 1951 did Japan become the world’s leading exporter by value as well as by volume. Britain remained the leading supplier of the world market for 140 years (1792–1932) or for five times as long as the 27 years of Japan (1933–41, 1951–69). The peak proportion of textiles in national exports was recorded at 71.3 per cent in Britain in 1834 and at 66.4 per cent in Japan in 1924. The import trade has never attracted the attention of growth-oriented economists and historians to the same extent as the export trade. In Britain raw cotton remained the principal import for 48 years from 1825 to 1873 and supplied the peak proportion of 28.5 per cent of imports in 1864 during the price-inflation of the Cotton Famine. In Japan the consumption of Indian cotton increased more than twice as fast as its spindleage (1889–1916), raw cotton remained the principal import for 66 years from 1891 to 1956 and it attained peak proportions of total imports during two exceptional years, first in 1915 at 41 per cent and then 1946 at 47 per cent. Raw cotton remained much more important in the import trade of Japan than cotton manufactures became in the export trade, in contrast to the pattern in Britain. Japan however never developed a raw cotton market comparable to that of Liverpool or an entrepôt trade in that commodity. In the large-scale establishment of cotton mills in China, Japan differed fundamentally from Lancashire. Only four British firms established mills abroad, in order to bypass tariff barriers, during the seventy years after 1864: none were upon the scale pioneered by Japan in China. Those mills played a role in the expansion of Japanese power.37 The British cotton industry supplied world markets rather than imperial markets, so that the Manchester radicals of the 1850s understandably regarded colonies as mill-stones around the neck of England. In Japan the cotton industry enjoyed closer relations with the State than did the British industry and it did so for very good reasons. First, it had developed much later, after the end-uses

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of cotton had been extended into the field of munitions by the invention of guncotton at Basle in 1845–46 and after raw cotton had been declared by the British Government in 1915 to be contraband of war, as the basis of explosives. Secondly, the industry had extended its mills into the vicinity of the imperial capital, in the four prefectures of Tokyo, Kanagawa, Tochigi and Saitama, and was well served by a powerful trade association. Thirdly, the industry fulfilled high national purposes. It pioneered the large-scale adoption of machinery and of steam power. It supplied the pattern for the modernisation of the whole industrial structure of the country.38 Until the 1930s it employed a majority of Japanese factory workers.39 Its dynamic expansion shifted the balance of the whole economy from a craft to a factory basis. Thus the cotton mill became a symbol of modernity and a national icon such as it never was in Britain. The industry also supplied Japan with its chief export and with vital foreign exchange during two separate periods, in 1934–36 and in 1946–54. Its products made a much greater impact in the world market during the 1930s than its handicrafts had done during the 1860s. The greater importance of cotton to Japan is best reflected in the respective shares of GDP contributed by the two industries. The British industry reached a climacteric in 1860, when it generated the peak proportion of 12.3 per cent of GDP. The Japanese industry generated its peak share of 13.4 per cent of GNP in 1919. The wide-ranging and constructive role played by the industry in Japanese development has never been subject to any revisionist onslaught, as has since 1962 the role of the industry in British development. The advantages of Japan: superior marketing strategy The innovations made by Japan in marketing contrast sharply with the conservatism displayed by Lancashire in its trading customs. Financial strength became the essential basis for effective operation in the markets and was provided by the trading companies and the banks specialising in foreign exchange. Such strength had been acquired by the ‘Big Six’ spinning companies before 1914, in sharp contrast to the position of the smaller spinning companies. After the outbreak of war in 1914 Japanese companies made large profits by buying raw cotton in bulk in the USA at low prices and then benefiting from the wartime inflation of prices. After the crisis of March 1920 on the Japanese Stock Exchanges Nippon Menka sold cotton futures in the USA and made immense profits upon the sale. Japanese spinners thus acquired vast financial reserves, including much sequestered in secret deposits, and thereby full freedom of action. Transportation facilities remained of vital importance both for the import of raw material and for the export of manufactures. From 1893 the Nippon Yusen Kaisha (NYK) waged a rate-war for three years against the P&O SN Co. and secured admission in 1896 to the Bombay—Japan Conference, which had been established in 1888.40 In 1906 the NYK succeeded in establishing parity with the P&O in the carriage of cargo to Japan, seven years before the Osaka Shosen Kaisha began its own service to Bombay in 1913.

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The initial expansion by Japan into foreign markets was aided by the influence of the diaspora of Chinese merchants, who served as the Levantines of Asia. The presence of those traders served, as Kaoru Sugihara has emphasised, to delimit the markets first captured by the manufactures of Kansai. Japan derived immense ultimate advantage from its proximity to China and from its share in the cultural heritage of Asia. In the development of selling techniques it could make full use of the expertise of the merchants of Osaka and of the state-aid secured by the new trade associations founded from 1888 onwards. In order to enable those merchants to encroach upon the preserves of their Chinese mentors the best and latest intelligence was vital. The systematic collection of market-data and its continuous analysis was undertaken as never before and as nowhere else. A whole range of bodies worked in close co-operation with government departments in order to fulfil that task. Those institutions included consular commercial reports from 1873, domestic industrial exhibitions from 1877, exhibition houses from 1890, export associations from 1897, trade missions, the dispatch of special students to foreign countries in order to conduct research on specific industries, and commodity exhibition centres abroad, including floating sample markets, after the (First) SinoJapanese War (1894–95), export cartels from 1906, trade commissioners from 1910, and world tours and business missions undertaken by exporters. The cotton trading companies remained a uniquely Japanese institution without parallel elsewhere, least of all in Lancashire. They became key agents in the expansion of Japanese commerce at the expense of Chinese merchants and made a stupendous contribution to the industrial development of Japan.41 All were creations of the Meiji era, emerging only after the abolition in 1871 of the autonomy of individual domains. They developed the indispensable links between Japan and foreign markets, becoming very important in the import trade as well as the export trade. For the cotton industry they provided financial support and a ready market for manufactures. A large group of textile trading firms developed in Osaka and succeeded in avoiding the handling costs incurred by Manchester merchants. The import of cotton was handled mainly by three firms, the Japan Cotton Trading Co., Gosho and the Mitsui Trading Co. Of those three importers the Mitsui Bussan Kaisha (MBK) became the most important. It was established in 1876 by Takashi Masuda (1848–1938) outside the House of Mitsui, which had been founded in the silk fabrics trade in 1673. Overseas commerce was regarded by the family as too risky in comparison to banking. By 1892 the firm had established a reputation for excellence and was taken under direct management by the family. Mitsui Bussan made foreign trade into its main business and developed the technique of direct trading to the fullest extent, eliminating all profit-taking intermediaries. It established its first foreign offices in Shanghai in 1877, in Hong Kong in 1878 and in London in 1879.42 Its London agent served as the intermediary in the negotiations conducted between Eiichi Shibusawa and Takeo Yamanobe. Those discussions led to Yamanobe’s historic journey northwards in 1879 to Manchester, to Blackburn and to Oldham. In return Yamanobe employed Mitsui to place the order of 10 June 1882 with Platt Bros. of Oldham for fifteen

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self-acting mules, each with 700 spindles specially adapted to the spinning of shortstapled Japanese cotton, by the new Osakabo (Osaka Cotton Spinning Co.).43 The new company ordered through MBK its first power looms in 1885 and its first ring frames, ten in number with 344 spindles each, in 1886. Under the contract of 1 December 1886 Mitsui Bussan became the sole agent in Japan for Platt Bros. It became the main vehicle for the import of textile machinery, with its orders reaching peak values in the years 1896–97 and 1908–9. Through its services Japan was endowed with a higher proportion of machinery made by Platt’s, the world leaders in the field, than any other state. MBK became the main agent in the process of import-substitution and in the establishment of Japanese independence in the sphere of textile manufacture. It became the leading importer of raw cotton, shipping cotton in 1886 from Shanghai to Japan. It supported the commission of experts despatched in 1889 to India, after the price of Chinese cotton rose by 30 per cent in the wake of a short crop. That sharp rise in price made it impossible for Japanese yarn to compete with Bombay yarn and so encouraged large imports of raw cotton from Bombay in 1888.44 For the shipment of raw cotton to Japan, MBK established offices in Bombay in 1893 and in New York in 1896: by 1897 it handled over 30 per cent of Japan’s cotton imports and first imported raw cotton from New York in that year. From 1893 it began to handle the shipment of cotton yarn to China. After the war of 1894–95 it expanded its China trade remarkably. It initiated third-country trade with China in 1895 and abolished the use of compradors after 1899, having introduced in 1898 a trainee system for the China trade.45 Thereby it stole a march upon British merchants, who remained dependent upon the use of compradors. MBK established the first successful Japanese spinning mill in China in 1902 and so stole a march upon the spinners of Bombay working to supply the China market. For the mills established in China thereafter under its auspices, it ordered all of the machinery from Platt’s and raised its orders for ring spinning frames for those mills to a maximum in 1930. MBK also organised in 1906 co-operation between export associations established for the trade to Korea and Manchuria. If Mitsui became the largest of the Big Three Zaibatsu, MBK became the greatest trading conglomerate in the world. It never employed foreign merchants but recruited into its service numerous engineers by 189746 and preferred to have its apprentices trained in Lowell rather than in Lancashire. It did all that it could to foster the development of mechanical engineering in Japan, securing from Platt’s in 1890 a full list of all its machines and supplying state-of-the art machinery to technical schools throughout Japan. On 8 March 1920 Mitsui & Co. Ltd. were elected to membership of the Manchester Chamber of Commerce. The heavy losses suffered by traders in cotton yarn after the crisis of March 1920 encouraged MBK to hive off in April 1920 the Oriental CottonTrading Co. Ltd. (Toyo Menka Kaisha Ltd.) as a separate company, in order to prevent the collapse of cotton prices from harming the parent firm. Thereafter it diversified and expanded its operations. In 1926 MBK established Toyo Rayon with the help of German engineers and so entered the

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sphere of chemical textile technology. In the same year Toyo Menka acquired the Toyo Podar Mill in Bombay, re-equipped it with 196 Toyoda automatic looms and aspired to make it the base for expansion into India on the pattern of China. MBK may have failed in that ambitious venture but it nevertheless achieved its greatest success in the marketing of Japanese yarn and cloth in the Indian market. In the selection of the most appropriate markets the greatest possible care was taken by all of the cotton trading companies. Newly captured markets could not however be retained in the face of domestic competition. Japan was never permitted to rest upon its laurels but had to engage in a constant search for new outlets. Such dynamic instability in the world market supplied it with a stimulus similar to that enjoyed by Lancashire during its own heroic age of 1784–1814 when the French Wars fulfilled a function similar to the wars waged by Japan between 1894 and 1918. In Lancashire no enhancement of productivity in marketing took place comparable to the achievement of the general trading companies in Eastern Asia. Commercial costs remained in general at a high level, as did finishing charges after the mergers of 1898–1900. Transport charges by both rail and steamship remained high, in the interests of Liverpool, despite the potential savings made available by the construction (1887–94) of the Manchester Ship Canal. Freights to China were thus maintained at a penal level until 1902 and were reduced only after a high-level deputation by Manchester merchants to the shipowners of Liverpool.47 Mercantile intermediaries, especially yarn and cloth agents, had become inextricably entrenched in the domestic trade in both yarn and cloth, so raising the level of transaction-costs to the very threshold of tolerance. Commissions were thus exacted upon the sale of yarn and cloth as well as on that of raw cotton. The barriers to communication within and without Lancashire originated in the old-established tradition of business-secrecy. The compilation of market-statistics was not undertaken systematically until 1926, the very year of the industry’s climacteric. Manchester lacked the most basic information upon market conditions because of the absence of any market surveys, trade missions, trade commissioners, commercial travellers, trade fairs, annual exhibitions or export associations. Lancashire remained separated from its Eastern markets not merely by an immense distance but also by a vast cultural and linguistic gulf. Lancashire manufacturers remained largely ignorant of market-conditions in Asia: they could neither appreciate Oriental tastes and habits48 nor extend their capacity to embrace the export of fully finished fabrics, like Japan. The mission dispatched to China in 1896–97 by the Blackburn Chamber of Commerce remained an isolated example.49 Since the 1820s Lancashire had increasingly relied upon foreign merchants domiciled in Manchester to link it with the markets of the world. ‘Our foreign trade is chiefly in the hands of foreigners in Manchester. Comparatively few Englishmen understand either foreign languages or the foreign markets to which our goods are sent.’50 Thus Lancashire never sent out salesmen to all the corners of the earth but remained passively content with the influx of foreign merchants to Manchester, allowing its overseas markets to be developed by alien enterprise.51 Such merchants

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served primarily the interests of their own homelands, shipping textile machinery abroad as well as textiles. Their numbers and their influence increased markedly between 1870 and 1914, even surpassing during the 1920s the number of spinners and manufacturers. The advantages of Japan: cost-cutting capacity The reduction of working costs proved to be specially important in Japan because the capital costs borne by the industry were threefold as much per spindle as in Britain.52 That goal was achieved by the continuous pursuit of technical excellence at minimum cost. The essential preliminary to the acquisition of new technology lay in the mastery of Western languages, wherein the Japanese achievement proved to be superior to that of India or China. English was adopted as the language of business, so precluding the emergence of any lingua franca comparable to the degraded ‘pidgin (i.e. business) English’ of the treaty ports of China. The capacity for the assimilation of alien learning was reinforced by the total absence of any religious constraints upon thought and conduct. Technology was not merely transferred to Japan but was also improved under the pervasive influence exerted by engineers upon the process of production, an influence largely absent from Lancashire. The simple imitation of a novel machine remained a complex and demanding task, which required considerable skill in order to undertake the full sequence of processes involved. Those skills were effectively deployed by versatile mechanics and smiths, working in the inspiring cause of national emancipation. Such artisans also devised new machines, such as the garabo in 1873,53 which served as functional equivalents but proved much more appropriate to local needs. Mill engineers assimilated the very best practice from abroad, adapted it to local modes of production and where possible improved it to the highest standard. A pattern of continuous technical innovation was favoured by the high turnover of labour, by the lack of resistance to any reduction in manninglevels, by the absence of male-dominated trade unions on the Lancashire pattern and by the restriction of unions, when they were formed from 1912 onwards, to the simple functions of a friendly society. Graduate engineers were recruited and promoted to the status of director from 1891 and even of president of a company from 1898, as they never were in Lancashire.54 Cost always remained the ultimate criterion of best practice. Thus the spinners of Osaka preferred the perfected Lancashire ring frame to the American model, which had only half as many spindles as its rival and therefore entailed higher unit-costs per spindle. Technical versatility enabled Japanese manufacturers to adapt their goods in pattern, quality, size and finish in order to suit the exact needs of a specific market. Production was thoroughly integrated with marketing, as it never was in Lancashire. Product-quality underwent a constant improvement as the range of expertise extended to cover by the 1920s the whole spectrum of production-processes from preparation to finishing, including from 1935 the manufacture of sewing thread.55 Research and development remained far less important than economy in the use of

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materials. For a long time the import of foreign technology remained a more rational and cheaper option than its indigenous development. Thus Japan remained dependent for machines upon British suppliers until the 1920s. The potential gains from R&D could in any case apply only to some 30– 40 per cent of the costs of yarn spinning. Its value was nevertheless fostered from 1921 onwards and was spurred on by a decline (1926–30) in spinning dividends. Most inventive talent was devoted however to the improvement of the weaving process.56 Japan almost doubled the number of its automatic looms (1930–36) and their share of the total stock, which rose from 7.4 per cent to 14.3 per cent. The reduction in costs proved to be most important in relation to raw materials. Raw cotton had to be imported from abroad and its cost represented some 60–70 per cent of the cost of spinning yarn. The spinners of Osaka followed the dictates of technology and the market by securing their needs conspicuously first from China from 1885 and then from India from 1889, supplemented by imports from the USA in 1886 and from Egypt in 1892. Thus they declined to invest in the improvement of the domestic cotton crop, which reached its maximum volume in 1887. They preferred to plough back their surplus profits into the purchase of raw cotton from abroad. They also perfected the technique of blending, unlike their counterparts in Lancashire or Massachusetts. Thereby they secured the most economical mixture acceptable to the market and could manufacture quality goods at the least possible cost. The skills involved in blending were as much commercial as mechanical, as Keizo Seki stressed in the best account available of the technique.57 Until the publication of Seki’s work in 1956 blending remained a closelyguarded trade secret, so that information upon its use still remains extremely scarce. The technique seemed to be in use around the year 1885 as spinners reduced their dependence upon the domestic crop, which at its best limited the fineness of the counts spun to a maximum of 17. It may well have been applied first to Indian cottons, with their 23 types and their 70–80 sub-classes, all with differing prices.58 Japan became from 1896 the largest single buyer of Indian cotton and increased its dependence upon supplies from Bombay for another twenty years. India remained the largest single source of supply from 1896 until 1927.59 The technique of blending was probably refined under the stimulus of the increased imports of American cotton by MBK and of the rising trend in cotton prices from 1898. Its more systematic development may well date from the 1920s when Japan markedly reduced after 1918–19 its share of Indian exports of raw cotton60 and the functions of the Sampin Exchange were first extended in 1927 to include raw cotton. The secret process became of paramount importance during the Indo-Japanese trade war of 1932–35 when the supply of Indian cotton was endangered. Thenceforth it became a standard tool of mill managers and was coupled with the refinement of carding to the highest degree, in order to secure the cleanest possible yarn. Some surprise has been affected at the manning of Japanese mills, as the vanguard of modernisation, by women.61 In fact Osaka derived an immense advantage from the employment of mill-girls, whose deftness and dexterity proved to be far superior to that of male operatives. Its mill-hands experienced the highest rate of turnover in

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the world, as the poaching of labour became endemic.62 They nevertheless proved to be superior to those of India and China in health, diligence, literacy and, above all, in productivity. That superiority was the result of a nutritious diet, careful training, efficient working practices and constant supervision.63 Double shifts had ended in Lancashire after 1855 but were introduced into Japan by the pioneering Osakabo from 1883, with the aid of electric lighting installed in 1886. That innovation raised production per machine as well as per operative and spread high capital costs over the maximum possible amount of production. Employers remained free from the restraints of factory legislation which tightly shackled the mill-owners of Lancashire. Such legislation was stubbornly opposed from 1900 onwards, as wholly alien to the paternal relations traditional between employers and employees. A systematic approach to worker welfare was developed during the war of 1914–18. Productivity per machine was always given more emphasis than productivity per person by the spinners’ association. The productivity of operatives was nevertheless stimulated by the payment of piece-rates, in both spinning and weaving. Productivity rose in spectacular fashion from 1903 onwards. It continued to do so after the workforce reached its maximum size during 1926 and after the end of double shifts reduced working hours by 15 per cent from 1929. Indeed the rate of increase in productivity accelerated from 1926, in weaving even more than in spinning. Productivity per operative rose twice as fast as productivity per machine, whether spindle or loom (1912–34)64 and rose twice as fast in weaving as in spinning. It reached a peak in weaving in 1932 and in spinning in 1934. That trend had no parallel in the history of Lancashire mills.65 Average wages were however drastically reduced by 34 per cent (1929–32) and remained stable at their low level for the remainder of the 1930s, as an indirect result of the collapse in the exports of raw silk from rural Japan. In contrast wages in Lancashire had always remained resistant to reduction since the introduction of local wage lists. In Lancashire the progressive decline of integrated firms since the 1850s had separated marketing from manufacture, spinning from weaving and weaving from finishing. Technical knowledge thus became compartmentalised. ‘Vertical ignorance’ increased amongst both spinners and manufacturers. The insulation of spinners from the ultimate market for woven goods made it more difficult for them to spin the yarns best suited to specific types of cloth. Spinners could not know that a printing cloth was best made from a dense well-compacted yarn and an Indian shirting from a warp yarn more loosely spun. The high degree of specialisation by process undoubtedly afforded the industry all of the economies of large-scale production so long as the total volume of output was maintained. It became however increasingly uneconomic as the volume of production declined after 1913 to a level at which the full employment of machines and operatives could not be sustained. That transition reduced the possibility of achieving either internal or external economies. Transaction-costs within the industry had been maintained at an acceptable level but became thereafter increasingly burdensome. Firms thus began from the 1930s to once more integrate their operations, as they had done during the era 1820–50, in order to respond more quickly to changes in volume, in

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style or product and in type of market. No attempt was ever made before the Second World War to reduce the immense variety of products. Some 300 types and 200,000 brands of Lancashire goods were being manufactured in over 2,000 mills.66 Such a multiplicity suggests the inherent difficulty of differentiating one piece of calico from another. That extensive variety was enforced upon the trade by Manchester merchants. It made cost-reduction much more difficult by replacing long runs of production by short runs.67 The pace of cost-cutting technical innovation was not maintained in Lancashire after the 1850s, so ending an era of three successive generations of inventive workers. The spread of general education and technical education failed to exert any countervailing influence. Costs became less flexible as price-cartels began to spread from 1889. The trusts formed in 1898–1900 sought to eliminate cut-throat competition but tended to inhibit innovation: they were not in origin efficiencycombines, like that formed in 1895–96 in the thread trade by J&P Coats of Paisley. Regrettably they became models to be imitated rather than shunned. The separation of textile engineering from the industry proper diverted the interest of machinists into the short-term service of foreign cotton industries. The absence of a chief engineer from the hierarchy of mill officials distinguished Lancashire sharply from Japan. Investment in R&D was restricted by the limited influence of engineers upon production-processes, remained much lower than in any other industry and was only undertaken eventually under pressure from the government. Within the mills of Lancashire managerial functions were restricted to the bare minimum by sheer inability to influence the price of either inputs or outputs and by the emergence of an internal cadre of middle managers. High working costs thus offset the low capital costs enjoyed by the industry and were further enhanced by restrictive factory legislation. All attempts to reduce costs were frustrated by the growing influence after 1870 of the trade unions. Those bodies became an integral part of the industrial structure and became the most powerful unions in the world, especially in mule spinning. The trade came to be regarded as a co-partnership of masters and men and as ‘an estate, not to be worked by each party for itself, or by individuals competitively, but by each party for the other and on the plan of a close corporation.’68 Those unions were controlled by men and maintained male status within the labour-force, despite the increasing proportion of female employees. They established in 1885 their own newspaper.69 From 1885 their secretaries were appointed as magistrates and from 1887 admitted to membership of the Manchester Chamber of Commerce. The cotton unions first secured direct representation in Parliament in 1902 and after the Lib-Lab pact of 1906 gained access to the corridors of power in Whitehall, to the consternation of employers.70 Above all, they developed to the fullest extent the technique of collective bargaining and so supplied the Webbs in 1894 with their ideal type of trade union. In 1917 they even became agents for the payment of unemployment benefit to operatives, including non-union members. In particular they protected the rights of adult males to sole employment as highly-paid mule spinners. They benefited from the restrictions introduced upon the employment of children from 1833 and of women from 1844

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as well as from successive reductions in the hours of labour in 1874, 1901 and 1919. The general reliance upon female labour and therefore upon single-shift working maintained the high level of labour-costs. Union members firmly resisted all such innovations as were pioneered in Japan by Kanebo and Toyobo.71 They opposed such cost-cutting measures as the employment of women on a night-shift or as mule-spinners. They also resisted the introduction of automatic weft-changing looms, the allocation of more looms to individual weavers and any reduction in over-manning. If the charge of technical stagnation against the industry can be justified then the responsibility must be shared between unions and employers. The inflexibility of wages was caused by the firm entrenchment of local wage-lists. Both masters and men sought to avoid wage-cuts, preferring in times of bad trade to work short-time. The industry’s loss of its share of the world market between 1872 and 1913 coincides exactly with the extension of union influence. Japan and the China market, 1890–1930 During the nineteenth century China exerted upon the outside world an unremitting but illusory fascination. As ‘the land of 400 million customers’72 it seemed to be the jewel in the crown of Asian trade. For long ‘the sons of Han’ had clothed themselves in the traditional blue T-cloths (plain weave cotton cloths, exported in the loom state) and in grey shirtings. They dressed in cotton from head to toe and formed the largest population in the world. Their potential consumption was however limited by their poverty and remained below the average level of world per capita consumption. In 1869 China had become Lancashire’s second largest market for piece-goods. For Japan it fulfilled a triple function, first as a market for yarn, then as an outlet for cloth and finally as a sphere for investment in cotton mills. It remained Japan’s main market for forty years up to the imposition of the tariff of 1929. In the yarn trade Japan faced stiff competition from Bombay, which had surpassed Lancashire from 1883 in the supply of yarn to China. Only in 1914 did its shipments exceed those from India. They did not continue to expand but rather receded from the maximum volume attained in 1915. The cause of the recession was the Chinese boycott of 1915, which was an immediate response to the Twenty-One Demands of Japan on China, enunciated on 18 January 1915. The boycott lasted for six months (January–June 1915) and reduced the value of Japanese exports to China by 33 per cent. It inspired the positive encouragement of the use of Chinese-made goods and extended to Singapore, frustrating Japanese attempts to expand sales in Malaya. ‘The 1915 boycott marks the beginning of the decline in the cotton yarn imports from Japan which have each year been replaced to a greater and greater extent by yarn spun in the mills in China.’73 It inspired Count Makino (1861–1949) of Satsuma, the second son of Toshimichi Okubo, to remind his fellow-countrymen that the China market was ‘the foundation of our national prosperity’.74 In the market for cloth Japan had made significant advances before 1914, especially in the supply of ‘Japanese cloth’ (narrow nankeens), benzo-red cloth and

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Figure 4.1 The more-looms proposal in the Lancashire weaving trade, 1931 (Courtesy Textile Weekly, 26 June 1931).

T-cloths. After the Russo-Japanese War Japan captured the trade of both Korea and

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Manchuria from Lancashire as well as from the USA.75 Lancashire’s exports thus reached their peak levels to Korea and China in 1905 and to Manchuria in 1909. Those shipments were surpassed by those of Japan to Korea in 1908 and to Manchuria in 1909. Thus Japan developed the techniques of adversarial trade and became from 1909 a net exporter of cotton cloth. The great turning-point in the history of the China trade had already occurred during the year 1906. In that year the flow of imported machine-made cloth began a long-term decline from the peak volume recorded in 1905. That decline can be attributed only to the competition of the newly-improved hand looms, an achievement comparable to that effected from 1877 by the hand looms of Japan. In the total imports of piece-goods into China Japan may have remained subordinate to Britain, supplying in 1913 22.5 per cent of the total volume compared to the 57.2 per cent supplied by the United Kingdom. It nevertheless reduced the volume of Lancashire shipments by some 41 per cent (1906–10), forcing it to fall back upon the markets of the Empire. The war of 1914–18 brought about a massive and general reduction in the competitive capacity of British industry. It stimulated the expansion of manufacturing throughout Asia and undermined the position of Lancashire in every market of the continent. Japan became the main beneficiary by the distraction of its rival producer. It surpassed it successively in the supply to the China market of turkey-red cottons, dyed T-cloths and cotton flannel during 1915, of plain dyed shirtings, plain cotton prints, 36-inch T-cloths, jeans and cotton towels during 1916 and, above all, of cotton piece-goods in general during 1917. After the war Japan crowned its victory by surpassing Britain in the supply of lastings from 1918, of Italians from 1924 and of sateens from 1925. Lancashire preserved only a limited role as a minority-supplier of specialities. Japan retained command of the import trade of China from 1917 until 1928, a decade of national disintegration as power passed into the hands of regional warlords. On average China imported between 1903 and 1928 some three-fifths of the total value of Japan’s exports of cotton yarn and piece-goods. Japan survived the imposition of five boycotts (1908–23) and increased its shipments of cloth to China to a maximum in 1925, when they accounted for the peak proportions by value of 30 per cent of cloth-production and 54 per cent of the exports of piece-goods. The British response to Japanese competition proved to be late, limited and ineffective, revealing a profound failure to understand market-trends. The trade of Lancashire was severely affected by a fifteen-months’ boycott in 1926–27. That boycott reduced the export of British piece-goods to China by 42 per cent during 1927, cutting them back to the level last attained in 1856. It also dethroned China from the position which it had held since 1869, as the second export market to India. The dispatch of a British mission to the Far East in 1930 was undertaken twenty-five years too late. ‘Things are not as Manchester has so far seen them.’76 Total British exports to China continued to slump and were surpassed for the first time by those of Japan during 1936.77 From 1890 China had established its own spinning mills, in order to replace the rapidly rising imports of yarn by a native product. As a second mover, it profited by

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its late entry into the era of machine-spinning. All its mills were equipped with the most advanced technology in the form of British ring frames. They expanded their ring spindleage faster than in any other state in the world (1890–1930), at fourfold the average global rate and faster even than Japan itself between 1890 and 1899 and between 1905 and 1930. By adopting a labour-saving technology in a land of cheap labour they illustrated the Saxonhouse paradox. They used local cotton in order to spin the coarsest counts of yarn in the world, which provided ideal warps for local hand looms. Within a decade those mills had fulfilled their primary function and checked any further expansion in yarn imports beyond the peak volume recorded in 1899. The export-orientation of the mills of Bombay reached indeed its highest point in 1901 when yarn exports accounted for 61 per cent of total production. The mills of China benefited by successive boycotts but expanded their spindleage at less than half the rate (1902–36) of the Japanese mills in China. The first Japanese mill was founded on the mainland of Asia in 1902. Japan thereby made an immense strategic advance at the expense of Bombay by eliminating all of the charges incurred by Indian merchants between mill and market. That single mill was founded by Mitsui in Shanghai, so realising the dream frustrated in 1896. It succeeded in its initial function by checking any further increase in the shipments of yarn from Bombay after 1905. Its success encouraged the foundation of others from 1911, the year of the Chinese revolution, onwards. Those firms prospered beneath the protection of the extra-territorial jurisdiction enjoyed within the international settlements of the treaty ports: they expanded in number until 1925 and in capacity until 1936. Throughout they profitably employed labour which enjoyed a lower standard of living than that of Japan, was paid at half the rate customary in Japan and did not require the extensive welfare services provided in Japan. The impelling influence behind successive waves of Japanese investment inevitably underwent major changes. During the period 1902–14 the motive was simply to compete with the mills of Bombay as well as indirectly with those of Lancashire and the USA. The period 1915–20 witnessed the greatest absolute and relative increase in spindleage as the Japanese sought to offset the impact of the Chinese boycott of 1915 on Japanese yarn and cloth and of the sharp rise in Japanese wages (1917–20). By 1922 the price of yarn in the Chinese market was being determined on the Osaka Exchange.78 Thereafter the output of the mills in China undoubtedly helped to reduce the proportion of textiles in the exports of Japan. The number of Japanese spinning firms in China quintupled from three to fifteen (1920–25) while their spindleage increased by 66 per cent. A fourth wave of investment, especially in 1928–30, sought to offset the decline in cloth exports from Japan to China after 1925 and to profit from the maintenance of double-shift working in China after the abolition of night-work in Japan from 1929. Whether the increase in output compensated for the decline in Japanese exports to China must be left for future scholars to determine. The Chinese tariff of 1930 and the great boycott of 1931 cut back Japanese exports to China severely and extended to the products of Japanese mills in China itself. Those mills undertook their last phase

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of investment in 1934–36, in order to bypass the restrictions on production imposed upon mills in Japan by the spinners’ cartel. Japanese mills became the most efficient in China and in the world, as Tetsuya Kuwahara has cogently demonstrated.79 They imported all the best techniques of Japanese management and even made significant advances thereon. They avoided the shortcomings present in Chinese mills, especially the use of contractors to organise production, the disposition towards nepotism in appointments and the failure to maintain machinery at its most productive levels. They used mostly Chinese cotton but supplemented it with American and Indian cotton and secured a reduction in freight charges from Bombay after organising in 1925 their own trade association. The Japanese Cotton Spinners’ Association in China thus replicated the achievement made in Japan in 1893.80 The technique of blending raw cotton was developed, in association with its purchase in bulk at low cost. Managers ensured the systematic training of their amenable operatives, hiring in 1930 one Japanese to every forty-four Chinese and imposing a rigorous work discipline.81 They employed Japanese engineers but employed Chinese foremen as interpreters. They improved the techniques employed in the handling of materials and introduced automated bleaching as well as, from 1933, high draft spinning.82 They proved to be aggressive in their entrepreneurship and marketed their products through the local branches of Japanese cotton trading firms established in China. They fared much better than the Chinese mills during successive depressions in 1923–25, 1927, 1929–32 and 1934– 35, when the eventual extinction of the Chinese cotton industry was foretold.83 The mills expanded their capacity more than twice as fast (1902–36) as that of Chinese mills. By 1927 their cloth output had surpassed that of the Chinese mills. They increased their share of mill spindleage from 33 per cent in 1924 to 40 per cent in 1930 and to 44 per cent in 1936 and of power looms from 26 per cent to 42 per cent and to 49 per cent. They controlled an even larger share of the most up-todate equipment. Their demand for machinery enabled Japanese exports of textile machinery to China to surpass those of the UK from 1935. Within North China they established a virtual monopoly of the cotton industry, encouraging Chinese mills to retreat into the interior. Their output helped China to make the transition in 1927 to the net export of yarn. Indeed they exported yarn to Japan, where the weavers’ association sought to secure their cheaper yarn through the establishment in the early 1930s of a bonded warehouse, so as to curb the high prices of domestic yarn. From 1927–28 they began to compete with the parent mills of Japan in export markets, such as S.E. Asia and India.84 Their exports of cloth to Japan were temporarily prohibited in 1931. Japanese efforts to invest in coal or iron mining or in railway construction in China proved failures except for some enterprises launched by the South Manchuria Railway Co., established in 1906. Their cotton mills however became the most successful of multinational enterprises. The establishment of an industrial enclave upon Chinese soil and of an imperial outpost in North China remained a unique achievement in world history.

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The repercussions upon Lancashire, 1920–25 The war of 1914–18 left Lancashire with an overwhelming desire to return to normality and to its pre-war eminence. The years from 1920 to 1925 proved however to be a harrowing experience and wholly failed to persuade the industry that the loss of its advantages was permanent. The reduction in the hours of labour from 1919 below the average Japanese level diminished both production and productivity. The devaluation of the pound sterling in 1919–20 raised the price of raw cotton to intolerable levels and slashed mill-margins by two-thirds but failed to price Lancashire goods back into foreign markets. Short-time working was organised after the crisis of 1920 in order to control production and prices, continuing for the next six years. Unemployment increased sharply. Loan capital became increasingly scarce as companies became bankrupt, forcing survivors into greater dependence upon the banks. The production of yarn, especially of coarse counts, declined by 30 per cent (1912–24) and the exports of piece-goods by 36 per cent, reducing them to the level of 1885. Exports of cloth to the main markets of Asia collapsed, to India by 46 per cent, to the Dutch East Indies by 55 per cent and to China by 59 per cent. Much of the industry’s productive capacity became surplus to the requirements of the markets but spindleage was still expanding in Oldham and Bolton. The entrenched policy of free trade precluded the grant of official subsidies for any extensive cost-cutting rationalisation of the industry. Japan and the world economic depression, 1929–32 The meteoric ascent of Japan within the economic firmament had been anticipated by Western observers between 1895 and 1914 but was wholly unexpected by their successors in the 1930s. The world economic depression of 1929–32 marked the turning-point in the Anglo-Japanese duel, which assumed a new intensity within a shrinking world market. Japan was adversely affected by the exclusion of its exports from both the United States and the China markets. The loss of the US market for its raw silk exports deprived Japan of its sole and its best market for its main export and therefore of its principal source of foreign exchange. China’s recovery of tariff autonomy in 1929 was followed by the great Chinese boycott of 1931. The boycott was the immediate response to the occupation of Manchuria by the Kwantung Army as it set forth upon its march of destiny in Asia. It inflicted enormous damage upon Japanese trade: it reduced the exports of piece-goods from Japan, by the last quarter of 1931, to one-tenth of their average monthly level during 1930. Japan was thus impelled to undertake a desperate search for alternative staples and alternative markets. Its businessmen turned to other textiles and especially to the cotton industry. Of the four states which exceptionally expanded their exports of piecegoods during the depression, Japan, Spain, Portugal and Russia, only one made a major contribution to world consumption. Japan’s exporters benefited from stateaid and from the competitive devaluation of the yen by 50 per cent in 1931. Japanese exports sank by only half as much as the rest of the world (1929–31).

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During 1932 its manufacturers enjoyed an export boom, as export-prices sank by 43 per cent and the trading companies cut profit-margins to one-third of the level regarded as customary by British merchants. Japan doubled its share of the world market for piece-goods (1928– 32) and launched itself upon a career of unprecedented economic expansion. The year 1933 became a landmark in its economic history: it first surpassed Britain in the total volume of piece-goods exported, an achievement which was first recorded during August 1932. In 1934 it replaced raw silk by cotton manufactures as its principal export. Its shipments of cotton manufactures into the home market of the UK first surpassed in value during 1933 those shipped by Lancashire to Japan, so flooding British shops with cheap textiles. From 1935 Japan replaced Belgium as the main supplier of piece-goods to the British market. The impact of Japanese exports upon the world’s textile markets during the years 1932–33 shattered their whole equilibrium and shifted prices downwards to a permanently lower level, creating consternation and confusion amongst established producers. The complex of innovations which created that effect exemplifies Schumpeter’s paradigm of ‘creative destruction’. Nothing comparable to Japanese prices had ever been known before, either in scale or in range. ‘The figures of Japanese conquest in all fields are not merely large; they have no parallel in economic history.’86 ‘No conceivable wage reductions in Lancashire and no feasible re-organisation of the Lancashire industry can bring costs of production down to Eastern levels.’87 The explanations offered in the West for the commercial success of Japan were essentially a product of its culture—negative, superficial and uncomprehending. They derived their character from the prevalent sentiments of fear, ignorance, prejudice and what Goethe termed ‘the Spirit which always denies’. Western critics charged the Japanese with being merely imitators, exploiters and dumpers. They focused attention upon four factors. Two were particular, the influence of the 1914–18 war and the devaluation of the yen. Two were general, the employment of ‘conscript labour’ at ‘starvation wages’ and the dumping of goods abroad at uneconomic prices. Thus Freda Utley (1898–1978) explained the ‘feverish expansion of cheap manufactures’ as ‘a hunger export’, born of sheer desperation.88 Freda wholly neglected the immense benefits conferred upon the consumers of the world and Adam Smith’s judgement ‘Consumption is the sole end and purpose of all production.’ An exaggerated emphasis upon labour-costs was placed by social reformers, union agitators and zealous missionaries. Such critics cast themselves in the role of crusaders in the cause of civilisation and of its associated standard of living. Their explanations proved readily acceptable because they avoided any recognition of the general competitive capacity of Japan. The belief that Japanese supremacy in the textile markets of the world was based upon the employment of sweated or even of slave labour became firmly embedded in Western minds. That opinion was still firmly held in 1946 by Stafford Cripps, the President of the Board of Trade, despite its emphatic refutation by the British observer with the US Textile Mission to Japan, F.S.Winterbottom.89 The belief ignored the range of creative cost-cutting responses made within Japan to the

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challenges of the time. The large spinners undoubtedly used their financial resources in order to profit from speculation in futures in the raw cotton market in 1930–31. They also applied the techniques of scientific management more extensively than ever before. They completed the change-over in the driving-mechanism of machines to single electric motors. They also developed the techniques of cotton blending more intensively than ever before because Japan was importing from 1931 more American cotton than Britain itself. From 1931 they adopted high-draft spinning and air-conditioning, in order to control temperature and humidity and to facilitate the spinning of higher counts of yarn.90 Between 1929 and 1934 the number of spindles increased by 23 per cent, output per spindle rose by only 14 per cent but output per operative rose by 28.5 per cent. Similarly in weaving the number of looms rose by 14 per cent, output per loom increased by 10 per cent but output per weaver shot up by 40 per cent.91 Productivity thus rose dramatically as operatives drew inspiration from the ‘Nippon spirit’ and embarked upon a national crusade, waging ‘a glorious war they cannot lose’.92 Japan undoubtedly employed labour which was cheap in comparison to that of Lancashire but real wages remained higher in Japan than in any other state in Asia. Labour costs formed a smaller proportion of total costs than in many other Japanese industries. Japan’s lower costs of production were given public recognition in 1929 by Freda Utley and by Arno S.Pearse, who served as general secretary from 1905 to 1931 of the International Federation of Master Cotton Spinners’ and Manufacturers’ Associations.93 Pearse uncovered no evidence of unfair competition by Japan and commended its pattern of organisation to Lancashire as a model for emulation. Comparable recommendations were made by the journalist Benjamin Bowker (1893–1940) in 1930, by the merchant Barnard Ellinger in 1930 and by the chairman of Platt Bros., Sir Walter Preston, in 1934.94 Japanese firms also diversified their operations and undertook the manufacture of a variety of textiles, including silk yarn from 1929, tyre cord from 1931, rayon in 1933–35, wool from 1933 and sewing thread from 1935.95 The most significant achievement took place in the manufacture of artificial fibre, which had been pioneered during the 1920s. There Japan rose in status from the world’s second producer of rayon in 1933 to the first in 1936. It became the world’s largest exporter of rayon piece-goods, supplying in 1937 twenty times the volume shipped by the UK. A principal factor in Japan’s emancipation from dependence upon the West lay in the development of its own textile engineering industry. Shipments of textile machinery from the UK to Japan had declined from their peak level of 1922. MBK placed its last orders with Platt’s for power looms in 1928 and for ring frames in 1932. From 1929 Japan began to compete fiercely with Lancashire in the expanding China market for textile machinery and reduced the British shipments from their peak level of 1930. MBK professed a wish to avoid damaging price-competition with Platt Bros. It failed to convert the contract of 1929 for the manufacture of the Platt-Toyoda Automatic Loom into a quasi-partnership with Platt’s.96 Platt’s did not succeed in the manufacture and marketing of that loom. Only 290 looms were produced. Orders began to fall off before the machine was even tested. Only six firms

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placed repeat orders, passing a decisive judgement upon its value. The blue-prints shipped from Nagoya to Oldham contained in fact over a hundred errors. In 1931 a four-months’ test of six different automatic looms proved a triumph for the traditional Lancashire loom and won laurels for the Northrop automatic loom but revealed the existence of serious defects in the Platt-Toyoda automatic loom as manufactured in Oldham.97 During 1931 Japan benefited from the devaluation of the yen in order to make the transition to the net export of textile machinery. The sales by MBK of domestic-made textile machinery first surpassed its imports. Japan thus laid the foundation of its future eminence in the field of engineering.98 In 1931 MBK sought in vain to sponsor a merger between Platt Bros. and the two expanding companies of Toyoda Automatic Loom and Toyoda Loom.99 Finally, it acted in 1932 as mediator in the dispute between Platt’s and Toyoda, securing in 1934 a payment of £45,000 from Platt’s. Mitsui developed closer relations with Toyoda at the expense of its relations with Platt’s, launching in 1937 the Toyota Motor Corporation. When the English-language corporate history of Mitsui was published in 1973 no reference to Platt Bros. appeared anywhere in the text.100 The establishment of Japanese primacy in Asian markets: the Dutch East Indies and India As the China market shrank in size Japanese merchants looked further afield and especially towards the Dutch East Indies and Africa. They targeted the impoverished rural populations of Asia, where living standards were lower than in Japan and cheap fabrics a necessity to existence. Their exports of piece-goods surpassed in succession those from Lancashire to East Africa and the Philippines during 1925, to the Dutch East Indies during 1928, to Malaya during 1930 and to Ceylon and the Middle East during 1931.101 The capture of such remote markets clearly demonstrated that distance was no obstacle to Japanese trade or shipping. The Dutch East Indies had become an important market to Lancashire ever since 1874. That island-archipelago offered a much smaller market than either India or China. The population was however much more dependent upon imports because of the small size of the local textile industry, despite its monopoly of batik printing. It had moreover been increasing since the 1870s at a rate three times that of the population of India or China. By 1913 it was importing from Britain an estimated 46 per cent of its total consumption of cotton cloth. Japan had surpassed the Netherlands in the export of piece-goods to its East Indies once already during the years 1917–19. In the 1920s it undertook to cater to the specific needs of that market by supplying striped cloth and sarongs and by manufacturing bleached cambric, specially designed by Toyobo in 1927 for the production of batik. It also benefited from the co-operation first of local Chinese shopkeepers and then from 1931 of local Japanese retailers.102 Above all, Japanese prices remained much lower than those of the Dutch or the British. From 1929 the balance of payments shifted in favour of Japan, which also benefited from the depreciation of the yen against the guilder, so effectively halving prices.103 Thus Japan ousted in succession the products first of Lancashire and then of the

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Netherlands. Thereby it created a crisis in the cotton industry of Twente, 8,500 miles to the west, eliminating its profits and reducing the number of its employees by 11,800 or by 38 per cent (1929–33).104 The Dutch response was twofold. First, they introduced in 1934 protective quotas, so preventing Japanese exports from rising any higher. Secondly, they built a large manufacturing plant, which was inaugurated in 1937 in the province of Tegal in Java. The most impressive local response occurred however in the massive increase in the number of hand looms (1930–40), especially of the treadle loom launched in 1926 by the Textile Institute of Batavia (TIB). India had been since 1843 Lancashire’s largest single overseas market. The British capture of the original cradle of the cotton industry was a truly epoch-making event. ‘It was a major landmark in world history.’105 That market was progressively recaptured by the alliance forged by the country’s hand loom weavers with the new mills of Bombay, whose production first surpassed the volume of imports from 1918. During the 1920s India came to exert a growing attraction upon Japan. Under the pressure of the Chinese boycotts in 1908 and 1909 Japan had begun to make large-scale shipments to India of yarn from 1910– 11 and of piece-goods from 1911–12. During the postwar years it increased its exports especially during 1918, 1920 and 1924. It surpassed Lancashire as the main source of yarn imports from 1923 and shipped more yarn to India than to China from 1927. Toyo Menka failed to make the Toyo Podar Cotton Mills Ltd of Bombay into a base for expansion into the domestic market on the pattern of China, because the privilege of extraterritoriality was lacking. Japan’s achievement in the Indian market during the 1920s nevertheless remains well-nigh incredible. Japanese spinners could buy in Osaka raw cotton transported 5,000 miles from Bombay at lower prices than those quoted in Bombay. They spun it into yarn and wove the yarn into cloth in their own mills. Then they shipped the yarn and cloth 5,000 miles back to India, where it competed successfully with the products of native mills in their own market.106 Japanese superiority derived primarily from the higher productivity of its mill-girls and from its lower labour-costs. It was maintained despite a range of countervailing influences, including the higher cost of living in Japan, the higher wages paid in Japan, the imposition of an import duty in India in 1927, the grant of a preference upon Lancashire goods in 1930 and prophecies that ‘the outlook for Japan in India is not particularly promising’.107 During 1932 a large increase in Japanese shipments took place, raising them to their all-time peak volume, and India replaced China as Japan’s largest foreign market. There upon India in 1933 trebled the import duty upon Japanese cotton textiles, so precipitating a Japanese boycott of Indian cotton and a bitter commercial dispute. One hundred days of delicate and difficult negotiations, conducted in the English language, ended in the agreement of 5 January 1934 whereby trade between the two countries was to be based upon the barter of Indian cotton for Japanese piece-goods. Japan’s aspirations to surpass Lancashire in the supply of the Indian market, as it had in China, were crowned with ultimate but brief success. From May 1935 Japan replaced Britain as the chief supplier of cotton

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cloth to India and Burma, so leading the Calico Printers’ Association to establish two printworks in India in 1935–36. The main supplier of the Indian market, as in China, had become the domestic industry which in 1935–36 furnished some 83 per cent of total consumption.108 The void in Anglo-Indian commerce was filled by other goods, especially by machinery. India remained Britain’s largest overseas market for textile machinery from 1891 until 1969. Upon the outbreak of the SinoJapanese War in 1937 it became a rejoicing neutral, swelled its exports and became from 1941–42 a net exporter of cotton cloth. In 1950–51 it even became the world’s largest exporter of cotton fabrics. Thereafter it reduced its exports in the mistaken belief that the markets of the West were saturated. The vast local handloom industry continued to thrive beneath the protection conferred by Mahatma Gandhi, who on 31 August 1920 had pledged himself to wear khadi for the rest of his life.109 Japan conferred a double benefit upon the consumers of the world by the export of cheap cloth, not only by supplying their needs at a reduced outlay but also by maintaining low prices into the future. Its expansion into foreign markets nevertheless provoked a hostile reaction in the form of a neo-mercantilist defence of local producers rather than of consumers. Discrimination against Japanese goods was initiated by India from 1925, by China from 1929 and by Egypt from 1933. That example was imitated in 1934–36 by some fifty-three other states. In a remarkable response Japan increased its shipments to such markets by 17 per cent between 1932 and 1935. In contrast Lancashire succeeded in increasing its own exports to such markets in only a single year, 1934, and in only a single market, that of Malaya. Under such pressure Japan sought out new markets in the Middle East, in Africa and in America. It increased the shipment of piece-goods to non-Asian markets from 17 per cent of the total in 1928 to 59 per cent in 1934. Its exports of piece-goods surpassed those of Lancashire to the USA in 1935 and to South America in 1937. Those new markets failed however to compensate for the losses suffered in the older markets so that its exports began in 1936 to decline from their peak volume of 1935. Shipments to the three markets of China, India and the Dutch East Indies shrank from 79 per cent of its total exports of piece-goods in 1929 to 41 per cent in 1937. Japan had laid the basis of a world-wide commerce, of a new low-cost system of production and of a price-structure at least one-fifth less than that of Lancashire. It had become the heir of, and the successor to, Lancashire in the supply of a shrinking world market. During the second half of 1935 Japan surpassed India, France and Germany in its spindleage, so as to rank third in the world after the UK and the USA. Looking to the future while Lancashire looked to the past, Japan remained determined to expand its market-share. During 1934 Asia as a whole became once more a net exporter of cotton manufactures, re-establishing the cotton industry upon a factory basis in the lands of its birth and bringing to an end a century of dependence upon imports from the West. The economic emancipation of Asia was effected by Japan more than a decade before its political emancipation in 1947–49.

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Figure 4.2 Japanese competition in the Indian market, 1931 (Courtesy Textile Weekly, 29 May 1931).

The repercussions upon Lancashire, 1926–39 Some forty inquiries were held into the condition and prospects of the cotton

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industry (1926–39), after only four such inquests in the years between 1920 and 1925.110 The world economic depression increased unemployment in the industry by July 1930 to a higher degree than in any other industry: it inspired a flurry of efforts to reorganise the trade and to cut costs. The turnover of the packing and making-up trade was halved (1924–30). The production of piece-goods declined by 29 per cent (1924–37) and exports of piece-goods by 69 per cent (1925– 38), reducing them to the level of 1852.111 The loss of the Asian market for piecegoods alone accounted for the decline in the total value of British exports (1913– 39). The home trade increased in importance to surpass the export trade, first in value in 1931 and then in volume in 1936.112 Two great amalgamations were created in 1929 at the behest of the Bank of England in order to relieve the pressure upon the banks of Lancashire.113 They were formed in the American and Egyptian spinning trades after the failure of earlier attempts in 1926 and 1927. Five successive attempts to force amalgamation upon the weaving industry however failed. Several attempts to merge merchanting firms also failed. Sir Walter Preston’s scheme of 1934 for the total reconstruction of the industry upon Japanese lines was flatly rejected by the trade. The number of firms was reduced by 700 or by 37 per cent (1925–38), the number of looms by 43 per cent (1919–39) and the number of mule spindles by 41 per cent (1926–38) but the number of ring spindles by only 23 per cent. The number of employees sank by 45 per cent (1920–39) and the number of trade union members by 43.5 per cent (1920–38), a reduction which hit the weavers’ union harder than that of the spinners. On 19 December 1932 the Manchester Chamber of Commerce established a Special Committee on Japanese Competition.114 The government proved however most reluctant to offer any aid to the cotton industry. No cotton union MPs sat in the House of Commons between 1931 and 1938. The influence of the cotton unions in the Trades Union Congress was declining. The economic policy of the government was determined by the agricultural, steel and oil industries. Its foreign policy became one of the appeasement of Japan, in order to keep a bridle upon Bolshevik Russia. Stanley Baldwin’s fatuous proposal in 1932 for the formation of a world cartel by the 2,200 manufacturing firms in the UK, India and Japan epitomised the laissez-faire policy of the government. The cotton industry was thus reduced to the status of ‘the Cinderella of British industries’.115 Import duties were indeed introduced in 1932 on yarn and cloth and, after the failure of four Anglo-Japanese conferences, preferential quotas were imposed in the Crown Colonies in 1934.116 The Empire markets for Lancashire piece-goods increased their share of total exports from 54 per cent in 1929 to 63 per cent in 1938. The morale of Lancashire manufacturers was shattered by the conflict with Japan, entrenching a defeatist mentality. They recognised that no cost-reduction on their part could prove effective and they accepted Japanese superiority as overwhelming.

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Figure 4.3 Great expectations were aroused in Lancashire by the Cotton Industry Reorganisation Act of 1939 which was, however, shelved on the outbreak of war (Courtesy Daily Dispatch, 31 January 1939).

The challenge by the mainland of Asia to Japan, 1945–90 Japan was better placed and better equipped than the industrial powers of the West to cope with any external challenge, because of its understanding of the capacity of its neighbouring rivals. Its textile industry was the most highly developed, diversified and productive in the world. The core-competence of its leading firms endowed them with immense survival-capacity. The foundation of its export trade upon the principle of ‘triple teaming’ entailed the closest possible collaboration between manufacturing, mercantile and banking interests. From 1951 Japan had become once more the world’s leading exporter of cotton piece-goods. From 1950 Japan had once more reversed the eastward flow of textiles from the West. The textile trade of the world was however transformed after 1945 by the expansion in production of manmade fibre at the expense of cotton. The share of raw cotton in world fibre production declined from 85 per cent in 1920 to less than half of the total in 1975. During 1987 per capita consumption of cotton reached an all-time peak level in China, in Asia and in the world. Textile firms became multifibre and multi-process concerns. The international federation twice changed its title, in 1954 and in 1978, becoming the International Textile Manufacturers’ Federation. The basic pattern of international trade underwent a fundamental change as exports of clothing

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expanded faster from the mid-1950s than exports of textiles, surpassing them in value from 1987. That transformation opened up new opportunities for three small states in East Asia. Those states shared common characteristics. All lacked natural resources but had ample resources of cheap labour, ideal for deployment into export-led textile production. All had experienced Japanese administration and found the perfect model for emulation in Japan. Their success in that competition proved rapid and unprecedented. Thus the exports of clothing from Hong Kong surpassed those from Japan from 1963. Its exports of yarn followed suit from 1965, as did its exports of cotton cloth from 1970. Taiwan and South Korea developed much larger textile industries and became much more specialised in textile-export than Hong Kong. Taiwan overtook Japan in two separate waves of expansion, first in exports of cotton yarn in 1969 and in exports of clothing in 1973 and secondly, in exports of cotton cloth in 1973–81 and again in 1986, in the production of man-made fibre in 1989 and in exports of textiles in 1990.117 South Korea followed a similar pattern, overhauling Japan in two distinct phases. It made however a much greater impact than Taiwan by invading the domestic market of Japan. First, it served as the main source of supply as Japan became from 1967 a net importer of yarn. Secondly, it overtook Japan in exports of clothing from 1972 and in exports of textiles from 1990. The impact of the imports from Korea was considerable because it embodied a reversion to the pattern of the late nineteenth century, an age which lay outside the experience of living Japanese. Japan recorded the peak volume of exports of cotton fabric in 1960 and the peak volume of production of natural-fibre fabric in 1961. Its loss of market-share proved however to be much slower than that of Lancashire, as a comparison of the experience of Lancashire in 1913–39 with that of Japan in 1960–87 will show. The production of cotton cloth declined somewhat more slowly in Japan than in Lancashire, at average annual rates of 2.4 per cent and 2.55 per cent. The export of cotton yarn declined however much more rapidly (7.8 per cent:2.4 per cent) while the export of finished cloth declined much more slowly (3.7 per cent:5.8 per cent). Under the guidance of the general trading companies, the textile manufacturers moved with all deliberate speed and confidence along the path of reorganisation and re-equipment.118 They benefited from the passage of four laws in 1956, 1967, 1974 and 1979 which were designed to encourage restructuring and vertical integration. Postwar diversification was pioneered by Kanebo from 1949 and accelerated from 1961.119 Textile firms were protected from competition not only by the preference of consumers for native products but also by seventeen different types of restriction upon imports, although the import duty on textiles was much lower than that on clothing.120 Yarn spinners formed their own protective cartel in order to limit the extent of Korean competition. Thus import-penetration was for long successfully limited to a greater degree than in other industrial states. The general trading companies served as parents, partners and guides. They became the most highly-developed form of trans-national conglomerates. From the 1960s they became major players upon the economic stage, as agents of change,

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transformation and acceleration. Those companies possessed large financial resources as well as immense powers of organisation, of intelligence-gathering, of network-creation and of integration of diverse functions. They became the supreme and systematic organisers of production, co-ordinating all the complex aspects of a multi-functional business. Serving as constant monitors of the market, they transmitted its signals speedily to manufacturers. They master-minded the transformation of the textile giants into multi-fibre, multiprocess firms. They imported cheap textiles but also invested in foreign production-facilities, in order to overcome the high costs of production in Japan. The textile firms developed new labour-saving techniques and moved away from the labour-intensive processing of natural fibres towards the capital-intensive production of man-made fibres. Thereby they enhanced the amount of value added to their products and replaced the import of raw cotton by the domestic manufacture of chemicals. The swelling production of synthetic fibre plunged the natural-fibre industry into ‘the polyester depression’ of 1971–75. Increasingly firms specialised in the high-technology processes of manufacture and sub-contracted other processes off-shore.121 Successive waves of foreign investment took place in 1971–74, in 1976–78 and in 1983–86, shifting some textile production to Korea, to Taiwan and even to China. In the 1980s the emergence of China as a textile superpower faced Japan with its greatest challenge. China had made textiles into its principal export in 1960. From 1969 it became the world’s largest exporter of cotton cloth, in succession to Japan, as well as a net exporter of textile machinery. It surpassed Japan first in cotton spindleage in 1967 and then in cotton loomage from 1971. It exceeded Japan in the value of its exports of clothing, probably in 1974, and exported in 1979 fourfold as much clothing as Japan. It surpassed Japan in textile exports in 1985 and. in the volume of production of man-made fibre in 1992. From 1983 Japan began to import more textiles from China than from Korea. It remained unique amongst the states of Asia in making the transition, like the states of the West, to the net import of cotton yarn from 1967 and of garments from 1973. The share of exports in its total production of textiles remained relatively stable until 1986.122 After the climacteric of 1961 Japanese supremacy in the textile world was prolonged for a further twentyfive years. From 1969 to 1984 Japan remained the second largest exporter of textiles as well as the second largest exporter of textile machinery. Finally, it became a net importer of cotton fabric during 1987, after earlier import-surges in 1974, 1979 and 1984. It also became a net importer of textiles in general during 1987. Thereafter its trade deficit in textiles and clothing increased rapidly and to a greater extent than that of Britain. In 1990 Japan still remained a major textile power and a net exporter of both chemical-fibre yarn and fabric and synthetic yarn and fabric. The level of employment in its clothing industry began to decline after 1992. Its leading textile firms nevertheless survived into the twenty-first century, suffering an inevitable loss in status but diversifying their operations and maintaining an unblemished record of profitability. Thus its textile industry avoided the fate suffered by those of the USA and the UK.

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The repercussions upon Lancashire, 1945–90 During the postwar boom of 1946–51 total bank clearings in Manchester reached in 1951 a peak which was surpassed only in 1959. Manufacturing employment in the region reached an all-time peak for men in 1951 and for women in 1961. Thenceforward a long-term depression encompassed Lancashire. From 1950 the cotton industry ceased to generate foreign exchange, after the devaluation of 1949. So dominant had the industry been in the export trade that thirty years of shrinkage (1914–42) were necessary in order to dethrone it. It finally lost its primacy in the export trade in 1942. Its status as an export industry declined from the first in 1941 to the eighth in 1956 and its share of exports sank from 12 per cent in 1941 to 2.8 per cent in 1956. From 1960 Britain became a net importer of cotton manufactures and of clothing, so ending the era which had dawned in 1788. Five sharp reductions in banking turnover occurred in 1952, 1956, 1958, 1962 and 1967. From 1952 mills closed down faster than ever before. The flow of cheap imports increased from 1955 to a torrent and made Britain by 1958 the world’s largest importer of cotton cloth. The Manchester Chamber of Commerce petitioned the government in 1958 for protection, so finally abandoning its traditional faith in free trade. Britain and the USA together built up the protective barriers which culminated in the Multi-Fibre Arrangement of 1974. The introduction of nightshifts in the mills from 1959, employing Asian immigrants, failed to check the pace of decline. Lloyds Packing Warehouses sold all its warehouses in 1959. The cotton exchanges closed down in Liverpool in 1963 and in Manchester in 1968. The great family firms and partnerships of Lancashire wound up their affairs, leaving only six still in business in 1990. The headquarters of the International Cotton Federation was transferred in 1963 from Manchester to Zurich. When the British Textile Council was established in 1972 it set up its headquarters in London. Unemployment rates rose sharply in 1962–63, particularly penalising juveniles. All the subsidiary industries collapsed, ending the local production of steel in 1970 and of pig iron in 1972. From 1962 a revisionist onslaught was launched upon the role of the cotton industry during the Industrial Revolution and upon the significance of the region in British history. That bold historical revision was ignored in Japan and in Lancashire but earned acceptance by the new economic historians. The decline and fall of the Lancashire cotton industry represented ‘the most terrible retreat in the history of industry.’123 ‘The British textile industry is the only textile industry in the world which is not considered to be an essential integral part of the national economy’ Scholars have never tired of debating the causes of its decline and of indulging in the pastime of giving ‘lectures to the dead’. What is surely most important is not the contraction of that industry but the long duration of its primacy. The decline of the Lancashire cotton industry remains the least significant feature of its long history: its influence changed the world for ever.

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Acknowledgements The authors acknowledge with gratitude the most helpful comments made upon an early draft of this chapter by Professors Gerhard Adelmann and Lynden M. Moore. The statistical sources are listed in the article ‘Mengyô to Ajia Shijô: 1890–1997 Nen’ (‘The Asian Market for Cotton Manufactures, 1890–1997’), in Nempô Kindai Nippon Kenkyu (Journal of Modern Japanese Studies), 19, 25 Nov. 1997, 44–83. Additional data have been helpfully supplied by Professors Takeo Izumi and Heita Kawakatsu. to whom the authors remain indebted. Notes The place of publication of all English language sources cited is London unlessotherwise stated. 1 W.Lazonick, Organisation and Technology in Capitalist Development (Aldershot, 1992), vii–xvii, ‘Placing History at the Service of Economics’. W.Mass and W.Lazonick, ‘The British Cotton Industry and International Competitive Advantage: the State of the Debates’, Business History, 32:4, Oct. 1990, 8–65. 2 D.A.Farnie, ‘The Structure of the British Cotton Industry, 1846–1914’ in Akio Okochi and Shin-ichi Yonekawa (eds.), The Textile Industry and its Business Climate. Proceedings of the Fuji Conference (Tokyo, 1982, International Conference on Business History, vol. 8), 69,‘The Influence of Competition upon the Structure of Industry’. 3 R.Skidelsky, John Maynard Keynes. II: The Economist as Saviour, 1920–1937 (1992), 263. D.Moggridge (ed.), The Collected Writings of John Maynard Keynes (1981), XIX:ii, 578–637. 4 J.S.Toms, ‘Financial Constraints on Economic Growth: Profits, Capital Accumulation and the Development of the Lancashire Cotton Spinning Industry, 1885–1914’, Accounting, Business and Financial History, 4:iii, 1994, 363–83. Chikage Hidaka, Eikoku Mengyo Suitai no Kozo [The Decline of the British Cotton Industry] (Tokyo, 1995). Textile Mercury, 17 February 1939, Supplement (Annual Trade Review), 26. 5 Duncan Gurr and Julian Hunt, The Cotton Mills of Oldham (Oldham, third edition, 1998), 97. H.Neville Davies, Moscow Mill and its People (Oswaldtwistle, 1974) Allan Ormerod, An Industrial Odyssey. Memoirs of an Engineer and Textile Industrialist in a career extending from 1936 to 1995 (Manchester, Textile Institute, 1996), 125. 6 H.A.Turner, Trade Union Growth, Structure and Policy. A Comparative Study of the Cotton Unions (1962), 113, charted the formation of over 200 unions and associations. Arthur Marsh, Victoria Ryan and John B.Smethurst, Historical Directory of Trade Unions (Aldershot, 1994), Vol. 4, 13 220 listed 494 recorded unions. The number of cotton unions in existence rose by 23 per cent from 137 in 1899 to 168 in 1924. 7 Margaret Cole (ed.), Beatrice Webb’s Diaries, 1924–1932 (1956), 115, 10 September 1926. 8 W.Miles Fletcher III, ‘The Japan Spinners’ Association: Creating Industrial Policy in Meiji Japan’, Journal of Japanese Studies, 22:i, 1996, 49–75. 9 Arno S.Pearse, The Cotton Industry of Japan and China (Manchester, 1929), 110. Takeo Izumi, ‘The Japanese Cotton Industry: a Study in its Structural Change during

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10 11 12

13

14 15 16 17 18 19

20

21 22

23 24 25

the late Meiji era’, The Economic Bulletin of Senshu University, 8, 1969, 139. Naosuke Takamura, Nippon Boseki-gyo-shi Josetsu [The History of the Cotton Spinning Industry in Meiji Japan] (Tokyo, 1971, 2 vols.). Keizo Seki, The Cotton Industry of Japan (Tokyo, 1956), 88. Toyobo Co. Ltd. i ed.), Toyo Boseki 70 Nen-shi [The Seventy-Year History of Toyobo] (Osaka, 1953), 181–2. Gregory Clark, ‘Why Isn’t the Whole World Developed?: Lessons from the Cotton Mills’, Journal of Economic History, 47, 1987, 141–73. Alexander K.Young, The Sogo Shosha: Japan’s Multi-National Trading Companies (Boulder, Colorado, 1979). Hidemasa Morikawa, Zaibatsu: The Rise and Fall of Family Enterprise Groups in Japan (Tokyo, 1992). Kunio Yoshihara, Sogo Shosha: The Vanguard of the Japanese Economy (Tokyo, 1982). Ken’ichi Yasumoro, ‘The Contribution of Sogo Shosha to the Multinationalisation of Japanese Industrial Enterprises in Historical Perspective’, in Akio Okochi and Tadakatsu Inoue (eds.), Overseas Business Activities. Proceedings of the Fuji Conference (Tokyo, 1984: The International Conference on Business History, 9), 65–94. Shin-ichi Yonekawa and Hideki Yoshihara (eds.), Business History of General Trading Companies. Proceedings of the Fuji Conference (Tokyo, 1987: The International Conference on Business History, 13). The precise date differs according to the trade statistics of the UK for exports (1869) or those of Japan for imports (1877). Heita Kawakatsu, ‘lnternational Competition in Cotton Goods in the Late Nineteenth Century, with special reference to Far Eastern Markets’ (University of Oxford, DPhil. Thesis, 1984), 130. H.Kawakutsu, op. cit., 177. Ibid., 179–80. Ibid., 177 F.Merttens, ‘The Hours and Cost of Labour in the Cotton Industry at Home and Abroad’, Transactions of the Manchester Statistical Society, 18 April 1894, 128, 173. J.E.Orchard, Japan’s Economic Position, The Progress of Industrialisation (New York, 1930), 432. Textile Manufacturer, 21 April 1895, 122; 22 June 1896, 202. G.E.Paulsen,‘Machinery for the Mills of China: 1882–1896’, Monumenta Serica, 27, 1968, 336–42. Kaoru Sugihara, ‘Patterns of Asia’s Integration into the World Economy, 1880– 1913’ in W.Fischer et al. (eds.), The Emergence of a World Economy 1500–1914 (Wiesbaden, 1986), Part II, 725. Idem, ‘Japan as an Engine of the Asian International Economy, c 1880–1936’, Japan Forum, 2:i, April 1990, 135–6. The Rocket, 15 Oct. 1896, 229,‘Lancashire v. Japan. Is the CottonTrade Doomed?’ North American Review, 163, Aug. 1896, 148, Robert P.Porter (1852–1917), ‘Is Japanese Competition a Myth?’, quoting Kentaro Kaneko (1853–1942), the ViceMinister for Agriculture and Commerce (1894–98) and a Harvard graduate. Robert Porter had been the Superintendent of the Eleventh US Census of 1890. Mass and Lazonick, op. cit., 33–49. J.E.Orchard, op. cit., 219–20, for a dissenting opinion. Takeshi Abe, ‘The Development of the Putting-Out System in Modern Japan: The Cotton Weaving Industry’ in Konosuke Odaka and Minoru Sawai (eds), Small Firm, Large Concerns (Oxford, 1999), 222–3. J.B.Sharp, Letters on the Exportation of CottonYarns (1817), 16.

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26 Matao Miyamoto, ‘The Products and Market Strategies of the Osaka Cotton Spinning Company: 1883–1914’, Japanese Year Book on Business History, 5 1988, 117. Kozaburo Kato, ‘Yamanobe Takeo and the Modern Cotton Spinning Industry’ in Erich Pauer (ed.), Papers on the History of Industry and Technology of Japan Vol. II: From the Meiji Period to Post war Japan (Marburger Japan-Reihe, 14:2, 1995), 12. Yotaro Sakudo, ‘The Establishment and Development of a Textile Company in Japan: Historical Development with Emphasis on the Case of the Osaka Spinning Company and the Toyo Spinning Company, 1882–1914’, Osaka Economic Papers, 35:2.3, Dec. 1985, 308–9. G.R.Saxonhouse, ‘A Tale of Japanese Technological Diffusion in the Meiji Period’, Journal of Economic History, 34, March 1974, 151–2. 27 D.A.Farnie and Shin-ichi Yonekawa, ‘The Emergence of the Large Firm in the Cotton Spinning Industries of the World, 1883–1938’, Textile History, 19:2, Autumn 1988, 180. 28 R.P.Porter, op. cit., 147. Takeshi Abe and Osamu Saito, ‘From Putting-out to the Factory: a CottonWeaving District in Late Meiji Japan’, Textile History, 19:2, 1988, 143–58. Takeshi Abe, ‘The Development of the Producing Centre Cotton Textile Industry in Japan between the Two World Wars’, Japanese Year Book on Business History, 9, 1992, 3–27. 29 Takeshi Abe, op. cit. (1999), 222–3. 30 Kazuo Sibagaki, Nippon Kinyu Shihon Bunseki [An Analysis of Finance Capital in Prewar Japan] (Tokyo, 1965). 31 The rest of the paragraph is based upon statistical data most helpfully supplied by Professor Takeo Izumi. 32 Textile Mercury, 14 May 1892, 35. 33 The Engineer, 4 Feb. 1898, 97; 25 Feb., 178, ‘Modern Japan—Industrial and Scientific. The Patenting of Inventions’. 34 Keizo Seki, op. cit., 362, 368. 35 A.Kertesz, Die Textilindustrie Sämtlicher Staaten (Braunschweig, 1917), 574. 36 Keizo Seki, op. cit., 296–8. 37 Hiroshi Nishikawa, Nippon Teikokushugi to Mengyo [Japanese Imperialism and the Cotton Industry], (Kyoto, 1987). Peter Duus, ‘Zaikabo: The Japanese Cotton Mills in China, 1895–1937’ in P.Duus et al. (eds.), The Japanese Informal Empire in China, 1895–1937 (Princeton, 1989), 65–100. 38 Keizo Seki, op. cit., 5. 39 Takeo Izumi, Transformation and Development of Technology in the Japanese Cotton Industry (Tokyo, United Nations University, 1980), 86. 40 W.D.Wray, Mitsubishi and the N.Y.K., 1870–1914. Business Strategy in the Japanese Shipping Industry (Cambridge, Mass., 1984), 293–302. 41 Keizo Seki, op. cit, 150. 42 Hidemasa Morikawa, op. cit, 36, 48. 43 Platt Bros., Machine Order and Delivery Books, Foreign, No. 16, May 1882–Oct. 1883, listed at DDPSL 1/78/16, pp. 5–6, in the Lancashire Record Office at Preston. 44 Consular Reports, No. 766, Hiogo, 10 June 1890, 4–5, Consul J.H.Longford. 45 Hidemasa Morikawa, op. cit, 61. 46 The Engineer, 25 Feb. 1898, 223, mistakenly affirms that Mitsui employed ‘not very far short of 2,000’ operative engineers. 47 Manchester Guardian, 15 March 1902, 5 iii; 17 April, 4 vii; 27 May, 9 vi.

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48 J.F.Watson, The Textile Manufactures and the Costumes of the People of India (1866; Varanasi, 1982). Agnes M.M.Lyons, ‘The Textile Fabrics of India and Huddersfield Cloth Industry’, Textile History, 27:ii, Autumn 1996, 172–94. 49 Report of the Mission to China of the Blackburn Chamber of Commerce 1896–7 (Blackburn, 1898, 2 vols.), by F.S.A.Bourne (1854–1940), who spent forty years (1876–1916) in the China Consular Service. 50 Manuscript evidence of James Fletcher and Samuel Andrew of Oldham, submitted in 1885 to the Royal Commission on the Depression of Trade and Industry, excluded from the printed minutes of evidence of the Commission and listed at OLD/2/16 in the papers of the Oldham Textile Employers’ Association, deposited in the John Rylands Library in Manchester. 51 Manchester Guardian Commercial, 16 Feb. 1922, 272. 52 W.A.G.Clark, ‘Cotton Mills in Japan. Capital Costs’, Manchester Guardian, 25 Jan. 1907, 10 iii. W.A.G.Clark, Cotton Goods in Japan (Washington, Dept. of Commerce S.A.S. No. 86, 1914), 212. 53 Ryoshin Minami, Power Revolution in the Industrialisation of Japan: 1885–1940 (Tokyo, 1987), 202–7. 54 Janet Hunter, ‘BritishTraining for Japanese Engineers: the Case of Kikuchi Kyozo (1859–1942)’ in H.Cortazzi & G.Daniels (eds.), Britain and Japan: Themes and Personalities (1991), 144. 55 Information helpfully supplied by Professor Tetsuya Kuwahara. 56 Takeo Izumi, op. cit, 20. 57 Keizo Seki, op. cit., 57–59, 90–91. 58 A.S.Pearse, The Cotton Industry of India (Manchester, 1930), 39. 59 Keizo Seki, op. cit., 328. 60 A.S.Pearse, op. cit., 53. 61 Koji Taira, ‘Economic Development, Labor Markets and Industrial Relations in Japan, 1905–1955’; in P.Duus (ed.), The Cambridge History of Japan, vol. 6 The Twentieth Century (Cambridge, 1988), 619. 62 G.R.Saxonhouse, ‘Country Girls and the Japanese Cotton Spinning Industry’; in Hugh T.Patrick (ed.), Japanese Industrialisation: Social Consequences (Berkeley, 1976). 63 Takeshi Abe, ‘Mengyo’ [Cotton Industry in the Inter-war Period] in Haruhito Takeda (ed), Nippon Sangyo Hatten no Dainamizumu [Historical Studies on the Competitive Advantage of Japanese Industries during the 20th Century] (Tokyo, 1995), pp. 35–77. Takeo Izumi, ‘The Cotton Industry’, The Developing Economies, 17:4, Dec. 1979, 408– 12. 64 Takeshi Abe, op. cit. (1995). Takeo Izumi, op. cit. (1980), 74. 65 Takejiro Shindo, Labor in the Japanese Cotton Industry (Tokyo, 1961), 122–3. 66 Textile Recorder, 42, May 1924, 58; 43, March 1925, 88–91. 67 R.Robson, The Cotton Industry in Britain (1957), 95–101. 68 The Times, 27 Dec. 1883, 2i, ‘CottonTrade Socialism’. 69 E.Cass, A.Fowler and T.Wyke, ‘The Remarkable Rise and Long Decline of the Cotton Factory Times’, Media History, 4:ii, 1998, 141–59. 70 Textile Mercury, 7 March 1914, 191, ‘The Home Office and the Cotton Weaving Industry’. 71 Manchester Guardian, 15 May 1931, 17 iv. ‘Lancashire and the East. Candid Comments from Japan’, citing Gennosuke Fukumoto of Dai Nipponbo and Fusajiro Abe (1868–1937), president of Toyobo.

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72 73 74 75 76

77 78 79

80 81 82 83 84

85 86 87 88 89 90 91

92

93

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Carl Crow, Four Hundred Million Customers (1937). J.E.Orchard, op. cit., 455. Ibid., 451. Manchester Guardian, 6 June 1911, 10 v, 9 June, 12 iv; 13 June, 13 iv, 28 June 14 v, A.S. Lewis. Marguerite Dupree (ed.), Lancashire and Whitehall. The Diary of Sir Raymond Streat (Manchester, 1987), i, 1931–39. 7, citing Sir Ernest Thompson’s letter of 14 Dec. 1930 to E.R.Streat. L.Hsiao, China’s Foreign Trade Statistics, 1864–1949 (Cambridge, Mass., 1974). China Weekly Review, 23 Dec. 1922, 142. Tetsuya Kuwahara, ‘The Local Competitiveness and Management of Japanese Cotton Spinning Mills in China in the Inter-war Years’ in D.J.Jeremy (ed.), International Technology Transfer: Europe, Japan and the U.S.A., 1700–1914 (Aldershot, 1991), 147– 66. Naosuke Takamura, Kindai Nippon Mengyo to Chugoku [The Modern Japanese Cotton Industry and China] (Tokyo, 1982). Tetsuya Kuwahara, op. cit., 159, 163. Ibid., 153, 164. Takeshi Abe, op. cit. (1995). G.E.Hubbard, Eastern Industrialisation and its Effect upon the West (1935, 1938), 200, 234. Rockwood Q.P.Chin, ‘Cotton Mills, Japan’s Economic Spearhead in China’, Far Eastern Survey, VI:23, 17 Nov. 1937, 264–65, an abstract of the author’s doctoral thesis submitted to Yale University in 1937. C.F.Remer and W.B.Palmer, A Study of Chinese Boycotts (Baltimore, 1935), 222. W.G.Fitzgerald (‘Ignatius Phayre’), ‘Japan’s “World War” in Trade’, Quarterly Review, Jan. 1935, 11. Freda Utley, What’s Wrong with the Cotton Trade? An Explanation of the Present Depression (1930), 17. Idem, Japan’s Feet of Clay (1936), 53, 201. G.C.Allen, Appointment in Japan. Memories of Sixty Years (1983), 79, 176. Daily Dispatch, 30 May and 1 June 1946, ‘Lancashire Told to Follow Japan’s Methods’. Takeshi Abe, op. cit. (1998), 25–35. Takeo Izumi, op. cit. (1980), 74–75. Idem, ‘Senkanki Sekai Menpu Shijo ni okeru Nichi-Ei Mengyo no Kakushitu ni tuite no Josho: 1920 Nendai no Tenkai’ in Senshu Keizaigaku Ronshu, 27; 2, March 1993. [‘An Introduction to the Competition of Japanese and British Cotton Industries in the World Textile Market in the Inter-war Period: its Development in the 1920s’]. Idem, ‘1930 Nendai Sekai Mempu Shijo ni okeru Nichi-Ei Mengyo no Kakushitsu’ [‘Competition for the Share of the World Textile Market between Japanese and British Cotton Industries in the 1930s’] in Shakai Kagaku Nempo (Senshu Univ.), 27 March 1993. Quarterly Review, April 1936, 343 ‘Militant Idealism of Japan’, citing Koyata Yamamoto, textile magnate, in the Osaka Mainichi. J.E.Orchard, op. cit., 346, 367, 481–82. F.Utley, ‘Cotton Trade Costs of Production in Japan. I—Spinning’; Manchester Guardian Commercial, 25 April 1929, 490. Idem, ‘Cotton Trade Costs of Production Japan. II—Weaving’, Manchester Guardian Commercial, 2 May 1929, 517–18. A.S. Pearse, ‘Why the Japanese Cotton Industry Succeeds’, Textile Weekly, 31 May 1929,

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94 95 96

97

98 99

100 101 102

103 104 105 106

107 108 109 110

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114

329. Idem, ‘The Cotton Industry of Japan, China and India’, International Affairs, 11, 1932, 651. B.Bowker, ‘How Can Lancashire Stop the Rot?’, Daily News, 13 Jan. 1930. Takeshi Abe, op. cit. (1995) Ryoshi Minami, The Economic Development of China. A Comparison with the Japanese Experience (1994), 120. Olive Checkland, Britain’s Encounter with Meiji Japan, 1868– 92 (1989), 31. Journal of the Textile Institute, 23:3, March 1932, 25–42, John Ryan, ‘Official Report concerning a Test of Automatic Looms, etc. made in 1932 by the Lancashire Cotton Corporation Ltd.’ J.R.McCulloch, A Descriptive and Statistical Account of the British Empire (1854), I, 649. Yutaka Taniguchi, ‘Sen Kyuhyaku Sanju Nen Zengo no Boshoku Kikai Kogyo ni okeru Nichiei Kankei no Ichi Danmen: Puratto Ryotoyoda no Gappei (Goben) Mondai wo Megutte’ [One Phase of Japanese-British Relations in Textile Machinery Industries circa 1930: Focus on the Merger Problem between Platt and both Toyodas] in Oishi Kaichiro (ed.), Ryotaisenkanki Nippon no Taigai Kankei [International Economic Relations during the Inter-war Period], Nippon Keizaihyoronsha, 1992, pp. 89–129. John G.Roberts, Mitsui (New York, 1973). H.Shimizu, Anglo-Japanese Trade Rivalry in the Middle East in the Inter-war Period (1986). Shinya Sugiyama, ‘The Expansion of Japan’s Cotton Textile Exports into Southeast Asia’, in Shinya Sugiyama and Milagros C.Guerrero (eds.), International Commercial Rivalry in Southeast Asia in the Inter-war Period (New Haven, 1994), 64. Ibid., 51, 61. H.Kockelkorn, ‘Conjunturele ontwikkeling van de Twentse katoenindustrie, 1925– 1965’, Textielhistorische Bijdragen, 29, 1989, 100. E.J.Hobsbawm, The Age of Revolution, 1789–1848 (New York, 1962), 53. Far Eastern Review, 22 Sept. 1926, 400–3, ‘Why Bombay Mills Cannot Compete with Japanese Mills’. Yukihiko Kiyokawa, ‘Technical Adaptation and Managerial Resources in India: A study of the Experience of the CottonTextile Industry from a Comparative Viewpoint’, The Developing Economies (Tokyo, 1983), xxi, 197–233. J.E.Orchard, op. cit. 438, 442. A.K.Bagchi, Private Investment in India, 1900–1939 (Cambridge, 1972), 227. M.K.Gandhi, The Wheel of Fortune (Madras, 1922, bound in khadi and reviewed in the Manchester Guardian Commercial, 15 June 1922, 743). Amalgamated Weavers’ Association, 62nd Report and Statement of Accounts for Year ending March 31st, 1946 (Ashton-under-Lyne, 1946), 47–51, Edwin Hopwood’s bibliography (1907–40). Manchester Guardian, 4 May 1938, 8 ii, ‘Back to 1852?’, by A.P.Wadsworth. R.Robson, op. cit., 345. R.S.Sayers, The Bank of England, 1891–1944 (Cambridge, 1976), I, 318–20. J.H. Bamberg, ‘The Rationalisation of the British Cotton Industry in the Inter-war Years’, Textile History, 19:i, Spring 1988, 83–101. The minutes of the committee fill 186 pages and are listed at M/8/5/22, 1934, in the Archives Department of the Manchester Central Library.

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115 News Chronicle, 5 May 1937, J.L.Hodson. Clemens Wurm, Business, Politics and International Relations: Steel, Cotton and International Cartels in British Politics, 1924– 39 (Cambridge, 1993). 116 Osamu Ishii, Cotton-Textile Diplomacy: Japan, Great Britain and the United States, 1930– 1936 (New York, 1981). D.Meredith, ‘British Trade Diversion Policy and the Colonial Issue in the 1930s’, Journal of European Economic History, 25:i, Spring 1996, 39–44. 117 International Cotton Advisory Committee, Cotton: World Statistics 1954–1992. 118 D.L.McNamara, Textiles and Industrial Transition in Japan (Ithaca, 1995), 148. 119 Takeshi Abe, ‘The Diversification of a Japanese Cotton Spinning Company: the Case of Kanebo’ (mimeo, 1996), 12–16. 120 GATT, Trade Policy Review Japan, Vol. 1,1994 (Geneva, 1994), 38–73. 121 Kym Anderson (ed.), New Silk Roads (Cambridge, 1992), 196. 122 Ibid., 93, 216. 123 Godfrey Armitage, ‘The Lancashire CottonTrade from the Great Inventions to the Great Disasters’, Memoirs and Proceedings of the Manchester Literary and Philosophical Society, xcii, 1950–51, 34. Allan Ormerod, op. cit, 189. John Singleton, Lancashire on the Scrapheap: The Cotton Industry 1945–1970 (Oxford, 1991). J.A. Blackburn, ‘The British CottonTextile Industry since World War II: the Search for a Strategy’: Textile History, 24:2, Autumn 1993, 235–58. L.M.Moore, The Textile and Clothing Industries of the United Kingdom (Manchester, 1971). Idem, The Growth and Structure of International Trade since the Second World War (Brighton, 1985), 314–45.

5 Labour management in the textile industry Kenneth D.Brown and KingoTamai

It has been rightly observed that until the publication of Harry Braverman’s Labor and Monopoly Capital in 1974, the study of labour management was not regarded as a central feature in the study of industrial relations.1 Thereafter, however, Braverman’s hypothesis that the modern transformation of work owed as much to evolving management practices as it did to technological change, became a major subject of debate amongst social theorists. Yet their efforts to classify and categorise labour management strategies in terms of controlling workers and the labour process have generally been unsuccessful, numerous empirical studies concluding that such policies were usually less coherent or well founded than employers generally liked to believe.2 Nevertheless, it is clear that as far as Britain has been concerned, managers, particularly in large firms, were attempting to impose greater degrees of control over their workforces from the late nineteenth century onwards, using a variety of measures such as decasualisation, the creation of internal labour markets, welfare schemes and training.3 It has also become apparent that, historically, labour strategy assumed a higher priority for business managers in times of intensifying economic pressure, a trend confirmed by recent American experience.4 Just such an upsurge of interest in labour management was apparent in both Britain and Japan through the 1920s as industry sought to adjust to changes in the international economy brought about by the First World War. Britain’s ability to rebuild its shrunken overseas markets and Japan’s capacity to retain the greatly expanded export levels secured during the war were both affected by the same set of constraints on the restoration of international trade—economic nationalism, altered complementarities between primary and secondary producers, the economic effects of Soviet and American isolationism and the crippling treaty conditions imposed on Germany. Efficient use of resources such as labour was thus at a premium. Two other common influences were also at work. First, there were indications that in future the state might intervene more directly in labour affairs. Government involvement in the British economy expanded enormously as part of the war effort. In Japan it seemed increasingly likely that government, both local and national, might act directly to remedy some of the worst labour abuses to which rapid wartime economic expansion had given rise. In both countries, however, employers were generally distrustful of government initiatives and their own growing interest

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in labour welfare might well be interpreted as symptomatic of their wish to preempt what they saw as state interference. Japan’s ‘business leaders’, remarks Kyoko Sheridan, ‘particularly in textile industries, feared the loss of autonomy and the reduction of cost competitiveness in the expanding export market.’5 She goes on to point out that in seeking ways of maintaining their managerial prerogatives, Japanese employers were also reacting to the growth of worker militancy and left-wing ideas which accompanied the first significant flowering of a European-style national trade union movement, especially after 1917. In fact, organised labour remained relatively weak, while a combination of police repression, the small size of the manufacturing workforce, internal ideological disputes and inadequate leadership prevented the left from securing any real foothold among Japan’s industrial proletariat. British labour, of course, was much more strongly organised. Against a background of political instability in Europe, Bolshevik attempts to export the Russian revolution, the foundation of the Communist Party of Great Britain and evidence of discontent in the army, it was hardly surprising that an upsurge of domestic industrial unrest from 1919 onwards should have alarmed the British Government. In fact, the left made little effective headway in Britain but there, as in Japan, employers’ fears of potentially subversive ideological ideas prompted them to explore appropriate methods of preserving control over their workforces. If the background influences at work in both countries were thus similar, the labour strategies which employers in Lancashire and Osaka devised were inevitably shaped by more immediate considerations, reflecting their own organisational strengths, the ages and structures of their industries and the nature of the labour forces with which they were dealing. Above all, wartime industrial expansion created particular problems of labour supply in Japan. In engineering, for example, the tradition of indirect recruitment of workers via a foreman (oyakata) was already crumbling even before the war gave an added incentive to employers to extend their own direct control over labour. The growth of the machine industries placed skilled engineering workers in a strong position, further exacerbating rates of labour turnover already high before 1914.6 During the war, prices rose faster than wages, promoting workplace discontent. The accelerating rate of disputes and union activity after 1917 showed employers that combining direct control with the rhetoric rather than the substance of paternalism, was not likely to keep their enterprises running effectively. As the growing industrial labour force showing signs of flirting with trade unionism and socialism, radicals hi-jacked the Yuaikai, a moderate labour organisation founded in 1912 by Bunji Suzuki, and transformed it into a far more aggressive General Federation. It was against this backcloth that a number of large firms decided to bureaucratise labour management, establishing special departments for the purpose.7 They also sought to ensure their skilled labour supply by establishing training schools for the impartation of specific skills and company culture, binding workers tightly to firms by means of fringe benefits and payment systems based on seniority rather than the type of work. The growing size of plants also worked in the same direction because it enhanced the employers’ need

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to control work processes, conditions and recruitment. Finally, although most firms initially resisted workers’ demands for collective bargaining, they came ultimately to appreciate the importance of regular contact, establishing works committees composed of management and worker representatives. By 1929 about a quarter of Japan’s 112 works councils were to be found in the Osaka-Hyogo-Kyoto region, the largest concentration being in the engineering, chemical, dying, and weaving industries. Significantly, the councils’ agendas tended to reflect management concerns rather than those of workers. A 1927 survey, for example, revealed that well over three-quarters of the discussions involved welfare facilities and working conditions.8 Such an approach may well have suited the general Japanese preference for consensus and certainly reflected contemporary fears about the potentially subversive effects of socialism, but it was conditioned primarily by the prevailing state of the labour market. A similar imperative was at work in the textile sector, although its tradition of labour recruitment was very different from that in engineering. The rise of modern spinning companies in Osaka from the 1890s led to serious labour shortages, with recruitment eventually extending to remote rural prefectures. Shortage of suitable accommodation, the threat of poaching by rival employers, and the desire to facilitate night shift working all served to push firms into providing living quarters for their employees. Thereafter, what began as an attempt to solve a labour shortage problem in the 1890s was further extended and improved, partly because expanding educational provision from the turn of the century onwards gave workers higher expectations. It was also the case that the national government, anxious to revise its treaties with European powers, wished to convince outsiders that Japan had successfully modernised every aspect of its economic and social life, including working conditions. Newly-established factory inspection revealed many cases of maltreatment of female textile workers and led to the passing of Japan’s first elementary factory law in 1911.9 There was thus some pressure to improve conditions, even before the First World War so exacerbated the problem of labour supply. Sanji Muto of the Kanegafuchi Spinning Co. (Kanebo), which had plants in Osaka and elsewhere, was certainly something of a pioneer in this respect, integrating accommodation and other facilities more fully into his labour management system. It is important to note, however, that he was largely building on existing ideas and practices.10 His strategy might best be described as essentially incorporationist, trying to inculcate intense worker loyalty by offering attractive conditions of employment, an approach also adopted by other leading textile enterprises operating in Osaka, such as Toyobo and Dai Nipponbo. All shared Muto’s belief that ‘spending a considerable portion of a Company’s earnings on the welfare of its employees and workmen is a most excellent investment.’11 Fostering a sense of identity between employers and employees, argued Muto, would ensure that ‘the relations of employer and employee, capital and labour… [would] become those of friends interested in each others’ welfare.’12 For the purposes of analysis the labour policies adopted in pursuit of such ends by the larger, modern textile firms may conveniently be considered under the headings of

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recruitment, training and work organisation, communication/representation, wages and welfare. Rather like their earlier Lancashire counterparts, the Osaka textile masters relied heavily on attracting female labour from the countryside, where traditional activities such as hand spinning and reeling had bequeathed a legacy of appropriate skills. In many cases company recruiters established long-term associations with specific districts. Fixed term contracts were signed with prospective employees’ parents, who had to be assured of the respectability and adequacy of the provision being offered for their daughters, since factory textile work traditionally had a low status in Japan. It was quite common for the recruiters to act as overseers in the residential accommodation the companies provided for their workers. In this limited sense at least, specialist labour management emerged quite early in Osaka and other leading textile centres. Kanebo, for instance, had a labour welfare manager as early as 1905. Nothing comparable existed by 1918 in Lancashire where the textile industry had developed into a well-established factory-based enterprise serviced by a large, skilled and intensively unionised workforce. In a highly urbanised society, the bulk of workers lived close to potential sources of employment, and were recruited, in spinning at least, by skilled mule operatives who acted as labour subcontractors for employers, taking on and determining the pay of an average of two piecers each. They also functioned as disciplinary agents and job trainers, as well as effectively determining promotion.13 In weaving there was no equivalent subcontracting, although (male) overlookers did exercise similar disciplinary functions over their (mainly female) subordinates. Only in their high reliance on female labour—80 per cent in the case of Osaka, 62 per cent in Lancashire in the 1920s—were recruitment patterns similar.14 Attitudes to training and work organisation were also different. By and large, Lancashire employers left technical training to apprenticeships and did not regard it as part of their function to provide any broader educational opportunities. Indeed, some were very critical of the industrial relevance of the ordinary schooling system, arguing that it was ‘merely producing in a deplorable degree, “idleness and extravagance”…education generally, more or less, is applied towards a state of existence without productively earning it’.15 At Kanebo, by contrast, employees were encouraged to devote their spare time to the study of subjects such as ethics and domestic economy: more significantly, they also received technical training. At the managerial level, the higher status afforded to business activity in Japan meant that it was not difficult to recruit well-educated individuals. Kanebo was among the first Japanese firms to take on graduates, with commercial expertise more highly sought after than mere technical know-how. By 1914, when it employed about 24, 000 workers, the company had 269 graduates on its books, many of them social scientists rather than engineers. Toyobo had 136 graduates out of some 32,000 total employees.16 In Lancashire, family-owned firms tended to keep senior posts in the family and paid relatively little attention to commercial as opposed to technical skills. The industry, it was remarked, ‘had trained very few managers and there were very few managers in the Lancashire industry intensively trained to management.’17

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British cotton managers, it was suggested by another contemporary observer, were ‘frequently called upon to lead the trade, though they possess only a training in machinery and acquire gradually a slight knowledge of economics’. In Osaka, he went on, ‘the leaders of the industry are not selected on account of their technical achievements, but rather for their knowledge of commerce and aptitude for reorganisation, though most of them also have had a technical training.’18 In 1937 a delegate at the annual meeting of textile managers’ associations claimed baldly that ‘management is leadership and to this extent the successful manager is born. It is very doubtful whether the true power of leadership can be acquired.’19 Partly as a result of their labour training methods and their better qualified managers, Osaka employers were able to organise their work in more efficient ways than was common in Lancashire. ‘The great difference between Manchester and Osaka’, remarked Sir Kenneth Stewart in 1925, lies less in the cheap labor and lengthy working hours of Japanese labor than in the simple fact that Osaka has carried into practice the values and economies of mass production. I inspected one factory in Osaka recently where…the mill workers were engaged in the same type of work, making for extreme savings in labor and economy of operations.20 Equally, however, it should not be overlooked that such methods of labour organisation for the purposes of mass production were also facilitated by the larger scale structure of the Osaka industry. Left-wing critics complained that the educational provision made for Osaka’s textile employees was designed to prevent them from asserting their rights either as women or as workers, but such concepts were largely alien to a workforce drawn predominantly from a rural background where the woman’s role was still largely bound by traditional ideologies. It is in this same cultural context that the comparatively limited nature of Kanebo’s representational mechanisms should be seen. Until 1925 Taisho democracy did not extend even to universal male suffrage, still less to women, and thus representational institutions were perhaps the least obvious component of Kanebo labour strategy. Nevertheless, some elements were in place, however attenuated by Western standards. Elected committees of operatives were charged with maintaining morale and also with overseeing workers’ discipline and domestic arrangements in the dormitories. Employees could at any time address complaints or suggestions to the director or managers. Such personal interviews, Muto averred, had ‘caused the Management of Factories to discover points for effective improvements in the treatment of the work people, and greater cooperation has resulted…’21 Other leading cotton firms established joint committees of workers and employers to discuss working conditions, wages, hours, holidays and dismissals, although it is clear that the agendas for such consultations were determined mainly by the employers. There was here a very obvious and historically determined contrast with the Lancashire industry in which the most significant channel of

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communication occurred, not at the level of the individual company, but rather between well-established trade unions and employers’ associations. Most of the big Osaka firms belonged to the Cotton Spinners’ Association (1882) but unionism had gained no real foothold in the industry. In Lancashire on the other hand, employers and workers in both weaving and spinning had achieved a significant degree of organisational solidarity by the end of the nineteenth century. By 1920 76.2 per cent of machine capacity in cotton spinning and 65.5 per cent in weaving were covered by employers’ associations, while almost half a million of a workforce of about 615, 000 was unionised.22 This compared with less than 5 per cent of Osaka workers and certainly facilitated collective negotiation and consideration of issues such as union recognition, conciliation procedures, and uniform wage lists. The only caveat to this was that proposals to extend the process of joint consultation in Lancashire were sometimes criticised by trade unionists on the grounds that it really operated in the interests of the employers, denying the workers’ representatives any share of authority or responsibility. ‘lt is no use’, asserted Henry Boothman of the Operative Spinners’Association, ‘propounding any scheme to the operatives unless you give them some responsibility… You cannot call us into consultation to decide this question unless you meet us on equal terms.’23 At the heart of the incorporationist policies developed in the Osaka textile industries lay welfare benefits, their appeal perhaps increased by the relative lack of public welfare provision then available in Japan. Amenities provided by Kanebo included low rent cottages for the married, nurseries, medical facilities, and mill shops offering cheap food and clothing. Among the other facilities were a savings bank, a mutual benefit association and comprehensive compensation schemes covering accident, sickness and death. In principle at least, there was little difference here from the practices of British colliery owners who resorted to similar devices as a way of securing steady and reliable workers in times of tight labour supply.24 Yet it was the Japanese provision of dormitories for the mass of single girls which attracted most Western interest and which almost became the symbol of textile company paternalism. By 1928 it was reported that 52 per cent of all Japanese factories had them, accommodating 60 per cent of their female and 16 per cent of their male workers.25 Even Freda Utley, a Western observer whose communist views predisposed her to be critical on first principles, conceded that ‘the big factories now consider it worth while to give their workers enough food, to provide healthier dormitories and look after their workers when they fall ill.’26 Each large mill, she added, ‘has its hospital, its doctors and nurses.’27 She attributed such provision, however, to the fact that the girls were so badly cared for that they either became ill or pregnant. Furthermore, she stressed that while the smaller weaving sheds provided dormitory or rented accommodation for their workers, other welfare facilities were relatively uncommon, exposing employees to the ‘worst conditions of all’ in the Osaka area.28 She was also suspicious of the fact that Toyobo, one of the city’s big three textile companies, denied her access to its local mills, sending her on a five-hour train journey to other—implicitly more appealing—sites.29 Yet other evidence confirms

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that Toyobo did provide a wide range of benefits for its employees. Utley tried to support her claim that ‘the girls hate the life’ with emotive descriptions of ‘the sad faces of the tired little girls standing long hours at their monotonous tasks’, but conditions were by no means uniformly superior in Lancashire’s mills.30 Photographs taken by Humphrey Spender of Bolton textile workers in the 1930s, for instance, show obviously tired women hunched over their machines.31 Oral testimony similarly points to poor working conditions in many Lancashire mills, with workers having their meals brought in from home and eating them from the floor. Furthermore, other Western accounts of conditions in Japan’s textile industry were much more positive than Utley’s. Arno Pearse, for instance, damned as ‘absurd’ negative Western reports about dormitories, asserting that all the major combines provided working environments far better than those left behind in the countryside.32 Fernand Maurette, assistant director of the ILO, was equally enthusiastic, reporting in 1934 on ‘clean and sanitary’ dormitories, the availability of low price foodstuffs, ‘extremely small’ rents, and numerous ‘free advantages of a social and intellectual kind’.33 Although these commentators played up the prevalence of welfare among the Osaka firms, similar types of provision were not altogether unknown in Lancashire. From 1919 the Bolton firm of Tootal Broadhurst Lee provided a profit-sharing scheme, a part-time continuation day school, recreational facilities, dining rooms and a dentist. The Fine Cotton Spinners’ and Doublers’ Association appointed a specialist supervisor to oversee the welfare schemes operative in forty-two of their ninety-four mills by the mid-1920s. An equally impressive range of provision was offered by the English Sewing Cotton Company. The underlying motive was exactly the same as at Kanebo and one Ashton Brothers executive indignantly refuted charges of philanthropy, asserting that welfare schemes were of immense benefit to the firm in improving efficiency and attendance.34 Yet as the Darwen Medical Officer of Health, Dr Robertson, pointed out, some of the keenest businessmen had the narrowest views on questions of this kind. It took the educated man of vision to look ahead and survey the whole position circumspectly. There was something more to business today than buildings, output and profits.35 Not surprisingly however, his recommendations for welfare provision raised little enthusiasm among his audience of Blackburn textile managers. One called his suggestions ‘utopian’ while another argued that the higher overheads incurred would merely make a struggling industry still less competitive.36 As in Osaka (and for that matter in the contemporary Lancashire engineering industry), the welfare element in labour management strategy was confined in the main to the better organised, more modern and larger firms which emerged out of the contemporary merger movement. The crucial point here, of course, is that such firms employed a much smaller proportion of Lancashire’s workers than they did in Osaka. Despite mergers and amalgamations, the typical Lancashire firm remained

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small and independent, reflecting the conviction of one Accrington manager that excessive combination was the root of the industry’s problems.37 In the 1930s the three major spinning companies in Britain (effectively Lancashire, given the concentration of the industry) employed only 22 per cent of all spinners. In weaving the top three employed merely 4 per cent.38 In Osaka, Toyobo, Dai Nipponbo, and Kanebo between them employed about 54 per cent of the district’s 35,000 textile workers in 1924. Kanebo alone was as large as Lancashire’s biggest firm, the Fine Cotton Spinners’ & Doublers’ Association Ltd, although it was only the ninth largest in Japan and the third in Osaka. Of the welfare benefits provided by the Osaka firms, housing and cheap food in particular provided significant marginal additions to workers’ income. Pearse calculated that such benefits cost Kanebo between 6 and 7 pence a day—14 yen a month—for each worker. As a result, he calculated, the company’s female workers could save over half their monthly wages, males slightly less.39 To this has to be added long service bonuses, usually worth between 10 and 20 per cent of monthly income, and lump sums payable after completion of specified periods of service, although Kanebo did not operate a formal profit-sharing scheme of the type established by some British firms. Interestingly, one of the few instances of unrest in the company occurred when the bonus scheme was suspended in the aftermath of the 1929 crash. The income effects of such benefits must not be overlooked when evaluating relative wage levels in Lancashire and Osaka, particularly in view of the oftrepeated Western claims that Japanese success was built upon a low wage regime. Direct payments were certainly low by Western standards. Female incomes at Kanebo averaged about 30 yen per month, while male workers received about 45 yen.40 These were considerably lower than in Lancashire where in 1931 male earnings averaged 45 shillings and 3 pence (about 22.5 yen) a week, and females about 27 shillings and 3 pence (about 13.6 yen).41 However, this left the male workers in 39th place in a wages league table of forty industrial groupings compiled by the Ministry of Labour for 1931: women were rather better placed, twelfth out of twenty-eight. It is important to bear in mind that wages in Lancashire also came under increased pressure in the interwar years as the full impact of a 40 per cent contraction in output and a decline in exports of between a quarter and a third became apparent. The drive to meet these pressures by reducing production costs led the Lancashire cotton employers to adopt labour strategies that were initially more aggressive but ultimately, as their own organisational solidarity crumbled under the impact of depression, less uniform. The interwar period exposed the complacency of the Textile Recorder’s claims that ‘Lancashire textile workers were the ‘most contented body of operatives in the country’ and that there was no other trade in which employers and workers ‘had become so intimately connected and where they understood one another better’.42 The immediate response to the onset of depression was a resort to short time working, a traditional prewar tactic in times of slack trade. However, it had only ever been a short term solution because lower rates

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of machinery utilisation led inevitably to higher unit fixed costs and compelled efficient producers to reduce output by the same proportion as the inefficient. Thus when it became clear that the postwar problem was more structural than cyclical, the employers turned, secondly, to wage cuts. As the industry’s prosperity disappeared, so the inducements over and above the agreed Uniform List, which had commonly been paid between 1915 and 1920, disappeared. There was also a lot of unofficial undercutting of workers’ rates. Industry-wide wage reductions were imposed by both spinning and weaving firms in the early 1920s, again between 1929 and 1932, and in weaving alone in 1935. More focused attacks were directed against the guaranteed wages of certain categories of workers, and weavers earning £3 a week in 1920 were receiving less than £2 by 1937. The average wage of spinners was forced down by 30 per cent between 1920 and 1932. Employer aggression also came through in an increased number of lockouts and cases of victimisation, although these should not be construed as attacks on the principle of trade unionism per se. During the 1920s the FMCSA imposed five lockouts in response to disputes in individual mills, forcing the workers to back down. Individuals perceived to be trouble-makers were frequently black-listed and the cotton unions claimed in 1932 that 5,000 of their members had been displaced in this way.43 Such labour displacement was also facilitated by heavy unemployment. Between 1912 and 1937 the numbers employed in weaving and spinning fell from 786,000 to 485,000: the cotton industry never had less than a 10 per cent unemployment rate between 1920 and 1939, while in the worst year of all, 1931, 43.2 per cent of the workforce were out of work. The ability of the employers to reclaim management prerogatives in the textile sector was also enhanced by changes in recruitment methods. In particular, the establishment of labour exchanges allowed them to by-pass the elite male workers on whom they had previously relied for finding workers. From 1916, for example, the Preston Cotton Employers Association asked its members to register vacancies with the local exchange. The National Insurance Acts of 1911 and 1920 were also significant in this respect, since workers had to sign on at the labour exchange in order to qualify for benefit before personally visiting local mills to acquire notes from the managers confirming that there were no vacancies. Thus a growing proportion of workers was recruited directly by the mills or through the exchanges, rather than the traditional method. One survey of Burnley in 1934 showed that while 34 per cent of boys obtaining jobs in local mills did so through personal recommendation, 24 per cent found work through the labour exchange and 38 per cent by direct application.44 There was also a sustained campaign to re-assert management control over work processes, or in the words of the Blackburn masters to take ‘the right…to employ whom we think fit, and also the right to make a change without being compelled to give a reason.’45 Twice between 1928 and 1932 attempts were made to increase the length of the working week which had been set at 48 hours in 1918. Both efforts failed, leaving accelerated work rhythms as the main alternative route to increased productivity. In the spinning sector this entailed attempts to reduce the

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independence of the overlookers and the speeding up of processes. During the war spinners had been forced by labour shortages and their own reluctance to accept more female workers, to accept more intensive work involving two rather than three workers per mule. This persisted after 1918. As cleaning and doffing began to be done by specialist groups so the role of the spinners as co-ordinators of work tasks was undermined, further diminishing their indispensability to employers. A cleaning time agreement was abrogated in 1929 by the FMCSA, forcing the spinners to work the full 48-hour week. As they were increasingly replaced by cheaper, less skilled workers, the spinners’ demarcation privileges were eroded. A further weakening of their position followed the introduction of automatic methods of counting thread breakages which undermined their traditional right to define bad spinning. Two legal cases in the late 1920s reestablished the employers’ rights to impose fines for sub-standard work. In fine weaving, on the other hand, the employers’ dependence upon labour was actually increased by the need to work on tighter margins.46 At the coarse end of the trade, however, the intensification of work processes culminated in the well-known more looms dispute, as weavers were required to work six or eight looms instead of the standard four. This, too, involved the fundamental issue of the right to manage. ‘The question has resolved itself into whether or not an employer should be allowed to use his machinery in the manner in which he thinks best, or whether he must be governed by the operatives’ association.’47 About a fifth of all weaving mills were affected and the stoppages associated with the dispute eventually resulted in the complete collapse of collective bargaining procedures, the culmination of a confrontational labour strategy which lost the cotton industry more than 30,000, 000 working days between 1921 and 1932. Yet there were limits on the employers’ ability to be too directly confrontational. First, well-established unions acted as one powerful constraint. Workers in the finer products, for which demand remained higher, could always afford to be more militant than those in the coarser end. Conversely, it was probably the relative weakness of the weavers’ unions which encouraged their employers to try to impose more looms on them, although this aggression may also have been rooted in the fact that in relation to total costs, labour in weaving was more expensive than in spinning where cheaper female labour was deployed less intensively on ring spinners. Second, it seems that the general failure to modernise or introduce scientific labour management on a large scale left spinning employers unable to press for fundamental reforms in work processes, manning levels and division of labour. New machinery was introduced only tardily, perhaps because of capital shortages, perhaps because there was a certain amount of collusion with the unions in maintaining the traditional gender divisions within the industry. Finally, it was also the case that the employers’ own cohesion was weakened by the internal divisions to which the economic climate gave rise. This distinguished Lancashire from Osaka where the Greater Japan Cotton Spinners’ Association succeeded in securing production curtailment agreements as a way of countering economic uncertainty. The major companies, it has been remarked, followed the line indicated

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by the Association, and ‘worked out adequate resources to adjust their production to cope with business depression.’48 In Lancashire, however, those firms primarily dependent upon the production of coarse and plain cotton for the Indian and Asian markets were harder hit than other producers and inclined therefore to take a harder line. There was also a split between those who favoured the continuance of free competition within the trade and those who wanted a recovery package based on central control and legalised price fixing. Thus divided, the employers’ federations found it hard to develop any cohesive strategy and solidarity waned. By 1933 53 per cent of the trade belonged to the NCSMA as against the earlier peak of more than 65 per cent. Membership of FMCSA also fell from 80 to about 66 per cent of the trade by 1935. Even among those who retained federation membership there was a growing tendency to ignore federal policy and decisions. Traditionally, textile firms had dealt with the unions through their own associations but collective agreements were progressively abandoned after the 1931 lockout. Industry-wide bargaining was reinstated only after direct intervention by the Ministry of Labour. Thereafter, industrial relations became less heated as product markets stabilised. The employers had succeeded perhaps in intensifying work processes and in regaining the managerial prerogative from labour. On the other hand, they had not generally been able to seize the opportunity to modernise the technology of textile production. It was never likely that the Lancashire employers could be as confrontational in their labour strategies after the Second World War as they had been before it, not least because the disputes of 1929–31 had confirmed that the industry’s survival depended on accommodation with the unions rather than browbeating them. Furthermore, wartime government intervention in the labour market largely undermined the notion of managerial infallibility, while the Labour Party’s victory in the 1945 general election also swung the balance of industrial power firmly in favour of the trade unions as against management. It also brought to power an administration committed to a policy of full employment, which served both to weaken one source of employer control over labour and also to reinforce the problem of labour scarcity which had emerged during the war itself. Transfers to more strategic industries had deprived the textile sector of 175,000 workers and the most immediate problem facing employers in 1945, therefore, was actual recruitment. One potential source of supply lay in Europe and by the middle of 1950 almost 11,000 Europeans were working in spinning and a further 2,000 in weaving. More important still, were the efforts made to attract married women back into the industry, although this required the extension of appropriate welfare amenities. By 1948 465 mills had canteens, while several others were in various stages of developing them. More importantly, perhaps, firms began to extend or provide their own child care facilities. By 1950 the Lancashire Cotton Corporation had nurseries at most of its 50 mills. There were limits on this as a policy, however, since women accounted for only about two-thirds of the British textile workforce, while nursery charges were high. Furthermore, welfare provision remained inferior to that available in other sectors: this, at least was the conclusion of onc contemporary

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Japanese survey of the Lancashire industry.49 By 1950 the labour force had been increased by about half since the war but there were still significant shortfalls on the 1937 levels—75,000 in spinning and 50,000 in weaving. Alternative employment opportunities were plentiful, many offering higher pay than the textile industry, even though wage rates in cotton rose faster than the industrial average in the immediate postwar years. Nevertheless, as virtually the only non-dollar country with a significant industrial base left intact, prospects for British industry in 1945 were good. Over the first six years of peace, yarn production rose 50 per cent, woven cloth by rather more. By 1950 cotton cloth output was 37 per cent higher than in 1946 and some 524,000,000 square yards were exported to major markets.50 Japanese employers faced very different circumstances in 1945. For one thing, economic recovery was initially very slow, hampered by the effects of intensive bombing and the economic restructuring undertaken by the Occupation authorities. Only in 1950 did the exports of cotton piece-goods from Japan surpass those from Britain. For another, new labour rights and employment standards were enshrined in the reforms introduced by the Occupation administration. Labour recruitment through professional agents was banned. Construction standards for company dormitories were prescribed by law and the occupants granted rights of self government. Labour organisation became much more widespread. Industrial unions were organised in the textile industry from 1946 and company-based unions co-operated in the National Federation of Textile Industry Workers Unions. By 1957 more than 90 per cent of the spinning labour force was unionised. Fernand Maurette had predicted that the emergence of trade unionism would destroy traditional labour strategies in the Japanese textile industry and there were certainly disagreements between workers and managers, for example about the extent to which welfare provision was a legitimate subject for collective bargaining. Yet almost all of the nineteen major disputes which occurred in the industry between 1946 and 1957 concerned wages. The strong demand for young female workers ensured that features of pre-war labour management, such as dormitories (notwithstanding a trend towards commuting), mutual aid insurance, health and recreational facilities all remained standard in the major firms. More than half of the textile workforce came from predominantly rural prefectures where a steady supply of female labour was still available, important when women accounted for fourfifths of the industry’s workforce of 260,000. Such was the comparative lack of alternative work that this figure represented a tenth of Japan’s total industrial labour force in 1952. Applications for employment greatly exceeded the available jobs, with the result that employers were able to recruit the best qualified students directly from the junior high schools. This helps to explain why 60 per cent of workers in the industry were girls in their late teens, compared with only 12 per cent in England, and also why the average age of female textile workers in Japan was just over 20 as against 37 in England.51 Lack of alternatives also encouraged these new recruits to stay much longer than in the pre-war period, providing a further source of labour efficiency. Only after the dispute at Osaka’s Ohmi Silk Spinning Company in 1954 did newer labour management practices start to become more prevalent, a process

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aided by the economic boom which resulted in growing scarcities of female labour and led many cotton firms to diversify.52 The different labour supply situations prevailing in the regions also ensured that wage levels in Japanese textiles remained at about half the level in Britain during the first postwar decade. On the other hand, this sort of comparison still ignores the incremental income benefits of welfare provision in Japan, calculated by one expert as contributing a further 16 or 17 per cent to average incomes in the industry.53 It is also worth stressing that in Japan textile wages bore exactly the same ratio to the general level of industrial wages as they did in Britain. Similarly, hours of work and holiday entitlements were broadly comparable between Osaka and Lancashire.54 In domestic terms at least, Japanese textile workers were no worse off than their Lancashire counterparts in the postwar years.55 By 1952 Japanese cotton yarn output exceeded that of Britain by about a fifth. Thereafter the British industry declined unrelentingly and it has been suggested that all aspects of management strategy were shaped by a pragmatic acceptance that this contraction was inevitable.56 Cloth production went down by more than two-thirds between 1950 and 1970 while the total labour force fell from 360,000 in 1951 to 31,000 by 1991. Against this background two labour strategies predominated. First, there were attempts to change working practices, in particular to extend use of the double shift system in order to counter the low machine utilisation rates evident in Table 5.1. By 1954 some 163 British mills were working double shifts and others had similar but informal arrangements with their workers. Employers reckoned that there could have been more but for the fact that workers successfully demanded high premiums for it. They were certainly higher than in Japan, between 16 and 20 per cent as compared with 3 per cent, although this undoubtedly reflected the different elasticities of labour supply and the strength of labour organisation in the two regions. A similar inflexibility on the part of the Lancashire workers was seen also in their generally suspicious attitude towards the introduction of wages based on work study, the second management strategy. In Japan, standard motion studies had become increasingly common before 1939 as part of the labour retraining process accompanying the wider introduction of high draft spinning and automatic weaving looms. In Britain, some little interest had been shown in the pre-war period but serious consideration developed after 1945 only with the growing realisation that competitiveness was being hampered by low labour productivity.57 Even including those mills where only part of the workforce was paid according to work study, only 38 per cent of those affiliated to the FMCSA were using such methods by 1953. The cost of failing to implement these schemes more widely is seen in the fact that they are estimated to have contributed about a quarter of the overall productivity rise achieved in spinning between 1950 and 1965. In weaving the existence of three competing pay systems—the more looms list, the Lancashire uniform list, and a list for those who worked on automatic looms—made the introduction of wage schemes based on work study even more difficult, only the automatic weavers proving at all positive in their response. For the rest, suspicion was such that even

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Table 5.1 Machine hours worked per year, 1953–63, in the British and Japanese cotton industries

Source: A study on cotton textiles, Geneva, GATT, 1966: quoted in Singleton, Lancashire on the Scrap Heap, (Oxford: Oxford University Press, 1991), p. 171.

one of the weavers’ own leaders criticised his union members for their blind, biased and unreasonable prejudice.58 Yet it is important to note as well that the industry was also hampered here by a lack of managers sufficiently skilled in the new systems, legacy perhaps of the low priority traditionally given to management training in British industry. At all events, unit labour costs in Britain continued to exceed those of competitors, hastening the industry’s precipitous decline. In the longer run, the decline of the Lancashire industry was matched by a similar contraction in Osaka. Japan’s total textile exports tripled between 1970 and 1990 but this growth was dwarfed by a massive rise in cheaper foreign imports from $1. 2bn to $15.4bn over the same period.59 With total spindle numbers dropping from 16 million to 9.6 million, employment fell drastically, by 55 per cent in spinning and 59 per cent in artificial fibres between 1975 and 1990.60 Yet organised labour played a far more constructive part in managing this process of adjustment in Japan than it did in Britain. The 1978 Cotton Industry Stabilisation Law required firms planning to lay off more than one hundred workers to submit plans for approval to the Ministry of Labour: such plans were invariably the product of joint consultations between employers and their workforces. The labour coalition to which the textile workers’ federation belonged emphasised the need for prior consultation between management and workers, the safeguarding of working conditions, and guarantees of full employment. Once approved by the Ministry, the schemes provided living and training subsidies for laid-off workers. The result was that between a quarter and a fifth of the textile workforce took early retirement, some left the labour market altogether, and the vast majority found alternative employment. The adjustment process was undoubtedly smoothed by the relatively buoyant state of the Japanese economy but the long standing tradition of state intervention and the industry’s own equally well-established tradition of less confrontational labour relations also allowed a more ordered and less wasteful adjustment than that which occurred in Lancashire. As the chairman of Toyo put it, relations in the cotton industry ‘are generally co-operative and stable and…this is supported by the deep rooted sense of mutual trust and the warm human relations between the workers and employers…the solid foundation of these human relations is unlikely to collapse easily.’61

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Labour management strategies have conventionally been defined as the methods used by employers to secure, organise, discipline and reward their workers.62 It is clear from comparing the policies adopted by textile firms in Osaka and Lancashire that the emphasis adopted by an individual firm at any specific time was constrained and shaped by a variety of influences. These included the general economic climate, the cohesion of employers’ organisations, the attitudes and strength of organised labour, the size and structure of the firm involved, the demand for its product and the elasticity of its labour supply. It is also apparent that employers in both regions generally adopted policies appropriate to their respective economic situations, responding equally rationally to their own unique economic, historical and structural situations. In this sense the comparison confirms the view that labour management strategies are not easily reducible to simple typologies concerned with control. Crucially, however, Osaka employers viewed labour management as an integral part of production management rather than as an added extra. It was thus given a much higher priority than was generally the case in Lancashire. Having initially started on the road to incorporationist strategies because of the need to ensure labour supply, Osaka employers continued with them as a way of countering the potential development of radical trade union organisation, and because they helped to make the industry internationally competitive. Osaka’s textile industry was by no means totally immune to labour troubles in the years before the Second World War, but such disputes, if fierce in Japanese terms, were relatively minor compared with events in contemporary Lancashire. It is valid to suggest, therefore, that the consistent application by the larger firms of strategies of consultation and benefits in kind was generally successful. Whatever the influence of cultural factors such as a preference for consensus, such practices were undoubtedly facilitated by the relative weakness of both trade-union and working-class identity, the cohesion of the employers, the dominance of large-scale enterprises, and the comparative lack of significant state provision for social emergencies. This was the obverse of the situation in Lancashire where employers and workers alike were strongly organised, firms generally smaller and functionally specialised. Nor was the appeal of benefits in kind ever going to be as strong in Lancashire as in Osaka because the perceived need for them was much less given the higher level of direct state provision in Britain and the mutual insurance functions of the unions. Indeed, there is some evidence to suggest that on the whole British workers were relatively indifferent to welfare and not particularly concerned about poor working conditions or high accident rates. Notwithstanding the difficulties of classifying strategies in terms of control, management theorists have identified two broad approaches to labour issues. In the external approach, labour is recruited from the national or local market, wages fixed according to market signals, industrial relations handled by employers’ associations, and already trained or apprenticed workers recruited for specific job tasks. The alternative internal model posits systematic recruitment onto internal job ladders, wages determined internally rather than according to the market price, the establishment of company unions or bargaining at plant, factory and company level

KENNETH D.BROWN AND KINGO TAMAI 175

rather than nationally, and the in-house training of the workforce.63 Research has indicated that even as the twentieth century draws to an end most British firms still remain improvisers when it comes to labour strategy.64 On the other hand, it has been suggested that historically, British firms broadly took the external approach, with the Japanese developing from the 1920s on exactly the opposite tack. This is certainly confirmed by the experience of the textile industries in Osaka and Lancashire. Notes 1 R.Church and Q.Outram, Strikes and solidarity: coalfield conflict in Britain, 1889– 1966 (Cambridge, Cambridge University Press, 1998). 2 For example, A.L.Freedman, Industry and labour: class struggle at work and monopoly capitalism (London, Macmillan, 1977). 3 J.Melling, ‘Employers, industrial welfare, and the struggle for work-place control in British industry, 1880–1920’, in H.F.Gospel and H.Littler eds., Managerial strategies and industrial relations (London, Heinemann, 1983). 4 P.Goldman and D.R.Van Houten, ‘Uncertainty, conflict and labour relations in the modern firm. 1: productivity and capitalism’s human face’, Economic and Industrial Democracy, 1980, vol. 1, pp. 63–98. 5 K.Sheridan, Governing the Japanese economy (Cambridge, Polity Press 1993), p. 100. 6 The fullest exposition of this process is in A.Gordon, The Evolution of Labor Relations in Japan: Heavy Industry, 1853–1955 (Cambridge, Mass., Harvard University Press, 1985), pp. 51–80. 7 This is derived largely from R.Okayama, ‘Japanese employer labour policy: the heavy engineering industry, 1900–1930’, in Gospel and Littler eds., Managerial strategies, pp. 171–96. 8 G.O.Totten, ‘Collective bargaining and works councils as innovations in industrial relations in Japan during the 1920s’, in R.P.Dore ed., Aspects of social change in modern Japan (New Jersey, Princeton University Press, 1967), pp. 203–44. 9 The results of factory inspection were published in four volumes and contain many references to mistreatment. For example, ‘if recruited girls found that actual factory life was completely different from what she has imagined…she has no one…to consult with. The mill owner is indifferent to her complaints…girls try to escape from the factory…many are captured by night watches and punished badly’. Shokko Jijo, 1903, vol. I, pp. 52–3. We owe this reference to Professor Tetsuro Nakaoka. 10 K.Tamai, ‘The evolution of industrial relations in Osaka: the case of the textile industry’, Osaka City University Journal of Economics, 1993, vol. 3–4, pp. 117–26. 11 S.Muto, Employers and workers: an appeal (Washington, 1919), p. III. 12 Ibid. 13 W.Lazonick, ‘Industrial relations and technical change: the case of the self acting mule’, Cambridge Journal of Economics, 1979, vol. 3, pp. 231–62. 14 A.S.Pearse, The cotton industry of Japan and China, being the report of the journey to Japan and China (Manchester, International Federation of Master Cotton Spinners’ and Manufacturers’ Associations, 1929), p. 92. F.Utley, Lancashire and the Far East (London, Allen and Unwin, 1931), p. 64. J.Hunter, ‘Recruitment in the Japanese silk

176 LABOUR MANAGEMENT IN THE TEXTILE INDUSTRY

15 16 17 18 19 20 21 22

23 24 25 26 27 28 29 30 31 32 33

34

35 36 37

38

reeling and cotton spinning industries, 1870s–1930s’, Proceedings of the British Association for Japanese Studies, 1984, vol. 9, pp. 64–85. J.Turner, ‘The key to industrial peace’, Journal of the British Association of Managers of Textile Works, 1922–3, vol. 2, n.p. S.Yonekawa, ‘University graduates and Japanese enterprise before the Second World War’, Business History, 1984, vol. 26, p. 196. ‘Do textile managers require scientific training?’, National Federation of Textile Works Managers’ Associations Journal, 1936–37, vol. XVI, p. 38. Pearse, Cotton Industry, p. 26. ‘Do textile managers require scientific training?’, p. 36. Quoted in K.Seki, The cotton industry of Japan (Tokyo, Japan Society for the Promotion of Science, 1956), p. 70. Muto, Employers and workers, p. 11. A.Mclvor, Organised capital: employers’ associations and industrial relations in northern England, 1880–1939 (Cambridge, Cambridge University Press), 1996, p. 191: C.J. Wrigley ed., A history of British industrial relations, 1914–1939 (Brighton, Harvester, 1986), pp. 62–63. Reported in ‘Trade union problems’, British Association of Managers of Textile Works Journal, 1925–26, vol. 5, p. 27. Church and Outram, Strikes and solidarity: coalfield conflict in Britain, 1889–1966, p. 133. S.Harada, Labor conditions in Japan (NewYork, Columbia University Press, 1928), p. 121. Utley, Lancashire, pp. 143–44. Ibid., p. 150. Ibid., p. 181. Ibid., p. 152. Ibid., pp. 143, 149. H.Spender, Worktown people: photographs from northern England, 1937–38 (Bristol, 1982). Pearse, Cotton industry, p. 91. F.Maurette, Social aspects of industrial development in Japan (Geneva, International Labor Organisation, 1934), quoted in K.Tamai, ‘The postwar structure of industrial relations in Osaka: the case of the textile industry’, Osaka City University Faculty of Economics Discussion Paper, 1992, vol. 4, p. 6. Quoted in S.Jones, ‘Cotton employers and industrial welfare between the wars’, in J.A.Jowitt and A.J.Mclvor eds., Employers and labour in the English textile Industries, 1850–1939 (London, Routledge, 1988), p. 69. J.Robertson, ‘Welfare work in the cotton trade,’ Blackburn and District Managers’ Mutual Assoaation Journal, 1936–37, vol. XVI, p. 111. Ibid., pp. 112–13. Mr Aspen ‘was an individualist and he was one of those who believed we were suffering from too much combination. If they had more individualism it would be a great deal better for obtaining a freer exchange of trade in the fullest sense.’ A.Naesmith, ‘The economics of the cotton trade’, Accrington and District Managers’ Mutual Association Journal, 1928–29, vol. 8, p. 293. H.Leak and K.Maizels, ‘The structure of British industry’, Journal of the Royal Statistical Society, 1945, vol. 108, pp. 161, 186.

KENNETH D.BROWN AND KINGO TAMAI 177

39 Pearse, Cotton industry, pp. 98–99. 40 Ibid., p. 99. 41 J.Singleton, Lancashire on the scrap heap (Oxford, Oxford University Press, 1991), p. 16. Between 1924 and 1929 the exchange rate was about 20 yen to £1.00. In the brief period of Japan’s return to the gold standard 1930–31 the rate fluctuated around a mean of 10 yen to £1.00. 42 Textile Recorder, 1924, August, p. 68. Ibid., 1922, February, p. 70. 43 Mclvor, Organised capital, pp. 187–88. 44 This paragraph is derived from M.Savage, The dynamics of working class politics: the labour movement in Preston, 1880–1940 (Cambridge, Cambridge University Press, 1987), pp. 88–92. 45 A.Mclvor, ‘Cotton employers’ organisations and labour relations, 1890–1939’, in Jowitt and Mclvor eds., Employers and labour, pp. 14–15. 46 See M.Savage, ‘Women and work in the Lancashire cotton industry, 1890–1939’, in ibid., pp. 203–23. 47 Quoted in Mclvor, ‘Cotton employers’ organisations’, p. 17. 48 Cited in T.Shindo, Labor in the Japanese cotton industry (Tokyo, Japan Society for the Promotion of Science, 1961), p. 9. 49 Toyobo Institute for Economic Research, ‘Manpower shortage in the British cotton industry’, Survey Material, 1955, vol. 17, p. 15. 50 D.H.Aldcroft, The British economy, 1920–1951 (Brighton, Wheatsheaf, 1986), p. 217. 51 All figures from Seki, Cotton industry, p. 162. 52 Tamai, ‘Postwar structure’, p. 9. 53 Seki, Cotton industry, p. 366. A figure of 18 per cent was given by the Japan Federation of Employers’ Associations, cited in Shindo, Labor in the Japanese cotton industry, p. 96. 54 Shindo, Labor in the Japanese cotton industry, pp. 58–61. 55 Seki, Cotton industry, p. 174. 56 J.Singleton, ‘Showing the white flag: the Lancashire cotton industry, 1945–65’, Business History, 1990, vol. 32, p. 129. An alternative hypothesis is advanced by W. Lazonick, ‘Industrial organisation and technological change: the decline of the British cotton industry’, Business History Review, 1983, vol. LVII, pp. 195–236. 57 See, for example, the analysis of union attitudes towards the Bedaux System as reported in the Textile Manufacturer, 1933, November, pp. 432–34. 58 Cited in Singleton, Lancashire, p. 184. 59 D.L.Macnamara, Textiles and industrial transition in Japan (Ithaca and London, 1995), p. 5. 60 Ibid., p. 127. 61 Shindo, Labor in the Japanese cotton industry, p. 211. 62 H.Gospel, Markets, firms and the management of labour in modern Britain (Cambridge, Cambridge University Press, 1992), p. 3. 63 H.Gospel, ‘The management of labour: Great Britain, the US and Japan’, Business History, 1988, vol. XXX, pp. 104–15. 64 J.Rubery and F.Wilkinson eds., Employer strategy and the labour market (Oxford, Oxford University Press, 1994), p. 28.

6 Electronics manufacturers in Osaka and Manchester A comparison of Matsushita and Ferranti Tetsuro Nakaoka and John F.Wilson

As one of the key sectors which was at the heart of the early twentieth-century ‘Second Industrial Revolution’, electrical and electronic engineering provided enormous market possibilities for entrepreneurs who were willing to embark on ambitious production and marketing strategies. Judging from the successes achieved by Japanese electronics manufacturers in gaining a substantial competitive advantage over their American and European rivals,1 in the long term firms like Toshiba, Hitachi, Sony, Sanyo and Matsushita have clearly been the most effective in converting these opportunities into real economic benefits. In sharp contrast, especially over the last fifty years, the British electronics industry has had to deal with extensive import penetration and intense competition from multinational subsidiaries, largely as a result of its relatively weak competitiveness in key areas like research and development and marketing.2 By using the case-studies of Matsushita and Ferranti, we intend to discover some of the principal reasons behind these contrasting records. In particular, it is essential to assess the extent to which these firms matched their values and resources to a constantly changing environment, especially as a means of formulating effective strategies which provided the basis for success.3 Of course, there are acute dangers in focusing on only two case-studies as a means of explaining why Japanese firms were so much more successful than their British counterparts. A more general study of the electronics industries in Kansai and Lancashire would have been preferable. However, largely because of inadequate, or in the British case non-existent, data for the period up to the 1950s, broad overviews are difficult to achieve. Similarly, other electrical firms could have been chosen, including GEC and Plessey in Lancashire and Sanyo and Sharp in Osaka. Again, though, informational constraints were apparent when targeting case-studies. In any case, apart from being the subject of separate research projects, Matsushita and Ferranti accurately reflect indigenous trends over most of our period, especially in the main battlegrounds of domestic appliances, defence and semiconductors, providing studies in microcosm of the general scene.4 Matsushita, in particular, demonstrates many of the characteristics of the Osaka electrical industry, in that in contrast to the large Tokyo-based firms like Toshiba and Mitsubishi Electric, it concentrated on domestic appliances. Ferranti, on the other hand, was typical of all

TETSURO NAKAOKA AND JOHN F.WILSON 179

British electrical firms, especially with regard to its preference for defence-related business, a strategy which substantially undermined its civil departments. On a more positive note, there are some similarities connecting the two casestudies, most notably the humble origins of founders who went on to establish a distinctive culture which influenced development of the family firm over many decades. Both were also structured along divisional lines, employing rigorous reporting techniques as a means of monitoring the activity of professional managers. Notwithstanding these similarities, the most obvious relevance of these case-studies is the way in which contrasting growth records, not to mention a difference in strategic direction, help to explain why the British-owned electronics industry has struggled to remain competitive, while its Japanese counterpart came to dominate the world scene. Founders: culture and strategy Although by the 1940s both Matsushita and Ferranti had evolved into substantial firms with extensive production, development and office facilities, each emerged from extremely humble origins. Indeed, as both founders experienced a traumatic childhood, organisational psychologists like Cooper would claim that this played a key role in their drive for success.5 In the case of Konosuke Matsushita (born in 1894), his relatively affluent family was thrust into penury as a result of the father’s dubious dealings in rice futures.6 Sebastian de Ferranti (born in 1864) had also been born into a prosperous middle class family full of artists and musicians.7 By 1881, however, after his father had suffered a cerebral thrombosis, the young de Ferranti was obliged to leave university and support his mother and stepsisters. Crucially, in both cases these experiences prompted a vigorous response from the two dynamic individuals who dominate this chapter. In fact, because of limited market opportunities and poor financial resources, both of their first forays into business were extremely small in scale and scope. On the other hand, their drive for success remained undaunted, especially in view of the need to support their own families. Matsushita’s first business was a classic example of what in Japan was known as a yojohan kojo (domestic workshop), where in 1917 he started making electric plugs in his own house, with his wife and brother-in-law.8 Sebastian de Ferranti at first had the support of several prominent businessmen when he went into business in 1882. Unfortunately, though, this finance was wasted by an over-ambitious partner, forcing de Ferranti to relocate in a small workshop which acted as his factory for over ten years. The key point to note about the consequent development of each business, however, concerns the contrasting patterns of growth which characterise their histories. In attempting to explain this contrast, as we shall see later, one can discuss at great length a variety of external factors, including the nature and size of the domestic market, support from financial institutions, and the differing attitudes of governments. On the other hand, perhaps greater benefit can be derived from a study of the cultures which dominated the firms for much of their history, and

180 A COMPARISON OF MATSUSKITA AND FERRANTI

Figure 6.1 Konosuke Matsushita (1894–1989), the founder of Matsushita Electric in 1983 at the age of 89.

especially the attitudes imbued into the respective organisations by founders who each had a clear vision of how they would contribute to society. This substantiates

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Figure 6.2 Sebastian Ziani de Ferranti (1864–1930), the founder of Ferranti Ltd, robed in his doctoral gown in 1926 at the age of 62.

Schein’s view, that first generation owner-managers often play a seminal role in fashioning company traditions, the impact of which are felt in the manner of a firm’s subsequent development.9

182 A COMPARISON OF MATSUSKITA AND FERRANTI

Matsushita Apart from its ability to develop and manufacture high quality consumer goods, one of the most outstanding features of the Matsushita organisation has been the spiritual character which has underpinned the company’s working philosophy.10 Konosuke Matsushita had always been a firm believer in the need to harmonise capitalism and social justice, developing a company creed and objectives which set him apart from many of his contemporaries. Although he was heavily influenced by detailed observation of the Tenrikyo religion in 1932, from the early days of the business he encouraged employees to ‘sell customers…goods that will benefit them’, arguing that capitalists had a broader responsibility to society.11 After studying the basic tenets of the Tenrikyo sect, he also started to fashion a corporate mission built around a 250-year corporate plan broken into twenty-five-year periods. This mission was based on a belief system which he called his ‘Basic Business Principles’, the first sentence of which proclaimed the firm’s principal aim as being: To recognise our responsibilities as industrialists, to foster progress, to promote the general welfare of society, and to devote ourselves to the further development of world culture.12 As Pascale and Athos have noted, such idealistic, if not altruistic, intentions would be seen in Western eyes as a front for corporate exploitation of the consumer.13 At Matsushita, however, where at the beginning of every working day all employees recite a code of values and sing a company song, both drafted by the founder in 1932, they are bound into a community which benefits enormously from the consequent cohesion and spirituality. Of course, company songs and mission statements are not the only features of what we can refer to as the ‘Matsushita Spirit’, because from an even earlier date the founder recognised the importance of serving the mass market with goods priced at levels at which each participant in the transaction would derive some benefit. This highly pragmatic and eclectic approach emerged largely as a result of his early experiences of marketing, when faced with the larger, more technologically proficient firms like Toshiba, Hitachi and Mitsubishi. In addition, he also fashioned a series of functional strategies which complemented his spiritual aims. First, as a yojohan kojo Matsushita did not benefit from zaibatsu support,14 while as a result of difficult experiences with price competition he decided to establish his own lines of product distribution. Indeed, his highly innovative move to market Matsushita goods under the National trade name, using aggressive marketing and sales techniques, set him apart from the rest of the embryonic Japanese electrical industry. These National Renmeiten (kin retail shops), numbering over 10,000 by 1941, were built on a system of profit-sharing, providing the incentive for each agent to increase sales. Furthermore, as a result of successful diversification away from bicycle lamps into radios and other electrical goods, by 1933 he had adopted a highly decentralised divisional structure which pioneered the concept of identifying

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Table 6.1 The growth of Matsushita, 1920–95

profit centres. Matsushita was especially concerned to instil entrepreneurial instincts into his managers, albeit within the context of a supracorporate supervisory system (devised by his assistant, Aratoro Takahashi) which provided him with detailed information on divisional performance.15 Finally, one must also emphasise the priority given to ‘followership’ and production engineering within the Matsushita organisation. Consistently from the 1920s right up to the 1970s, a substantial proportion of its internal resources have been devoted to imitating the best features of competitors’ products and manufacturing the end-product more cheaply. This ensured that the firm kept pace with the latest developments, yet outperformed rivals through improved production techniques and aggressive selling.16 The key features of the Matsushita philosophy were consequently aggressive marketing and selling, a focus on mass-producing quality goods at competitive prices for the low-income market, pricing goods at a level which would benefit all participants in the transaction, and the creation of a highly cohesive labour-force which worked within a decentralised organisation united by a sincere commitment to the founder’s belief system. Even though Konosuke Matsushita retired as company president in 1965, in favour of his son-in-law, Masaharu Matsushita, he remained on the board as chairman until 1973, providing the continuity necessary in sustaining all the major features of his organisational and commercial strategies. It was an ethos which helps to explain the rapid growth recorded in Table 6.1. Indeed, Matsushita has expanded from a workforce of just thirty-two into what by 1980 was the world’s largest manufacturer of electrical appliances, achieving sales per employee which were double those of its main American (General Electric and ITT) and European (Phillips and Siemens) rivals.17 More importantly for Osaka, according to the tables presented by Abe and Sasaki, Matsushita had become by the 1950s one of the region’s three largest manufacturers and maintained that position into the 1990s.18 This provided Osaka with a dynamic employer which has consistently invested substantially in people, product and production development since its foundation in 1917.

184 A COMPARISON OF MATSUSKITA AND FERRANTI

Ferranti When one begins to study Ferranti, it is clear that while there are certain similarities with Matsushita’s style of management and organisation, in many ways the contrasts are much more noticeable. One must first remember that de Ferranti had already been in business nearly forty years when Matsushita created his yojohan kojo in 1917. From the start, his firm also differed markedly in the type of products developed, a theme which will feature prominently in this study. Sebastian de Ferranti built his initial reputation as a designer of electrical generators, diversifying quickly into the associated fields of transformers, meters and instruments.19 Although the firm struggled to survive what was a difficult first decade for the British electrical industry, by the time he had moved out of London in 1896, to Hollinwood, just outside Manchester, the Ferranti business was firmly established as a major supplier of generation and distribution equipment. Largely as a result of his pioneering work at the Deptford power station between 1887 and 1891, Ferranti had also become well known for his pursuit of a technology-led strategy which became the principal characteristic of the Ferranti mission. This established a philosophy which was transmitted through succeeding generations of the family into the organisation as it evolved through the twentieth century. This technology-led strategy was clearly the most consistent feature of what came to be known within the firm as the ‘Ferranti Spirit’. Just as in Matsushita, a devolved structure was also adopted at an early stage, in order to encourage managers to develop and introduce new ideas. Unfortunately, however, because of a reluctance to dilute the firm’s financial control and ownership, Ferranti experienced a severe liquidity crisis in 1903, after which the bank replaced the founder as chief executive with two chartered accountants who were responsible for managing the company up to 1928.20 We must return later to discuss the financial constraints imposed by the family’s refusal to sell a controlling interest in the firm, because after a series of capital reconstructions, Ferranti Ltd. reverted to family control in 1928. This reversion also provided the second generation (Vincent) de Ferranti with an opportunity to restore commitment to his father’s belief in a technology-led strategy, building a firm over the following forty-five years which pioneered a wide variety of new and exciting products. It was in this period that the family coined the catchphrase, the ‘Ferranti Spirit’, as a means of engendering loyalty amongst employees and customers.21 Although the technology-led strategy initiated by the company’s founder undoubtedly dominated decision-making at Ferranti for much of the twentieth century, it is vital to remember that Vincent certainly learned from his father’s experiences in 1903 and retained many of the financial systems introduced by the bank’s representatives.22 In effect, though, while Vincent attempted to achieve a balance between commercial and technological aims, Ferranti retained a commitment to long-term product development strategies which fuelled the expansion recorded in Table 6.2. At the same time, it is clear that under Vincent, and later under his son, Sebastian, Ferranti sought refuge from the harsh

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Table 6.2 The growth of Ferranti, 1907–87

competition in civil markets by focusing on what Burns and Stalker claim to have been the ‘friendly path’ of defence contracting.23 This dimension to the firm’s strategy must be explained in some detail, a task to which we shall return later. At the outset, though, it is clear that from a variety of perspectives, and especially their contrasting approaches towards innovation, selling and markets, Ferranti and Matsushita differed in significant ways. Organisational dynamics The missions devised by both Sebastian de Ferranti and Konosuke Matsushita clearly possessed great durability, because in their respective firms later generations of chief executives continued to cling strenuously to the ideals and aims laid down by the founders. Of course, the latter’s spiritualist notions and market-led strategy were different from the former’s commitment to building the ‘Electrical Age’ through the pursuit of a technology-led strategy. As we shall also see, the firms operated in different markets, a feature of their evolution which to some extent reflected the pressures inherent in their respective domestic environments. On the other hand, they had a common belief in delegating responsibility down the managerial hierarchy, constructing a financial reporting system which allowed for adequate supervision of departmental activities. This provided a highly organic organisational culture which, if the evidence recorded in Tables 6.1 and 6.2 is worth noting, facilitated their impressive growth into major players in their own right. Clearly, though, alongside its status as the world’s leading electrical appliance manufacturer, Matsushita stands out as by far the most impressive, if turnover and capital are considered. This contrasting performance provides an interesting conundrum, leading us to compare the roles played by organisational dynamics and external stimuli in dictating the respective patterns of development at the two firms.

186 A COMPARISON OF MATSUSKITA AND FERRANTI

The domestic environment and early company growth to the 1940s While the principal characteristics of the two companies’ cultures certainly seemed to have provided a dynamic boost to their activities, inevitably one must also consider how well suited this ethos was to the respective environments in which each operated. Of course, there were major differences in the way the two economies evolved over the twentieth century. In Japan’s case especially, not only was the economy lagging significantly behind its rivals in the West, but also the decisive watershed of 1945 acted as a cataclysmic influence on so many different aspects of its development. There are other issues which will need to be explained, for example the respective roles played by financial institutions and government ministries. Nevertheless, it will be the contrasting market opportunities which will demand most attention, providing a crucial insight into the firms’ patterns of decision-making. Matsushita When in 1917 Konosuke Matsushita first went into business manufacturing a novel electric socket, the Japanese electrical industry was still in an embryonic stage of development. Indeed, while the Japanese economy had benefited enormously from a surge in demand during the First World War, it was still heavily dependent upon cotton textiles and heavy engineering for the bulk of its industrial activity.24 Furthermore, zaibatsu groupings dominated the industrial sector, while the distribution and selling of goods was controlled by an intricate network of independent agents and merchants. With specific regard to domestic electrical appliances, however, the market was so small that major firms like Mitsubishi and Hitachi showed little interest in diversifying away from their staple business in capital goods and defence equipment, providing a wide range of opportunities for an innovative electrical engineer capable of producing quality goods at reasonable prices. It is also interesting to note that the larger firms were all based in Tokyo, given their need to be close to the seat of political power, while Matsushita remained in Osaka, Japan’s commercial capital and centre for light engineering. Having been employed as an installation technician by the Osaka Electric Power Co. since 1910,25 Matsushita was well aware of the considerable potential in electrical appliances, leading him to establish his own business at the height of the First World War boom in 1917. Although the first few years proved extremely difficult, with all the major firms ignoring the relatively small domestic appliance market, early successes with a novel electric socket and bicycle lamp provided a solid base on which to expand the yojohan kojo. The bicycle lamp proved especially successful, especially when powered by a new type of battery which possessed an ability to last much longer than most of its rivals, forcing Matsushita in 1928 to expand into larger premises. Earlier, in 1927, he had also launched the National brandname, breaking with convention in developing a distinctive marketing identity

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which reflected his desire to manufacture products which would be indispensable to every household in Japan. This then led to a decision in 1929 to distribute (but not necessarily manufacture) a full range of consumer electrical appliances, using his own distribution channels and dedicated retailers who were provided with advertising displays and even hire purchase facilities. It was also in 1929 that Matsushita first established contact with the Sumitomo Bank, when the firm sought loan facilities of up to 20,000 yen,26 a relationship we shall examine later. Matsushita’s willingness to break with convention when marketing and selling goods was clearly one of the principal reasons why his firm expanded so rapidly during the interwar period (see Table 6.1). As we noted earlier, though, production engineering was another key feature of the Matsushita strategy, reflecting his intense interest in the achievements of Henry Ford in the automobile industry. An excellent example of this twofold emphasis on efficient production and aggressive selling was the ‘Super iron’ he launched in 1927. The iron was still regarded by most Japanese as a luxury item, annual sales rarely exceeding 100,000. Matsushita, however, believed that a good quality product sold at a reasonable price would overcome this image, an attitude which resulted in the mass production of 10,000 units per month of a ‘Super iron’ which was 30 per cent cheaper than those of his rivals. Similar successes were recorded with domestic heaters and dry-cell batteries, after a public share issue in 1935 provided the funds to diversify production into new areas, indicating how the firm’s ability to mass-produce and distribute electrical goods provided a competitive edge in an expanding market. The battery business, as we noted earlier, was particularly successful, leading Matsushita in 1936 to buy the Asahi Battery Co. An indirect benefit of this purchase was the acquisition of the managerial skills of Aratoro Takahashi, the man largely responsible for developing over the following years the firm’s highly effective internal accounting system. Ironically, though, in view of the firm’s later prominence in the field, the first Matsushita radio set was not mass-produced when introduced in 1930, largely because of its technological limitations. As the firm’s expertise improved, however, and sales increased from just 1,000 sets in 1931 to 206,000 by 1937, substantial economies of scale were achieved, bringing prices down to such an extent that Matsushita became the largest radio manufacturer in Japan.27 Matsushita had clearly expanded rapidly over the interwar era (see Table 6.1), largely by exploiting the growth in electricity consumption through a policy of selling innovative consumer products at highly competitive prices through a dedicated network of agents. One must remember that rarely did Matsushita take a pioneering role in any market, preferring instead to follow the lead forged by larger Japanese companies like Tokyo Denki (by 1938, Toshiba).28 The case of the radio is typical, because Matsushita relied on Toshiba to supply the complicated components like vacuum tubes. At the same time, by outperforming its rivals through the use of superior production and distribution techniques, Matsushita was able to establish strong market positions in a wide range of appliance markets. As a consumer goods producer focusing more on mass-markets, Matsushita consequently became a major player in the Japanese electrical industry in its own right. Such was

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its prominence that after the National Mobilisation Law was enacted in 1938, the government directed the firm to play a full part in the provision of military equipment for the war with China. By the time war with the United States had broken out on 8 December 1941, Matsushita was making a wide range of electrical and electronic devices for the military, later diversifying into aircraft and ship production with some success. To Konosuke Matsushita, while as patriotic as most contemporary Japanese, this diversion of resources away from the domestic appliance markets was most unwelcome. He complied with all the government’s demands during those difficult years, accruing enormous debts which later crippled the company. Nevertheless, he was much more interested in the original mission which had fuelled his firm’s early growth, to produce quality goods at reasonable and competitive prices for mass consumption. This drive resulted in the return to this market as soon as possible after the disastrous defeat of Japan in 1945. Of course, because the new constitution imposed on Japan in 1947 by the victorious Allies forbade the build-up of an indigenous military capacity, defence market opportunities were extremely limited.29 More importantly, though, unlike the bigger electrical firms like Hitachi and Mitsubishi, Konosuke Matsushita was much more interested in consumer goods production, a stance which determined the pattern of development his firm pursued over the following decades. Ferranti While Ferranti by no means ignored the opportunities provided by a rapid expansion in electricity sales during the interwar era, it is clear that the firm’s technology-led strategy proved to be inappropriate to mass-consumption markets. In fact, both Sebastian and Vincent de Ferranti invested substantial financial and technical resources in radio development and production, in addition to which by the 1930s a wide range of electric fires and heaters was being made from a factory in Moston. Nevertheless, power transformers and meters provided Ferranti with the bulk of its profits up to the 1940s, products which were sold to customers— electricity authorities and supply companies—who could afford to base their purchasing decisions on non-price criteria.30 Up to the financial crisis in 1903, Ferranti had actually been a manufacturer of generating units (including a reciprocating steam engine) and other electrical equipment, building a reputation for design, quality and durability. The generator department was closed in 1905 by the new management imposed by the bank, largely because the firm could not afford the substantial amounts of capital required to move into turbo-alternator production. However, this did not necessarily result in a strategic switch in markets, because the power transformers, meters and electrical instruments manufactured over the following thirty years were still sold principally to the same type of customer. Furthermore, the radio and domestic electrical appliance ventures initiated towards the end of the 1920s were dismal financial failures, accumulating

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substantial losses throughout the 1930s in spite of the consumer market’s rapid expansion.31 In retrospect, it is clear that Ferranti management possessed neither the marketing nor the production skills to succeed in mass-consumption markets. The meter department stands out as a paradox in this respect, because these products were mass-produced using advanced flow-line production techniques and American machine tools. At the same time, one should emphasise that success in this market was built on a highly successful price cartel, ensuring that Ferranti would make a profit on meter sales, which in any case went in their entirety to technically-oriented consumers like electricity supply authorities. As we noted earlier, even though a rigorous reporting system had been introduced into the firm after 1903, and under Vincent departmental managers were left in little doubt that they must produce commercial rewards,32 the ‘Ferranti Spirit’ was based on a belief in pushing forward the frontiers of technology. Just like his father, Vincent had a highly supportive attitude towards new ideas, encouraging managers ‘to take a sporting swipe’ at emerging technologies which seemed to offer some commercial potential. The third generation of the family to take on the position of chairman and managing director, Sebastian de Ferranti (1963–75), similarly pursued ambitious development strategies, sponsoring in particular the highly expensive semiconductor programme which was investigating the possibilities in integrated circuits and large-scale integration. The technology-led strategy so beloved of the eponymous owning family was clearly the main driving force behind Ferranti from its inception right through to the sad demise following revelations of a massive fraud perpetrated in 1987.33 Its reputation for making highly innovative equipment also prompted defence ministries to recruit the firm into what became a major rearmament drive during the late-1930s. Although Ferranti had supplied the armed services with shells and fuses during the First World War, after 1918 it had concentrated on civil lines like transformers, meters and radio, leaving the defence market to established suppliers like Vickers and Armstrong-Whitworth. By 1934, however, firms like Ferranti were being requested to provide specialist assistance in projects like the development of radar or electronic gunnery control systems.34 Vincent de Ferranti realised that the defence market offered enormous opportunities for firms with extensive research facilities, especially as the ministries could be persuaded to fund both the capital investment and development programmes with generous allowances and progress payments. As Ferranti succeeded in making a highly effective contribution to the rearmament and wartime efforts, especially in areas like avionics and control systems, this also provided a solid basis for an ongoing relationship with the civil servants and government research establishment personnel who controlled the defence budget. Of course, defence expenditure plummeted during the late-1940s, forcing firms like Ferranti to rebuild their civil product lines. However, once the Cold War took a grip of British politicians, especially during the Korean War (1950–53), firms like Ferranti were again being encouraged to participate in a huge military expansion

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programme. For example, Ferranti was invited to tender for finance to develop a guided missile, resulting in the provision by the Ministry of Aviation of a new factory in Wythenshawe, where the Bloodhound system was developed. Similarly, the avionics activities in Edinburgh and naval computers business at Bracknell also benefited from substantial defence contracts. At the same time, as we shall see later, while Vincent had attempted to rebuild the radio and domestic electrical appliance departments, they only managed to repeat their 1930s experiences and record substantial losses. Indeed, by 1957 these businesses had been sold off and their factory in Moston had been converted to manufacture the Bloodhound missile. This reflects the extent to which Ferranti avoided the mass-consumption markets, preferring instead to focus attention on the defence markets which seemed to offer better financial prospects for a firm which was essentially self-financed and committed to a technology-led strategy. Expansion and prospects since the 1940s We shall return later to debate whether or not Ferranti had taken what some regard as the ‘soft’ option in concentrating on defence markets. The main point of contrast with Matsushita, however, is already apparent, because while the Osaka company was much more interested in exploiting its established marketing and production expertise in the domestic appliances market, Ferranti strategy focused more on defence businesses and technological innovation. Inevitably, the external environment played a key role in determining these strategies, and especially the fundamental differences in the two countries’ international political stances.35 At the same time, especially as a result of a strengthening exchange rate and a growing trade balance, Japanese firms like Matsushita developed highly ambitious global strategies which strengthened further their international competitiveness. On the other hand, the inherent features of the company cultures would appear to have been at least as important in determining the respective patterns of development. Over the post-1945 decades, the contrast in approaches widened even further, a trend which helps to explain why the Japanese electronics industry proved to be so much more successful not only in developing a highly successful domestic business, but also with respect to its multinational activities. Matsushita Compared to its rapid rise during the interwar era, the prospects for Matsushita in 1945 appeared to be extremely bleak. In the first place, its wartime efforts for the military had left the firm and Konosuke Matsushita saddled with enormous debts. During the latter years of the war, the founder had personally borrowed 7 million yen to help build the aircraft and ship production facilities required by the government. Such was the firm’s financial state by 1948 that it was obliged to borrow 200 million yen from the Sumitomo Bank in order to cover its commitments.36 The senior management of Matsushita was also purged, as part of

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the attack on zaibatsu control of industrial activity, even though the founder protested that his firm had never been linked with any such grouping. After more than fifty visits to the American headquarters in Tokyo, and the presentation of a petition signed by 15,000 existing and former employees, Konosuke Matsushita was exempted from the purge. However, his firm was still faced with an enormous challenge if it was to extract itself, along with the entire Japanese economy, from the disaster enveloping the country in 1945.37 As a reflection of this difficulty, the Matsushita workforce fell from over 24,000 in 1944 to just 4,438 in 1950, a trend which the founder regarded as a betrayal of his firm’s role in society. Characteristically, Matsushita attempted to deal with this challenge by further extending the spiritual philosophy which since 1932 had been at the core of his firm’s expansion. Keieihoshin Happyokai (meetings to announce business policies) were inaugurated in 1945 as opportunities for the founder to explain the following year’s strategy. In 1946, he also established the PHP (Peace and Happiness through Prosperity) Institute,38 as a means of strengthening the spiritual dynamic within the firm. More importantly, though, by October 1945 full lines of consumer appliance production had been recommenced at Matsushita. All employees received a copy of the founder’s appeal, which noted that: ‘Production is the very basis of recovery. Let’s reaffirm the traditional Matsushita spirit and commit ourselves to the restoration of the nation and the elevation of our culture’.39 This demonstrates how a combination of spiritual and nationalistic motives once again lay at the very heart of Matsushita’s philosophy, alongside which his work for the PHP Institute helped to restore a feeling of community within the firm, boosting the drive back to commercial viability. In spite of the immense sense of camaraderie which typified the Matsushita organisation, the late-1940s proved extremely difficult for consumer appliance firms. This is not surprising, given the high levels of unemployment, hyperinflation and complete sense of crisis which pervaded these years. The drastic deflation of the Japanese economy in 1949 further weakened the prospects for firms like Matsushita, causing many to fear for the future. By that year, Matsushita was in such financial difficulties that the founder was branded the ‘King of Arrearage’, such was the sum his company owed in unpaid commodity taxes. Ironically, Matsushita largely survived in this period because of its position as one of the leading battery manufacturers, such was the irregular supply of electricity for appliances. It was only when during the Korean War the American government placed substantial contracts with Japanese suppliers that industrial activity started to recover. It was also at this time that Matsushita negotiated a licensing agreement with the Dutch firm of Philips, giving the Osaka venture access to some of the world’s most advanced electronics technology. The 1952 Philips agreement marks an important watershed in Matsushita’s technical development. It came largely as a result of the founder’s realisation that if the Japanese economy was ever going to compete with its Western rivals, it had to imitate their management systems and technology. Matsushita had never been regarded as strong technologically, having copied other firms’ designs and relied on

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its production and marketing strengths to increase sales. The wartime provision of gunnery control equipment had undoubtedly brought new expertise into the company, while the transfer of Toshiba valve-making technology was similarly beneficial. Nevertheless, it was only after Philips agreed to sell a technology transfer licence in 1952 that Matsushita established a reputation for producing advanced equipment. By the time a Philips-Matsushita factory had been opened in 1954, producing components and tubes: ‘A customer-focused, high-productivity, and wellled organisation was now fused with world-class technology.’40 As the postwar constitution imposed on Japan by the Allies severely limited the country’s ability to rebuild its armed services, all this expertise was also going to be devoted to serving civil requirements, especially as the larger electrical firms mostly focused their attention on capital equipment markets. Before passing on to an assessment of how Matsushita applied this new-found technical expertise in its quest to exploit the latent demand for electrical appliances in Japan, it is necessary to analyse the firm’s reputation as a follower, rather than an innovator. In fact, up to the 1960s rarely did Matsushita launch its products before those of its rivals like Sony and Hitachi, preferring instead both to refine its designs through the use of extensive reverse engineering, as well as develop the most efficient manufacturing techniques. Indeed, the firm was often called Maneshita (meaning ‘to have imitated’) by contemporaries, because of its ‘fast-second’ approach.41 At the same time, not only did Matsushita acquire the Philips licence in 1952, a year later a central research laboratory was opened in Osaka (Kadoma), demonstrating how the firm was willing to invest substantially in product development. The tendency to move from a ‘fast second’ approach to one where Matsushita was originating products accelerated significantly from the 1950s. It is important to remember that while the bulk of its research and development expenditure (averaging 4 per cent of sales value, or $400 million in 1980) was devoted to production engineering, over 40 per cent went into new designs and products.42 This was especially apparent after the Oil Price Shock of 1973, when along with most major Japanese corporations much more original work was being conducted within Matsushita.43 An excellent example of how this strategy was effected can be found in the firm’s role in securing a victory over its rivals in the use of VHS technology for video recorders. In fact, Sony had pioneered this technology, introducing its betamax brandname during the late-1970s. As a result of detailed marketing surveys, however, Matsushita realised that consumers wanted longer video capacity than that provided by betamax, resulting in the development (with its subsidiary, Nippon Victor) of the VHS technology which was soon to overtake Sony’s early lead. Of course, Matsushita’s strong sales network was partly responsible for VHS’s rapid rise to market pre-eminence, as well as which through the use of effective production technology Sony was undercut in price by almost 15 per cent. Matsushita had clearly demonstrated its technological prowess in overcoming the early lead gained by Sony, reflecting a commitment to original research which has become the hallmark of its recent rise to ascendancy in the world electronics

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industry. It was also during the 1970s that Matsushita ventured into the high-risk area of electronic components, becoming by 1989 the world’s ninth largest chip producer as a result of an intense campaign to produce semiconductors which would keep its products at the forefront of this technology.44 One must consequently be wary of falling into the trap created by the firm’s 1950s reputation, because progressively over the postwar decades Matsushita has become a world leader in electrical appliance technology, providing the expertise which could be incorporated into a product range which was very much in demand. Given this increased commitment to technological innovation, Matsushita was consequently in a strong position to exploit any growth in domestic and international demand for its products. Of course, it is a matter of historical record that between the early-1950s and 1973 Japan enjoyed an ‘Economic Miracle’, with economic growth rates averaging almost 10 per cent per annum and per capita GDP rising from 131 dollars in 1950 to 4,475 dollars by 1975.45 Japanese consumers were clearly keen to take advantage of new technology and purchase electrical appliances in enormous numbers. As Table 6.3 reveals, this expansion in appliance consumption passed through a series of overlapping stages linked to the introduction of new products. The radio initiated this process, following which Japanese consumers eagerly bought the latest gadgets on offer. It is also worth noting that by 1964 almost 88 per cent of households possessed a black-and-white TV, while 61 per cent had a washing machine and 38 per cent a refrigerator.46 Excluded in Table 6.3 are audio players and air conditioners, while later video recorders and satellite receivers acted as yet further stages. Crucially, though, especially with Philips technology in the 1950s and later through the investment of substantial sums into in-house development programmes, Matsushita was well placed to exploit these mass consumption markets, utilising the production and selling skills which had been the foundations of its earlier growth. A major reorganisation of the sales network in 1957 also provided a more focused approach to the mass market, giving the newly-formed Matsushita Electric Industrial the role as the sole marketing and distributing arm of the whole organisation.47 Although none could match the firm’s expertise in this area, other Japanese firms attempted to follow this model, by developing what is known as a keiretsu hanbai-mo (keiretsu sales network). By the late-1960s, ‘National Shops’ accounted for 40 per cent of all electrical appliance stores in Japan, providing a solid sales base and direct knowledge of consumer trends. When combined with the firm’s policy of improving on rivals’ designs, not to mention its renowned expertise in mass-production, this boosted its aim of becoming the country’s leading appliance manufacturer. The Matsushita marketing and sales structure was undoubtedly a major contributor to its success in the consumer appliance markets, especially when one considers the relationship between producer and retailer. As he had been since the early days of his firm, Konosuke Matsushita was especially concerned that products should be sold at a price which benefited all involved in the transaction, whether they be the

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Table 6.3 Domestic production of electrical appliances in Japan, 1950–70

consumer, producer or seller. This involved what in the UK would be described as a system of retail price maintenance, by which all distributors and retailers sold at prices determined by Matsushita, preventing the onset of a price war within the network which the founder regarded as highly damaging. This approach must not be confused with the extensive cartelisation of industry which dominated the British industrial scene up to the 1950s, because the Japanese domestic market was characterised by intense competition between indigenous firms and across groups. On the other hand, the distribution network did provide Matsushita with the required level of contact between producer and consumer which was fundamental to the firm’s strategy. The founder also wanted the members of the marketing network to feel that they were just as much a part of the Matsushita community as his production workers. By 1956, there were 33,000 retail outlets (as well as 620 distribution agents) linked to the firm, providing a powerful vehicle through which the products were sold to an expanding market. During the early-1960s, after Matsushita had also reinstituted the ‘full line of electrical appliances’ strategy first devised in 1929, with its keenly competitive pricing structure and reputation for quality, the firm was able to build up substantial market shares in all product lines. This helps to explain why between 1945 and 1973 Matsushita sales multiplied over 4,000 times in real terms, laying the foundations for a period of rapidly increasing profitability.48 Not only was Matsushita successful in its home market, just as with many of its contemporaries from the mid-1950s an export strategy featured prominently in the founder’s plans.49 An exporting department had been established as early as 1932, while by 1945 thirty-nine plants and sales bases (mostly in Taiwan, Korea and Manchuria) had been opened. Although all of the overseas facilities were requisitioned by their home governments at the end of the war, and shortages of materials and a strong antipathy to Japanese products in South East Asia limited exports prior to the Korean War, Matsushita remained convinced that his firm could sell successfully overseas. Matsushita Electric Trading was consequently

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provided with parent company finance and management expertise after 1955, substantially boosting the company’s export efforts. The enormous benefits derived from serving a rapidly expanding domestic market, coupled with the luxury of a highly favourable exchange rate, also combined with the firm’s marketing and production strategies to give Matsushita a significant competitive advantage in its chosen markets. As many authorities have noted, with scale becoming a crucial condition for success in the electronics industry,50 Japanese firms were able to utilise their expanding domestic market as the base for what was a highly effective assault on world markets. This explains why between 1955 and 1959 Matsushita increased the value of its exports by 600 per cent, from 0.5 billion yen to 3.2 billion.51 Initially, most of this trade was with Asian and South American economies, where low-income markets existed for the firm’s goods. The problem encountered by Japanese firms, though, was the inability of these countries to export goods to Japan, resulting in the establishment of overseas production and distribution facilities. Guided by Takahashi, who was responsible for managing the firm’s overseas strategy, Matsushita usually started by building a battery plant, then progressing to more sophisticated products like radios and TVs. Konosuke Matsushita, however, was extremely keen to exploit the much more affluent American market, building on the success achieved by Sony with its famous transistor in the early-1950s.52 Although another American firm was already using the National brand name, Matsushita overcame this by introducing the Panasonic label which has since become so well known outside Asia. Matsushita also benefited from the problems experienced by the largest American producer of domestic electronic appliances, RCA, which diverted too much of its resources into a failed attempt to launch a computer venture. Indeed, while in 1960 the USA was selfsufficient in TVs, by the 1980s Japanese import penetration or production by Japanese-owned firms dominated the market.53 While success as a TV manufacturer had been instrumental in establishing Matsushita as an international competitor, above all the firm’s control of the VCR market ‘propelled MEI into its mid-1980s position as the world’s number one consumer electronics company’.54 Not only had its VHS system succeeded in the struggle against Sony’s betamax variant, but an aggressive licensing strategy ensured that most of the leading Japanese (Hitachi, Sharp and Mitsubishi), American (General Electric and RCA) and European (Philips) corporations were tied to the firm. Furthermore, the established distribution lines and brand names used to build up TV sales were exploited to develop VCR sales across the largest international markets. As a result, by the mid-1980s VCR profits accounted for 45 per cent of Matsushita profits and 30 per cent of total sales, much of which came from sales and production overseas. This success was built largely on a series of product improvements and process innovations, substantially outperforming the American firms in their own markets.55 Matsushita was very much in the vanguard of this movement, using to such good effect the aggressive marketing and production techniques which had proved so successful in its home market to become a major producer in the USA.

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The firm was also partly responsible for making Tijuana the world’s leading television producer, because after Japanese firms were affected during the early-1980s by intensifying competition from Korean domestic appliance manufacturers, plants were opened in this city to take advantage of the cheaper Mexican labour. This resulted in the establishment of a host of Japanese electronics subsidiaries in Tijuana, most of which were linked to sister plants in the USA. As we shall see later, a similar story can be related about its activities in Western Europe, where indigenous firms proved just as incapable as their American counterparts in resisting the Japanese challenge. Matsushita has consequently become a major multinational electronics corporation since the 1960s, extending its success in the domestic market into a large number of economies by undermining indigenous manufacturers. Matsushita had consequently emerged as a multinational in three stages, starting with its first moves into Asia and Latin America during the 1950s and 1960s, moving on to the USA in the 1970s, and culminating in further expansion after 1985 when the yen increased substantially in value relative to the dollar. The latter was the result of the G5’s decision, taken at the Plaza Hotel in New York, to depreciate the dollar, leading to the yen’s parity rising from 221 to the dollar to 128 within three years. This resulted in the expansion of overseas Matsushita production facilities in Singapore and Malaysia, using them as the base for exports to Western markets. In fact, by the 1990s twenty-three Matsushita production companies were operating out of these two countries, supplying high quality components for connected firms all over the world. By the 1990s, Matsushita had established an international network of overseas manufacturing plants and sales companies which accounted for 44 per cent of its total sales.56 The geographical distribution of these outlets reflected the dynamic nature of Matsushita’s overseas expansion, with fifty-two operations in North America, thirteen in Latin America, fifty-nine in Europe, sixty-one in Asia and the Near East and thirty-nine in China and Hong Kong. Over the course of the 1990s, this global dimension was also increased, partly in response to international complaints concerning Japan’s protectionist policies and an increasingly powerful yen which led the government to encourage firms like Matsushita to expand production overseas. In fact, the new president of Matsushita, Akio Tanii, introduced a plan to produce 50 per cent of all its foreign sales overseas. Although this will undoubtedly have implications for employment prospects at home, especially during crisis periods like the late-1990s, implementing this strategy was essential if Matsushita wanted to preserve its position as the world’s leading electrical appliance manufacturer. Whether this aim can be achieved at a time when the Japanese economy was suffering its worst crisis since the Second World War will be the subject of future research.

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Ferranti From being a medium-sised electrical engineering concern in the early-1920s, producing a small range of equipment for use in the supply industry, Ferranti had expanded substantially over the following thirty years into a highly diversified electrical and electronics firm competing in several civil and defence markets. As we noted earlier, though, especially since the mid-1930s rearmament drive, Ferranti had devoted a growing proportion of its technical and financial resources to the latter. The chairman, Vincent de Ferranti, attempted in the late-1940s to boost activity in civil markets like power transformers and domestic appliances, arguing that a balance must be effected between the two markets. However, only the former proved to be a success, while the latter generated such losses that by 1957 radio, TV and appliance production had been stopped and the factory converted for use by the guided missile department. Similarly, the Edinburgh factory opened by Ferranti in 1944, to manufacture on-board radar equipment for fighter aircraft, also continued to focus its attentions on the defence market after 1945, successfully establishing what by the late-1950s was Britain’s leading defence avionics business. At the same time, while in the 1950s Ferranti was regarded as one of the major British mainframe computer designers and manufacturers, by 1963 this business had been sold to ICT, leaving only the naval systems department in Bracknell, a business which was largely devoted to supplying the needs of the Royal Navy. As Table 6.1 reveals, the growing dependence on defence business at Ferranti during the 1950s was by no means stifling its growth path. Even though over twothirds of its annual profits, and much of its cash-flow, came from this sector, there seemed every prospect that with a well-established product range Ferranti would continue to flourish. In this context, though, it is important to note that Burns and Stalker criticised the Ferranti operation in Edinburgh for pursuing ‘the more friendly path of military aircraft and instruments, rather than the more treacherous domestic market related to industrial processes’.57 Of course, Ferranti was simply a microcosm of the entire British electrical industry, in that most of the leading manufacturers were deserting the highly competitive mass-consumption civil markets for what many perceived to be ‘safer’ defence sectors.58 On the other hand, one might also note that Ferranti experienced great difficulty in generating substantial sales for advanced products in British civil markets, reflecting a general problem which undermined the intention of developing a balanced product portfolio. Benefiting from the advantages of substantially greater domestic sales, American, and later Japanese, firms were able to swamp British markets, competing fiercely with indigenous firms which were simply incapable of harnessing the same dynamic economies of scale. Furthermore, as Ferranti discovered in 1964 when accusations were levelled at the profits generated from the Bloodhound contracts, defence markets were far from ‘friendly’.59 In 1965, after the TSR-2 aircraft project was cancelled, avionics firms like Ferranti also faced a bleak future, precipitating a period of acute liquidity which culminated in the crisis of 1974–75.60

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Of course, apart from defence market uncertainties and Bloodhound contract difficulties, there were several reasons why in 1974 Ferranti fell victim to a serious cash-flow problem.61 In the first place, having invested substantially during the 1960s in new production and development facilities for power transformers and semiconductors, these markets proved to be highly troublesome. This reflected yet again the difficulties associated with working in such advanced technologies at a time when foreign competition was encroaching further into these sectors. Secondly, the senior management, by that time led by the third generation of the family, Sebastian de Ferranti, was reluctant to take the harsh decisions and close these ailing departments. At the same time, one must note that while the arguments presented by Sebastian seem weak in retrospect, his committed belief in the ability of his managers to turn round difficult positions reflected the family’s consistent willingness to take a long-term position on departmental viability. Sebastian was also convinced that the National Westminster Bank (NatWest) would continue to service the firm’s short-term liquidity requirements, given the historic links between the two firms which went back to the 1890s. However, by the early-1970s NatWest was in dire straits, after several unsuccessful property-related ventures, forcing the bankers to refuse Sebastian’s request for an extension to the overdraft in September 1974. This decision would eventually lead to the Labour government’s acceptance of all Ferranti debts (totalling £15 million), a move which resulted in the firm’s quasi-nationalisation. More importantly, as a condition of its support, the government forced the family to take an honorary role in the hierarchy, replacing Sebastian as managing director with a former Burmah Oil executive, Derek AlunJones. In many ways, one could regard 1975 as a distinct watershed in the development of Ferranti, especially as Alun-Jones introduced a multidivisional form of organisation, alongside formal budgeting and planning procedures.62 Apart from government funds, by 1977 Ferranti had also raised substantial loans from a syndicate of British and American banks, while by 1980, as part of the incoming Conservative government’s privatisation programme, the firm’s equity had been sold off to the leading City institutions. Ferranti was consequently a much more orthodox company by the early-1980s, compared to its family-based character prior to 1975. However, one should not be fooled into believing that its essential character had changed, because the technology-led strategy, devolved organisation and commitment to defence markets remained central to the new management’s approach. Indeed, one might argue that with all the additional finance, Ferranti could afford to indulge its commitment to advanced technologies, investing substantially in a wide range of new areas of the electronics industry. The family also insisted that the rapid recovery made by the firm after 1975 was based on the product range and engineering team developed under their stewardship,63 a point which has considerable credibility when one considers the successes achieved in areas like avionics, computer systems and semiconductors. Table 6.2 confirms the rapid progress made after 1975, especially in terms of turnover, while Ferranti shares developed a solid reputation as a consistent earner of both dividends and investment premiums.

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Tragically, however, all the achievements of an organisation which had developed such a wide reputation were reduced to virtually nothing after the 1987 merger with International Signals & Controls, Inc. (ISC), of Lancaster, Pennsylvania. The alliance with ISC seemed to offer Ferranti a superb opportunity of entering directly the American and other overseas defence markets (especially the Middle and Far East). By 1989, though, while the senior management had consulted many of the leading City authorities on the merger, it was apparent that serious irregularities had appeared in the accounts, resulting in the firm’s liquidation at the end of 1993. This story cannot be related in any detail, because of the legal implications. However, it provides a tragic end to a firm which had been one of Britain’s leading-edge electronics innovators. Conclusions The disappearance of Ferranti International in 1993 could well be used to support a damning case against both the British electronics industry and the City institutions which had supported its 1980s expansion. In contrast, Matsushita and other Japanese electronics firms like Toshiba, Hitachi, Sharp, Sony and Sanyo seemed to gather strength over the 1980s and 1990s, investing the considerable wealth generated from expanding domestic sales into overseas subsidiaries which strengthened and extended their well-established competitive advantage in appliance markets.64 Of course, the Ferranti case must be regarded as unusual, especially in the way that it suffered an enormous fraud which was not detected by some of the leading City institutions. At the same time, the manner in which Ferranti and Matsushita evolved up to the 1980s was indicative of the sharp contrast in both company cultures and domestic environments which influenced their respective strategies. It is consequently essential to assess the main factors which account for these contrasts, in the process explaining why over the postwar decades the Japanese electronics industry has performed more effectively. Indigenous government support It has become almost a commonplace of Japanese economic history to claim that organisations like the Ministry of International Trade & Industry (MITI) and the Ministry of Finance played a crucial role in nurturing domestic industries through the late-1940s crisis and on to the ‘Economic Miracle’ years of the period 1955– 73.65 Of course, few authorities now accept that Japanese government policies were so important, when compared to the initiatives taken by private enterprise in developing what would become an unrivalled competitive advantage in high growth sectors like automobiles, shipbuilding, steel and electrical appliances. MITI may well have devised suitable protectionist policies which supported the early emergence of a competitive TV industry, as a complement to its work in the semiconductor sector. On the other hand, there is little evidence that Matsushita benefited directly either from actions taken by civil servants or general policy

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initiatives, preferring instead either to negotiate its own licensing deals or rely on internally-developed strategies. Furthermore, in response to inflationary tendencies, the Ministry of Finance would regularly deflate the economy, artificially dampening demand for goods like electrical appliances. For example, at the end of 1963 a severe deflation of the economy was effected by the Ministry of Finance, creating enormous difficulties for appliance manufacturers like Matsushita.66 In simple terms, even though Japanese ministries actively supported indigenous innovation and industrial expansion, helping to create a conducive environment in which business could flourish, it was private enterprise which provided the fuel for the ‘Economic Miracle’. In contrast, blame has often been heaped on successive postwar British governments for not only pursuing short-termist macro-economic policies, resulting in the allegedly damaging ‘stop-go’ cycle, but also for a failure to instigate sufficiently supportive industrial policies which could have sponsored indigenous technologies.67 Again, this thesis can be overplayed, especially when one considers the efforts of both Wilson administrations (1964–70 and 1974–76) to create ministries (respectively, the Ministry of Technology and National Enterprise Board) which might play similar roles to MITI in Japan. On the other hand, initiatives like the National Research Development Corporation were fraught with difficulties,68 resulting in only minor contributions to the development of competitive high technology industries. Authorities like Sebastian de Ferranti consequently complained in the 1960s that American manufacturers were winning what was often described as the ‘Electronics War’. In particular, he noted that politicians remained totally ignorant of the pressures imposed by a rival which was capable of exploiting the enormous advantages associated with its domestic space and military programmes and dominate the European electronics markets.69 Market opportunities and pressures Of course, specifically with regard to the British position, it is probable that whatever the government had done, indigenous manufacturers would have been powerless to withstand the onslaught effected by foreign firms from the 1960s. As we have already noted, scale was the key to success in the electronics industry. With specific regard to electronic components, for example, as the American electronics market at that time was at least ten times larger than any of the European markets like the UK, West Germany or France, this substantially reinforced the competitive advantage gained through government funding programmes. Furthermore, in the most advanced sectors like integrated circuits the USA accounted for 80 per cent of total world sales.70 For this reason, British manufacturers like Ferranti showed a greater propensity to shelter from these competitive winds by concentrating on defence markets. Japanese manufacturers, on the other hand, were able to expand production and utilise foreign technologies in the development of advanced devices, given the enormous surge in domestic demand for electrical appliances and sophisticated computing and telecommunications equipment which occurred behind protective measures.

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This helps to reinforce the point that a thriving domestic market must be a key ingredient in the creation of an environment conducive to industrial expansion. Certainly, the relatively low level of British demand for advanced electronics goods can help to explain why indigenous manufacturers failed to compete against the American,71 and later the Japanese, multinationals which came to dominate most parts of the industry. In this context, focusing on defence could well have been an entirely rational approach to the scene, especially as for firms like Ferranti this provided the liquidity to fund exciting projects which frequently challenged the frontiers of existing technology. Having noted the importance of domestic market pressures in pushing Ferranti and Matsushita into their respective strategies, another key dimension to each firm’s postwar development was their response to the opportunities in international trading. As we noted earlier, by the 1980s Matsushita had become one of the world’s leading multinational electronics firms, establishing subsidiary plants in North America, Asia and Europe on an extensive scale. This strategy was based partly on the firm’s vision, to serve mass markets with affordable products, and partly on international pressures associated with Japan’s mounting trade surpluses and the consequent increase in the value of the yen. In sharp contrast, apart from a Canadian subsidiary which rarely generated much profit for the parent company,72 until the 1980s Ferranti invested the bulk of its resources in UK-based facilities, resisting the lure of foreign opportunities on the grounds that its interests were better served by exporting goods to overseas customers, rather than risk scarce capital abroad. Even when the firm did develop a stronger multinational dimension, by buying several American electronics corporations, poor acquisitions ultimately resulted in the late-1980s crisis which eventually brought Ferranti to its knees. While globalisation was one of the key features of Matsushita’s recent successes, for Ferranti it proved to be fatal. Support from financial institutions One of the principal reasons why up to the 1970s Ferranti failed to build a greater global presence was the lack of surplus resources to invest in overseas branches. While the de Ferranti family was willing to take a long-term view of departmental viability, especially when advanced projects were coming to fruition, as we have noted several times the firm was vulnerable to financial constraints imposed by its owners’ refusal to dilute control and ownership and sell the equity. Although the bank proved highly supportive over most of the firm’s evolution, in 1903, in 1957 and again in 1974 its intervention resulted in dramatic changes to either the management structure or product portfolio. While the events of 1903 and 1974 have been briefly described above, it is vital to note that the 1957 decision to close the domestic appliances departments and convert the Moston factory to guided missile production was made after the bank pressured Vincent de Ferranti into taking decisive action on a ballooning overdraft caused by the former’s substantial losses.73 In simple terms, the reliance on internally-generated long-term capital

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frequently limited the firm’s ability to take risks on civil technologies which lacked the same kind of certainty as products developed for the military. This was also by no means unusual for British electronics manufacturers in general,74 which were criticised for committing a relatively small proportion of their funds to research and development activities. At the same time, one might also stress how financial institutions pursued such conservative and short-termist approaches to the provision of industrial finance that manufacturers were pressured into limiting this work.75 While at Ferranti these pressures were compounded by the family’s preference for retaining complete control, as the events of 1957 indicate even a family firm’s strategy could be influenced by bank attitudes. In stark contrast to the problematic relationship between British industry and the country’s main financial institutions, one of the most consistent features of the Japanese business scene has been the level of support provided by banks for longterm investment in manufacturing ventures.76 Indeed, bank finance, rather than equity, has been the main source of industrial capital in Japan, especially since the early-1950s, reinforcing the move into keiretsu groupings which have provided such a solid base for industrial expansion. As we noted earlier, in 1929 Matsushita had struck up a relationship with the banking arm of Osaka’s leading zaibatsu, Sumitomo, and over the following decades this institution has continued to provide the necessary support for the firm’s product development strategies, especially during the financial crisis of 1948. At the same time, in spite of the massive debts incurred during the 1940s, Matsushita resisted the appeal to join the Sumitomo group, preferring instead to rely on its own organisational dynamics and strategies which had been evolving since the 1920s. In fact, apart from the difficult period up to 1952, Matsushita was so successful over the postwar decades that it has managed to fund most of the expansion from internally-generated funds, reinforcing the independent stance taken by the founder. Indeed, because of its self-financing abilities, the firm was at times referred to as ‘Matsushita Bank’. Even though at no stage did it attempt to move formally into this field, this reputation was built on its practice of running the corporate treasury like a commercial bank, taking 60 per cent of all divisional surpluses and paying interest at market rates. Divisions could also apply centrally for additional investment capital, competing against other divisions for the available funds.77 Crucially, though, Matsushita could always have fallen back on the bank’s support, confident in the knowledge that these powerful financial institutions would have encouraged the long-termism inherent in its approach to the market. Just as importantly, bank capital has consistently been much cheaper than any of the sources of venture funds provided by institutions in either the USA or Europe, substantially assisting the investment strategies of Japanese firms up to the mid-1990s crises.

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Culture, strategy and performance Clearly, market potential and the support of wealthy financial institutions were major determinants of the pattern followed by indigenous electronics industries in Japan and the UK. In this context, though, it is vital to return to the earlier analysis of company culture and strategy, because the two case-studies chosen also reflect the importance of the decisions taken by the respective founders and their successors. At Matsushita, for example, the founder was dedicated to supplying the requirements of a low-income market with goods of high quality at a reasonable price. This philosophy, reinforced by a spiritual character to the firm’s operations, has acted as the driving force throughout its development since the 1920s, underpinning the innovative approaches towards marketing and production. Ferranti, on the other hand, has consistently expressed a commitment to engineering excellence and pioneering innovation, stressing the importance of these aims as a means of spreading the benefits of electrical and electronic technology. Even though the firm ventured into the mass-consumption markets of radio,TV and appliances, it generally failed to harness its technical abilities and produce competitive products which could have withstood the challenges posed by rival manufacturers. Instead, it focused more on work in the defence field and with electricity supply authorities, where technical superiority was appreciated above cost. This contrast in strategy and culture could also be used to illustrate the main differences between the British and Japanese electronics industries. By the 1980s, of course, rather than the challenge from American multinationals, the remaining British firms faced an even more powerful threat, in the form of either Japanese imports or products made at the overseas factories of firms like Matsushita, Sharp or Sony. In this context, it is vital to note that even by 1986 the consumption of electronics goods in Britain ($20.2 billion) was only just over one-tenth of the American level ($200 billion) and less then one-quarter of the Japanese figure ($89. 6 billion).78 This confirms our earlier point, that because British firms were unable to harness the dynamic economies of scale available in the much larger American and Japanese markets, they were forced either to focus on protected sectors like defence, electricity supply and telecommunications, or to forge defensive alliances with American or European rivals. The limited opportunities in British markets was certainly one of the main reasons why in 1987 Ferranti decided to merge with ISC, in the hope that its competitive advantage in defence electronics and computer systems could be exploited more extensively through the American firm’s networks. At the same time, GEC has forged extensive relationships with a variety of European electronics firms, as a means of extending sales in the European Community and elsewhere.79 The strategies devised by British electronics firms to overcome the inherently weak base provided by their domestic market again stand out in stark contrast to the highly aggressive manner in which Japanese counterparts have encroached on overseas markets through foreign direct investment. In particular, while British firms have pursued the defensive strategy of alliances and mergers, the now

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dominant Japanese giants like Matsushita have been able to remain independent, reinforcing the durability of the cultures and strategies established by their founders. This continuity will remain a considerable source of strength for Japanese electronics firms, reinforcing the dynamism which has always been a hallmark of their activities. Indeed, even though the American market continued to account for the largest single share of world electronics sales, by the 1980s Japanese firms were successfully encroaching on what to date had been the exclusive preserve of indigenous manufacturers. Of even greater concern in the USA, while in 1970 the world’s six largest integrated circuit producers were all American, by 1990 (apart from Intel) they were all Japanese, giving them an extremely powerful position in the development of a technology which was advancing rapidly.80 This reinforces the point that domestic market size is only one of the factors which help to explain the relative dynamism of electronics manufacturers, giving greater credence to the claim that the cultures and strategies of Japanese firms provided the inner strength which has set them apart from counterparts in both the UK and the USA. While by the 1990s the British electronics industry had dissolved into a group of firms sharing resources with mostly European partners, Japanese firms continued to demonstrate genuine competitive advantages in the crucial growth sectors of the industry. In explaining this contrast, one can point to a variety of differences in the respective environments in which the firms operated, most notably the role of government ministries, the size of home markets and the cost of capital. More importantly, though, the main reason why firms like Matsushita have succeeded must have been the drive and determination provided by the working philosophy developed by its founder, imbuing into the workforce a commitment to succeed which was transferred directly into everyday operations. The ‘Ferranti Spirit’ may also have been an effective means of encouraging engineers and managers to devise successful products, leading to the introduction of designs unmatched by much larger rivals. Unfortunately, though, this culture would only appear to have been capable of operating in markets which were less price sensitive than the mass-consumption appliances sector, resulting in the firm’s complete withdrawal from the latter and increased focus on defence technologies. The small scale of the domestic market clearly played a role in inhibiting the opportunities for mass sales of the civil products Ferranti succeeded in developing, allowing American, and later Japanese, firms the opportunity to dominate the British scene. Similarly, the attitude of British financial institutions also reinforced the need to take a ruthless attitude towards the market, limiting the opportunity to pursue the same kind of long-term development programmes which characterised the activities of firms like Matsushita. Most importantly, though, in sharp contrast with Matsushita and the thrusting Japanese electronics industry, Ferranti clung stubbornly to its perceived advantages in defence technologies, eschewing any opportunities associated with mass-consumption markets. In consequence, it is the Japanese who now dominate the British electronics industry, overtaking the American firms which once had a stranglehold in key areas. Clearly, in this context leadership has been the key to success, confirming Kotter’s conclusion that: ‘The mission-centred, customer-

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focused, high-productivity, employee-involved and constantly improving Matsushita Electric…may offer a far better role model than GM, Philips, Sears [and Ferranti], or most other well-known businesses’.81 Notes 1 For an analysis of these trends, see P.Dicken, Global Shift. The Internationalisation of Economic Activity (London: Paul Chapman, 2nd ed., 1992), pp. 309–48. See also M. Fransman, Japan’s Computer and Communications Industry. The Evolution of Industrial Giants and Global Competitiveness (Oxford: Oxford University Press, 1995). On a more general level, information on the major Japanese electronics firms can be found in W.M.Fruin, The Japanese Enterprise System. Competitive Strategies and Cooperative Structures (Oxford: Clarendon Press, 1992). Unfortunately, there is no similarly authoritative study of the British electronics industry, but see T.Wilson, ‘The electronics industry’, in D.Burn (ed.), The Structure of British Industry. A Symposium (Cambridge: Cambridge University Press, 1958), pp. 130–83. For a more recent view, see J.McCalman, The Electronics Industry in Britain: Coping with Change (London: Routledge, 1988), and C.Freeman, The Economics of Industrial Innovation (London: Frances Pinter, 1982). 2 For case-studies of these trends, see John F.Wilson, Ferranti. A History, Vol. I, Building a Family Business, 1882–1970 (Lancaster: Carnegie Press, forthcoming), and A.Brummer and R.Cowe, Weinstock: The Life and Times of Britain’s Premier Industrialist (London: HarperCollins, 1998). 3 For the conceptual background to this analysis, see J.L.Thompson, Strategic Management. Awareness and Change (London: Chapman and Hall, 2nd ed., 1993), pp. 8–23. 4 See Wilson, Ferranti. A History for a study of this firm. Professor Nakaoka is also undertaking a study of Matsushita, as part of his on-going analysis of industrial innovation. See T.Nakaoka, ‘Changes in the attitude of major Japanese corporations towards R and D’, Japan Forum, Vo1. 4, No. 1, April 1992, pp. 121–43, and idem, ‘A giant home electronics company in a declining textile region: postwar strategy of Matsushita Denki’, paper presented at a conference in Osaka to examine ‘Contrasting Business Strategies in Lancashire and Kansai’. 5 See C.J.Cox and C.Cooper, High Flyers. An Anatomy of Managerial Success (Oxford: Blackwell, 1988), for a review of the impact of childhood tragedies on career progression. 6 Much of the material on the life of Matsushita has been taken from original research by Professor Nakaoka into the Matsushita archives, as well as Matsushita Denki 50nen no Ryakushi [A Brief History on 50 Years of Matsushita Denki], 1968 and Matsushita Denki no Gijutsu 50nen-shi [A 50-Year History of Matsushita’s Technology]; K.Matsushita, Watashi no Rirekisho [My CV], Nippon Keizai Shimbun-sha, 1980; Y.Okamoto, Hitachi to Matsushita [Hitachi and Matsushita] (Tokyo: Chuokoronsha, 1979); K. Ozaki, ‘Matsushita’s marketing channel and business strategy in the pre-war period’, Hikone Ronsou, No. 257, 1989, pp. 123–52; J.P. Kotter, Matsushita Leadership. Lessons from the Twentieth Century’s Most Remarkable Entrepreneur (New York: The Free Press, 1997); and PHP Institute, Inc., Matsushita Konosuke (1894–

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7

8 9 10 11 12 13 14

15

16 17 18 19

20

21 22

23 24 25 26

27 28

1989). His Life and His Legacy (Tokyo: PHP Institute, 1994); Arataro Takahashi, Kataritsugu Matsushita Keiei [Tales of Matsushita Management for Younger Workers] (Kyoto, PHP Kenkyusho, 1963). See also C.A.Bartlett and S.Ghoshal, Transnational Management. Text, Cases, and Readings in Cross-Border Management (Chicago: Irwin, 1995), pp. 82–91, and Fruin, The Japanese Enterprise System, pp. 148–51. Material on de Ferranti can be found in Wilson, Ferranti. A History. See also John F. Wilson, Ferranti and the British Electrical Industry, 1882–1930 (Manchester: Manchester University Press, 1988). The brother-in-law, Toshio Iue, would later establish the rival firm of Sanyo. E.H.Schein, Organisational Culture and Leadership (London: Tavistock Press, 1985). See R.T.Pascale and A.G.Athos, The Art of Japanese Management (London: Penguin Books, 1981), pp. 28–57. Kotter, Matsushita Leadership, p.5. For a full analysis of the Matsushita mission, see Kotter, Matsushita Leadership, pp. 107–20, and Pascale and Athos, The Art of Japanese Management, pp. 49–51. Pascale and Athos, The Art of Japanese Management, pp. 49–51. See also Bartlett and Ghoshal, Transnational Management, pp. 82–3. For a description of how the zaibatsu system operated, see H. Morikawa, Zaibatsu (Tokyo: Tokyo University Press, 1992), and Fruin, The Japanese Enterprise System, pp. 90–2. Kotter, Matsushita Leadership, pp. 121–35. Ill-health might also have been another reason why Matsushita was keen to delegate more responsibility to his managers. Bartlett and Ghoshal, Transnational Management, pp. 82–3. Pascale and Athos, The Art of Japanese Management, pp. 30–1. Dicken, Global Shift, p. 336. See Jeremy, Abe and Sasaki, Chapter 3, this volume More detail can be found in Wilson, Ferranti and the British Electrical Industry, chs 1– 3. See also I.C.R.Byatt, The British Electrical Industry, 1875–1914 (Oxford: Oxford University Press, 1979), pp. 136–54. One of these receiver-managers was A.W.Tait, who had become ‘a force in industrial finance’ as a result of his work with the prominent accounting firm of Touche, Ross & Co. See R.P.T.Davenport-Hines, ‘A.W.Tait’, in D.J.Jeremy (ed), Dictionary of Business Biography, Vo1.5 (London: Butterworths, 1986). See Wilson, Ferranti. A History, Ch.l, for an analysis of this culture. The company’s financial systems are described in John F.Wilson, ‘The struggle between priorities and reality: Ferranti and the accountant, 1896–1975’, Accounting, Business and Financial History, Vol. 8, No. 1 (1998), pp. 53–72. T.Burns and G.M.Stalker, The Management of Innovation (London: Tavistock Press, 1961), pp. 56–7. See Kenneth D.Brown, Britain and Japan. A Comparative Economic and Social History since 1900 (Manchester: Manchester University Press, 1998), pp. 36–40. Kotter, Matsushita Leadership, pp. 49–58. This section on the firm’s pre-war development is based on Kotter, Matsushita Leadership, pp. 62–103 and 137–45, PHP, Matsushita Konosuke, pp. 11–30, and Pascale and Athos, The Art of Japanese Management, pp. 30–42. Kotter, Matsushita Leadership, pp. 98–101. On Toshiba’s early history, see Fransman, Japan’s Computer and Communications Industry, pp. 29–30, and Fruin, The Japanese Enterprise System, pp. 93–6 and 216–17.

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29 Brown, Britain and Japan, p. 142. 30 Wilson, Ferranti. A History, Ch. 7. 31 On this trend, see T.A.B.Corley, Domestic Electrical Appliances (London: Jonathan Cape, 1966), pp. 33–7. 32 Wilson, ‘The struggle between priorities and reality’, pp. 56–7. 33 Two years after Ferranti acquired the American electronics firm International Signals and Controls, Inc. in 1987, it was discovered that the latter’s principal owner, James Guerin, had defrauded the former of approximately £400 million. This story will be related in Vol. II of Wilson, Ferranti. A History. 34 This section is based on Wilson, Ferranti. A History, Chs 7–8. 35 For a discussion of these issues, see J.Lovering, ‘Opportunity or crisis? The remaking of the British arms industry’, in R.Turner (ed.), The British Economy in Transition (London: Routledge, 1995). 36 This section is based on Kotter, Matsushita Leadership, pp. 149–61, and PHP, Matsushita Konosuke, pp. 30–9. 37 On the state of the Japanese economy in 1945, see Brown, Britain and Japan, pp. 130– 4. 38 PHR Matsushita Konosuke, pp. 33–41. 39 PHP, Matsushita Konosuke, p. 35, and Kotter, Matsushita Leadership, p. 158. 40 Kotter, Matsushita Leadership, p. 171. 41 Nakaoka, ‘A giant home electronics company’. 42 This section is based on Pascale and Athos, The Art of Japanese Management, pp. 30–1. 43 See Nakaoka, ‘Changes in the attitude of major Japanese corporations towards R&D’, and idem, ‘A giant home electronics company’. See also Bartlett and Ghoshal, Transnational Management, pp. 582–7, for an analysis of the manner in which Matsushita’s central research laboratory works with operating departments in Japan and abroad. 44 Dicken, Global Shift, p. 329. 45 By 1988, this had risen to $19,905. On the ‘Economic Miracle’, see Brown, Britain and Japan, pp. 130–9. 46 Fruin, The Japanese Enterprise System, pp. 180–1. 47 The firm’s development in this period is well described in Fruin, The Japanese Enterprise System, pp. 178–85. See also Bartlett and Ghoshal, Transnational Management, pp. 82–5. 48 Pascale and Athos, The Art of Japanese Management, p. 41. 49 On the firm’s global strategies, see Kotter, Matsushita Leadership, pp. 163–78. On growing Japanese domination in this sector, see Dicken, Global Shift, pp. 337–43. 50 See Fransman, Japan’s Computer and Communications Industry, pp. 1–26, and Dicken, Global Shift, pp. 309–11. 51 S.Hasegawa, ‘Technology transfer and the development of TV in Japan’, in J. Hashimoto (ed.), Nippon Kigyo Sisutemu no Sengo-shi [A History of the Corporate System in Japan] (Tokyo: Tokyo University Press, 1996). Kotter, Matsushita Leadership, p. 172. See also A.Hiramoto, Nippon no Terebi Sangyo [The Japanese TV Industry] (Kyoto: Minerva-shobo, 1994), p. 320. 52 Fruin, The Japanese Enterprise System, p. 179. 53 Fransman, Japan’s Computer and Communications Industry, p. 10, and Dicken, Global Shift, p. 317. 54 Bartlett and Ghoshal, Transnational Management, pp. 84–5.

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55 This section is based on M.Fujita and R.Ishii, ‘Global location behaviour and organisational dynamics of Japanese electronics firms and their impact on regional economies’, in A.D.Chandler, jr., P.Hagstrom and O.Solvell (eds.), The Dynamic Firm. The Role of Technology, Strategy, Organisation, and Regions (Oxford: Oxford University Press, 1998), pp. 376–79. 56 This section is based on Bartlett and Ghoshal, Transnational Management, pp. 89– 91. 57 Burns and Stalker, The Management of Innovation, pp. 56–57. 58 McCalman, The Electronics Industry in Britain, pp. 36–48. 59 J.F.Flower, ‘The case of the profitable Bloodhound’, Journal of Accounting Research, Vol. 4, No. 1, Spring 1966, pp. 16–34. 60 For further evidence of these difficulties, see C.Gardner, British Aircraft Corporation. A History (London: Book Club Associates, 1981), pp. 114–26. 61 Wilson, Ferranti. A History, Chs 10–11. 62 M.Goold and A.Campbell, Strategies and Styles. The Role of the Centre in Managing Diversified Corporations (Oxford: Blackwell, 1987). 63 Interview with S.Z. de Ferranti, July 1998. 64 Dicken, Global Shift, pp. 334–48. 65 For a review of this debate. see E.Abe, ‘The state as the “Third Hand”: MITI and Japanese industrial development after 1945’, in E.Abe and T.Gourvish (eds.), Japanese Success? British Failure? Comparison in Business Performance since 1945 (Oxford: Oxford University Press, 1997), pp. 17–44. 66 PHP, Matsushita Konosuke, pp. 41–2. 67 S.Pollard, The Wasting of the British Economy (London: Croom Helm, 1982). 68 See J.Hendry, Innovating for Failure. Government Policy and the Early British Computer Industry (Cambridge, Mass.: Massachusetts Institute of Technology Press, 1989). 69 Wilson, Ferranti. A History, Ch. 11. 70 E.Sciberras, ‘The UK semiconductor industry’, in K.Pavitt (ed.), Technical Innovation and British Economic Performance (London: Macmillan, 1980). 71 Corley, Domestic Electrical Appliances, pp. 138–47. 72 See John F.Wilson, ‘International business strategies at Ferranti, 1907–1975: direction, management and performance’, Business History, Vol. 40, No. 1, 1998, pp. 100–21. 73 Wilson, Ferranti. A History, Chs 8 and 10. 74 Corley, Domestic Electrical Appliances, p. 117, and Wilson, ‘The electronics industry’, p. 181. 75 John F.Wilson, British Business History, 1720–1994 (Manchester: Manchester University Press, 1995), pp. 181–94. 76 See T.Okazaki, ‘The evolution of the financial system in post-war Japan’, Business History, Vol. 37, No. 2 (1995), pp. 89–106, and Fruin, The Japanese Enterprise System, pp. 189–91. 77 Bartlett and Ghoshal, Transnational Management, pp. 82–3, and Kotter, Matsushita Leadership, p. 172. 78 McCalman, The Electronics Industry in Britain, p. 20. 79 Brummer and Cowe, Weinstock. On the general trend towards international alliances, see J.H.Dunning, Alliance Capitalism and Global Business (London: Routledge, 1996). 80 Dicken, Global Shift, pp. 329 and 336–48. 81 Kotter, Matsushita Leadership, p. 13.

7 A comparison of Cammell Laird and Hitachi Zosen as shipbuilders Toru Takamatsu and Ken Warren

Both north-west England and the Hanshin industrial region of Japan, centred on Osaka, contain a wide diversity of manufacturing. Shipbuilding has for long made up only a small part of the output of this sector of their economies. In the mid-1960s for instance shipbuilding provided 2 per cent of the net manufacturing output in the North-west and about half that in Osaka. At the level of the subregion the industry has been of much greater importance; locally it has sometimes been dominant, as in the economy of both Barrow-in-Furness and Birkenhead in north-west England. The analysis which follows concentrates on two companies, each prominent in the shipbuilding operations of their respective countries. Construction by Cammell Laird was confined to Birkenhead throughout a business history which began in 1824 and ended in 1993. Hitachi Zosen originated in Osaka in 1881 and, though largely relocatcd from that city, is still active. The complex of commercially important choices involved in organising any major industrial company is well exemplified in the experiences of the two shipbuilders. A key consideration involves economies of scale, the securing of which may make integration of operations desirable. There may also be economies of scope, the manufacture of more than one product with the same plant, as for instance when slipways, crane power or bending or cutting machinery used to build naval vessels can also be employed for liners or bulk carriers. On the other hand a shipbuilder may choose—or be forced—to specialise on one type of vessel, or, if a multi-plant operation, to concentrate production of particular types of vessel in different yards. The importance of ancillary trades such as engine building or the fabricating of metal and other materials may lead to product diversification which spreads company interests beyond shipbuilding. This may provide a useful counterbalance to the oscillations in demand for ships, but can also prove a dangerous distraction. Cost advantages can be gained from integration. This may be either vertical—backward to components or even to steel or, though rarely, forward into merchant marine operations—or horizontal—a merger of yards leading to possibilities of specialisation economies but historically more usually resulting in rationalisation causing closure of the less competitive operations brought into the amalgamation. Although these varied development paths offer possible economies, they may also cause diseconomies; in extreme instances a wrong choice may bring a company to crisis or failure. Entrepreneurial excellence consists of making the right

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Figure 7.1 British shipbuilding, 1957.

choices, the rightness being established by subsequent business success. Many of these policy choices and some of their desirable or less desirable outcomes are illustrated in the histories of Cammell Laird and Hitachi Zosen.

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To an exceptional degree shipbuilding has been an industry which operates in a global market; sheltered home outlets exist to a lesser extent than for most industries. Both companies have been affected by the course of the general world demand for ships and by the same technological innovations. However, like any other industrial concerns, they have also been shaped by more particular, national circumstances—the size and growth of the home merchant fleet or navy, the general socio-economic state and business ethos of the country, the policies of governments and above all by the structure and entrepreneurial and managerial talent exercised within the firm. Though operating in the same industry, these companies have worked over unequal time spans and within radically different national economies. Marked contrasts as well as suggestive analogies are to be found in their business careers. From the mid-nineteenth century the Birkenhead shipbuilding and engineering firm of Laird was prominent in a Merseyside sub-region which was traditionally dominated by commerce, and, except for its import/export functions, was distinct from the textile-based manufacturing complex of the North-west region as a whole. Established in 1824, Lairds moved within four years from boiler making into iron shipbuilding. From an early date it was distinguished as a pioneer in materials, propulsion and design. It was especially well-regarded for naval work; in mercantile shipping it was less prominent. The company made its own marine engines; around 1900 it quickly took up the use of the turbine. At that time, as the third generation of the controlling Laird family passed on, the company faced a series of challenges. A rapid increase was occurring in the size of both merchant and naval ships. This indicated the need for a new yard, which the company began to construct shortly after 1900. Technology now made possible larger scales of operation and in naval building in particular, major rivals were already carrying through what promised to be beneficial links with steelmaking. Together with the new yard, a young, fourth generation of the family began to organise sources of financing and forms of business organisation to meet these new circumstances. The necessary changes could go ahead more easily after 1903 when Laird Brothers was taken over by the steel, engineering and armament firm of Charles Cammell of Sheffield, which had recognised the necessity of protecting its own business from aggressive rivals by equipping itself, like them, to undertake large scale naval work. Until the First World War profits made in Cammell Laird steel production were diverted to modernise shipbuilding; Sheffield subsidised Birkenhead. By 1910 the company had completed its ‘new’ yard on a partially cleared, partially reclaimed site next door to its old slipways. Further improvement, modernisation and extension occurred from time to time, including an important new layout in the 1950s and a covered construction facility in the early 1970s, but the shipyard which it built before the First World War was to remain the company’s operating environment for the rest of its business life. A fundamental reconstruction in three of the five main steel/armament/shipbuilding groups at the end of the 1920s replaced a series of major vertically integrated companies by horizontal mergers. As a result of its participation in this reorganisation scheme, from this time onwards the Birkenhead

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Figure 7.2 HMS Ark Royal before its launch at Birkenhead in 1937. This vessel was the third to bear the name first given to Lord Howard of Effingham’s flagship which led the attacks upon the Spanish Armada in 1588. The aircraft carrier was torpedoed and sunk in the Mediterranean in 1941 (Courtesy Williamson Art Gallery and Museum, Birkenhead).

yard was Cammell Laird’s only directly controlled production location. The company remained joint owner of the capital of major steel and engineering companies, notably the English Steel Corporation and the railway rolling stock firm Metropolitan Cammell. Both contained former Cammell Laird plants which fared badly in subsequent programmes of rationalisation. Income from these subsidiaries remained important to Cammell Laird finances, in years of low activity in shipbuilding providing a valuable counterweight. In 1964 and 1965 for instance, when the Cammell Laird trading profit averaged £0.45 million, dividends and interest on investments and other forms of interest amounted to £0.85 million. In a further reorganisation in 1970 the company was shorn of this valuable diversity of sources of income. The foundations of Hitachi Zosen were laid almost 60 years after those of Cammell Laird. Its sub-region had many shipyards but its economy was dominated by textile manufacture. As the Osaka Ironworks, it was started in 1881 by an Irishman, E.H.Hunter. Change of name to Hitachi Zosen came as late as 1943. Moving on from assembly of imported components, the company began to construct small vessels and floating cranes. Until 1895 Japanese shipyards had built only one

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Figure 7.3 Japanese shipbuilding, 1900–90.

steamship of over 1,000 gross tons. Next year an important new stage in the national industry was signalled by the Shipbuilding Encouragement Act, which provided government building subsidies for iron and steel ships of over 700 tons— 12 yen per ton up to 1,000 gross tons and 20 yen per ton for bigger ships (see Table 7.1). A subsidy of 5 yen per horse power was also paid for home-built marine engines. Osaka Ironworks benefited from this Act, but less than the two much bigger shipbuilding groups of the time, Mitsubishi and Kawasaki, which together over the years 1897 to 1911 were responsible for about 89 per cent of the tonnage constructed under its provisions. The main reason for the difference was that they concentrated on ocean-going ships whereas Osaka built mainly for Inland Sea lines, requiring smaller vessels. At this time Osaka made its own marine engines, but unlike Lairds it avoided direct links with the steel industry, which was as yet little developed in Japan. Four years after the 1896 Act, Osaka Ironworks built a new yard at Sakurajima on Osaka Bay in the north-west sector of the city. This was designed to build vessels of over 1,000 GT. At this stage and for many years afterwards, Japanese construction was on a very small scale as compared with that of the UK. Not until 1914 did national completions exceed 100,000 GT: the previous year British yards launched 1.9 million tons of merchant ships. Osaka completed 9,043 tons in 1914; Birkenhead mercantile launchings in 1913 were 32,376 tons, its largest output to date. The First World War gave a major fillip to Japanese shipbuilding and 1918 completions were six times the 1914 level; at Osaka Iron there was a more than tenfold increase.

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Table 7.1 Ships built with the support of subsidies under the Shipbuilding Encouragement Act between 1897 and 1910

Source: T.Takamatsu.

During the war Sakurajima yard was enlarged and bigger ships were produced at Innoshima in Hiroshima prefecture, some 140 miles west of existing operations, where previously mainly repair work had been undertaken. In short, from this fairly early stage in its development the company proved able to conduct operations on more than one site. Barrow and Belfast were much nearer sea distances from Birkenhead than was henceforth the case in the spread of the Osaka Iron operations, but the locations of these independently owned Irish Sea yards helped to defeat attempts to co-ordinate them half a century later. The First World War building boom was followed by collapse and in fact not until 1956 did completions at Japanese yards surpass the 1918 figure. To help use its resources in the difficult interwar years Osaka Iron added the production of chemical equipment to existing sidelines such as engine, bridge and railway rolling stock. Ship repair work was emphasised in years of low demand for new tonnage. By this time Kawasaki and Mitsubishi had spread their interests much more widely still, including production of internal combustion engines and aircraft. Osaka Iron now became the shipbuilding subsidiary of the Hitachi group. The vital importance of the national economic context is well brought out by post-Second World War experience at Hitachi Zosen. Between the wars its operations had remained small as compared with those at Birkenhead. By 1950 Japanese shipyards had recovered from wartime damage and postwar disruption of the national economy and recorded their largest tonnage of peacetime completions since 1919 at 547,000 tons. At this time Hitachi Zosen remained a smaller factor in world shipbuilding than Cammell Laird. Two years later, when Japan built only 46. 7 per cent as much tonnage as the United Kingdom, Hitachi Zosen was the world’s sixth biggest builder, slightly ahead of Cammell Laird. After this there occurred a remarkable contrast in the trends of the two national outputs (see Table 7.2). Within eight years Japan was building over 30 per cent more tonnage than the United Kingdom; by 1970 it built almost 8.5 times as much. The two companies responded to this divergence in their national industries. Like other Japanese companies, Hitachi Zosen proved able to construct new yards representing the best modern practice, and to buy and further build up other operations. By contrast,

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Table 7.2 Ships launched in Japan, the United Kingdom and the world, 1936–38 and postSecond World War, 1949–85 (thousand gross registered tons)

Sources: Economist Intelligence Unit and, for the world in 1950, Woytinsky 1953, p. 1160.

British shipbuilders, finding it impossible to hold on to their markets, never mind consistently expand output, were shown to have too much capacity. With one minor exception no new British yard has been laid out on a greenfield site since 1920. World shipbuilding increased at an unprecedented rate after 1950, tonnages rising tenfold in twenty-five years. A large part of this was in bulk carriers, above all oil tankers. For success with these relatively unsophisticated vessels competitive pricing was particularly important. After the mid-1970s the quarter century of great expansion was followed by a sharp decline in demand for new ships. This was associated with a world recession sparked off by the 1973/74 oil crisis. In spite of this painful halt to the earlier headlong growth, at the end of the 1980s world building was still far greater than in the early 1950s. Japan adjusted downwards but remained the biggest producer; in complete contrast, the shipbuilding industry of the United Kingdom, the world’s leader until the mid-1950s, shrank to very minor proportions. As this happened many great company names disappeared from the lists. Under the new, much more difficult trading conditions the output of Hitachi Zosen varied substantially; in the late 1970s and again in the 1980s it suffered serious cut backs. Even so, in the see-saw of shipbuilding activity after the mid-1960s, this company proved successful in transferring emphasis either to or from a wide range of independent engineering activities according to the state of demand. This was important in explaining why, though forced to trim its activities and above all its workforce, it survived the crises in world shipbuilding and survives as a major shipbuilder. In contrast, the later history of Cammell Laird is a sorry tale of decline in which the few halts in the process proved nothing more than a temporary staving off of a predictable outcome. In 1977, seven years after its shipbuilding was split off from other group activities, the company was taken into the newly nationalised industry as a subsidiary of British Shipbuilders. In the mid-1980s it was privatised as part—a subsidiary part—of the VSEL naval building operation, whose main centre of operations was Barrow-in-Furness. The last new vessel was completed at Birkenhead

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in summer 1993. Two years later there was some revival of activity on part of the site but only for ship repair and conversion work by a new company which later acquired the right to use the name Cammell Laird. Repair work prospered and expanded to such an extent that in summer 1998 the new Cammell Laird was involved in takeovers of repair operations on the Wear. However, though in 1997 GEC which owns the remainder of the former Birkenhead yard was reported to be seeking contracts to restart shipbuilding, this has not yet happened. Why in the uncertainties of this difficult period of world shipbuilding did Hitachi Zosen succeed and Cammell Laird fail? That there was an overall decline in United Kingdom construction seems to point to general causes rather than ones which are specific to individual companies. The simple fact is that British shipbuilding proved uncompetitive. Reasons for that fatal condition are less easy to uncover. As a major assembly industry shipbuilding has wide effects on a regional economy outside the individual plant. To all intents, the Birkenhead shipbuilding operations were the only significant ones on the Mersey since long before the twentieth century. By contrast, Hitachi Zosen emerged and grew as part of a major complex of yards at the eastern end of the Inland Sea—as one account put it, perhaps rather exaggerating, the yards along the Kizu river above the inner end of Osaka Bay had produced ‘a landscape reminiscent of that of the pre-war Clyde Valley’.1 Through many supply chains shipbuilding also has links with the industries of distant regions, including other shipbuilding complexes. In addition to the possibilities for in-house inputs, it has long been recognised that for such a cyclical industry a range of counterbalancing lines of production is desirable. Until nationalisation of steel in 1967 Cammell Laird retained large investments in the English Steel Corporation. As noted above, in the 1960s a remarkable feature of its cost situation was the way in which times of poor returns in shipbuilding were compensated (see Table 7.3) by good years in its other, wholly-owned steel subsidiary, which was small enough to be below the size threshold for nationalisation, the Patent Shaft Steel Company of Wednesbury, in the Black Country. Unfortunately, at the end of the 1960s Cammell Laird made a number of acquisitions in lines of manufacturing having little or no connection with the company’s main activities, and in which its board had no particular expertise. In 1970 all operations except shipbuilding were split off into a new, independent company, the Laird Group. Henceforth, work on marine structures or warships proved inadequate substitutes for loss of work on mercantile ships at a time when the course of business lay through heavier seas than ever before. Hitachi Zosen had long been an engineering as well as shipbuilding concern. After a high of 26.6 million yen in 1957, orders for new ships fell away sharply, the combined total of the next two years being 18.7 million yen. Like other major Japanese firms, behind which indeed it lagged in this respect, HZ now diversified even more purposefully. Paper making and fertiliser machinery were among the lines developed, but the most important involved manufacture of equipment for the rapidly growing steel industry, including sintering plant, rolling mills and continuous casting installations, using technologies from Lurgi Chemie and Demag.

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Table 7.3 Tonnage of ships launched/completed by Cammell Laird and Hitachi Zosen, 1950– 95 (thousand tons)

Sources: CL shipyard records and HZ history. Notes * excludes HMS Devonshire, a guided missile destroyer † launchings by all UK yards in 1970 totalled 1,237 th tons

From 1966 the Sakurajima yard was wholly given over to machinery production. Like Cammell Laird, Hitachi Zosen experienced some setbacks in its diversification programme, the cement equipment division for instance causing problems for over ten years. There were disappointments in export markets for machinery. But in this case the ‘counterweight’ function of these diverse lines was still visible. In 1960 when shipbuilding was slack, 60 per cent of the year’s investment went into the machinery division; during the first five years of the 1970s, shipbuilding in Japan and at Hitachi rose to dizzy heights and only 17 per cent of investment went into machinery. After the oil crisis of the mid-1970s shipbuilding fell away and additional products became important, including marine structures and desalinisation plant. At the end of the 1980s a new round of diversification concentrating on activities largely serving home demand again reduced shipbuilding with its vulnerability in world markets. Finally, from a low of 12.5 per cent of company sales in 1988, shipbuilding increased to 27.2 per cent in 1994. In fact the division of the company’s activities varied sharply from year to year (see Table 7.4). The export share of all sales fell from 43.4% in 1988 to 28.1 per cent in 1995. In short, it seems clear that, in spite of making some mistakes and being less successful in this respect than other leading Japanese shipbuilders, Hitachi Zosen has generally benefited from spreading its interests, whereas Cammell Laird diversified unwisely in the 1960s and after the 1970 reorganisation was left with nothing to fall back on when hard times came. A much more important factor in the decline of Cammell Laird was its long-term failure, in common with other British companies, to modernise shipyard work so as to match increasingly keen competition from the industry’s pacemakers. The necessity for this was created by two main conditions, new production technologies

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Table 7.4 Structure of sales at Hitachi Zosen in the 1995 financial year (% of total)

Source: T.Takamatsu.

and a change in the structure of demand. There were two key technical innovations, whose effects tended in the same direction. In the early postwar years the timehonoured method of riveting steel plates was at last commonly replaced by allwelded hull construction; in the same period block construction replaced layer by layer building of the hull upwards from the keel on a slipway. Welding did away with traditional skills; block construction involved putting together large subassemblies, often prefabricated under cover. Because of the large tonnages involved, more powerful cranes were required. Evolving concepts of flow production meant an ideal yard layout should provide for straight line movement from the steel yards to sub-assembly shops and the building bay. A virgin site was better than an old one in which existing facilities limited freedom of layout. Changes in the structure of demand reinforced the trend to new standards for location and site. The most vital factor was the transformation of the energy situation which led to the triumph of the supertanker. World output of crude oil in 1975 was five times the level of 1950. Most of this increase was distant from consumption centres. The link between the two required huge increases in tanker capacity. By the time of what proved to be the peak of activity (1975), 75.7 per cent of all merchant tonnage on order was for tankers. Moreover, because of the economics of bulk sea transport, there was from the mid-1950s a huge increase in the average size of these vessels, combined at each stage with a strong tendency to standardisation of design. In 1955 the largest tanker afloat was a British-built vessel of 31,000 gross tons. Ten years later the record was 96.5 thousand tons and by 1975 238.5 thousand tons.2 Efficient construction of ‘super-tankers’ by modern technologies highlighted the advantages of large, new, greenfield sites fronting directly onto deep water. Although not all had existing yards which were suitable, Japanese shipbuilders responded positively to these new requirements. Hitachi Zosen began this phase of development near to its home base. From 1959 to 1965 Yawata Steel company was building a major steel complex on a largely reclaimed site at Sakai on Osaka Bay; responding to pressure from the Osaka Prefecture Office, between 1961 and 1966 Hitachi Zosen constructed a major new yard nearby. Sakai could build vessels of up to 250,000 dwt. However maximum tanker sizes continued to increase, so that, by the end of the 1960s, they were already beyond the capability of the 4-year-old yard. The company began to lose business. In the first half of 1970 it received enquiries for forty-two vessels of over 200,000 dwts; 15 exceeded 300,000 dwts. Again the response to this crisis in its affairs was immediate and positive. By August 1970 it had decided on a new 800,000-ton building dock at Ariake at the northern

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Figure 7.4 A Japanese supertanker constructed in 1971 at the Sakai Shipyard of Hitachi Zosen on Osaka Bay during the great tanker-building boom of 1969–74. Its dead-weight tonnage of 238,588 was tenfold the 22,000 tons of the Ark Royal (Courtesy Hitachi Zosen).

end of the inland sea of Kyushu. This second new yard to be started within ten years was completed in 1974. Consequently it came into production when the first oil crisis was causing a sharp fall in tanker orders. In short, the physical limitations of Sakai and the unfortunate timing of Ariake together represented heavy burdens. Impressed as a Western commentator must be by the readiness of Japanese firms to develop such yards, it is probable that, financially at least, rather than surviving because of its enterprise, Hitachi Zosen survived in spite of it. In contrast to the Japanese situation, almost all British yards occupied estuarine rather than coastal sites. As opposed to the positive response of Japanese builders, those in Britain either did no more than realign their berths to permit construction of longer vessels, or made vague plans for launching them in half sections to be later welded together. There is no evidence that any of them seriously contemplated a new site. Cammell Laird had never been pre-eminently a tanker builder and at this critical time seemed to be fortunate to be able to find a way out of the situation by concentrating on higher value vessels, especially naval work. It built three tankers in 1951, the largest of 18,600 tons. In October 1956 the 24,790 gross ton Zenatia was launched at Birkenhead, the yard’s largest to date. In the early 1960s some tendency was shown to follow the upward trend, with a 32,220 ton- and a 42,109 ton-tanker

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in 1961 and culminating in the British Ensign of 43,334 tons launched for BP in 1963. After that, except for one vessel in 1965, Cammell Laird did not build another tanker until 1972; by that time it was concentrating on smaller product tankers.3 Naval work offered many attractions, but in the long run this refuge from the harsh realities of the commercial world proved to hold dangers of its own. Warship construction involves quality work, and the Admiralty has, for generations, rewarded the private yards which have supplied it by payment on a cost-plus basis. Such a system provides no incentive to keep costs down. At Birkenhead much of the 1960s was taken up in building two large nuclear powered Polaris-missile submarines. During these years Cammell Laird not only failed to capitalise on the tanker boom—for which the company had already made large new capital investment—but also missed out on bidding for such a prestige project as the new Cunard liner the QEII—constructed at Clydebank by their long-time rival, John Brown. Even more important, as recognised in retrospect, nuclear submarine construction fostered an exceptional lack of concern with cost economy—the nickname given to Polaris vessels by Birkenhead workers was eloquent of the realities of the situation: they called them ‘gravy boats’. When this period of active naval work was over, managers and men alike had to relearn habits more appropriate to the keener environment of commercial work. Hitachi Zosen undertook naval construction at Maizuru on the Sea of Japan, but this was always a small part of its activities. In any case, because of the separation and considerable distance between its yards, any less than commercially keen practices could not spread contagiously to other yards or sections of the business. Then and later it strove to increase efficiency, in 1988 for example introducing a production control system designed to reduce costs by some 10 per cent each year. It also economised by using more foreign components, some of them from China. Automation of plate cutting and welding was increased and more female workers were employed. By the mid-1990s the company was in the process of halving ship design costs by using standard specifications for bulk and container carriers. Overheads were cut by selling Ariake yard, Hitachi Zosen now merely renting its use. The two companies have had very different histories in terms of the impact of outside interests, notably banks and government. In Britain private banks have not normally been close business associates of manufacturing firms, In the critical, depressed decade of the 1920s pressure from the main commercial banks, exercised in order to safeguard their loans to steel or shipbuilding companies, sometimes steered the latter in the direction of merger and rationalisation, but on other occasions it undermined their credit at critical times. Much more important was the part played in the interwar years by the Bank of England, taking up the responsibility of initiating a reconstruction of basic industry which government then so signally failed to undertake. In shipbuilding the most prominent agent of this intervention was National Shipbuilders Security Limited, formed in 1930 and which in the course of some three years compensated owners— though not the workers or communities dependent on their yards—for withdrawing about one

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million tons of building capacity, or a tonnage equal to half Britain’s highest ever shipbuilding output, reached in 1920. (Even in the halcyon post-Second World War years levels of output comparable with 1920 were never reached—the average of the eleven years 1948–58 was 1.35 million gts.) Cammell Laird were involved with NSS only as a contributor to its funds and in its directing body. Until it was broken off from its non- shipbuilding subsidiaries, like most British companies Cammell Laird was owned by a multitude of small investors and fewer large institutions. In complete contrast, though the most independent of the leading shipbuilding companies, Hitachi Zosen for many years had strong business connections with a major banking company, the Sanwa Bank, based in Osaka. Sanwa is now only a small shareholder, but the advantages of association with wide banking connections remains, and the raising of capital has been easier than in the British tradition of free-standing industrial companies. The matter goes further. In times of difficulty the bank has provided financial expertise to help sort matters out. For example, in summer 1988 Sanwa put the 62-year-old business expert, Y.Fujii, in place as Chief Executive at Hitachi Zosen and began to turn round what were regarded as ailing shipbuilding and engineering operations. In summer 1995 Fujii became Chairman, with an Hitachi Zosen engineer as President. Relations between the banking and industrial interests have not always been smooth. On one occasion the bankers and Hitachi Ltd proposed that Hitachi Zosen should give up shipbuilding at Ariake, concentrating instead on the Imari yard of Namura Shipbuilding, a subsidiary of Sanwa Bank. The chief executives of Hitachi Zosen held out against this plan, arguing it would too greatly restrict their product range. Eventually it was agreed Ariake should be retained; revival of demand for large tankers seems likely to justify this decision. In advanced industrial countries over much of the postwar period manufacturing has come increasingly under the influence of government. The key sector is that of national government, although sometimes regional or local government has also been important. For over sixty years regional policy has had an impact on industry in Britain. However this has been mainly concerned with the attraction of new projects and so had little effect on a long-established firm such as Cammell Laird. In the years around 1970 there was a good deal of national discussion of the creation of what were called ‘maritime industrial areas’ on big, coastal sites having deep water access. These and the conditions of landward and seaward access to them were to be chosen so as to be suitable for space-extensive heavy industry such as steel and petrochemicals. Obviously such sites might also have accommodated new shipyards, but, as outlined above, the industry showed no inclination to develop greenfield operations in its time of expansion and now it was rapidly falling away in world rank it brought forward no plans for such a radical departure. In spectacular contrast, facing up to a situation both of fewer naturally good tidewater sites and much more industrial growth, Japanese planners had then for over a decade been developing new coastal industrial complexes on large reclaimed sites. Shipyards, geared especially to the increased size of oil tankers, became important tenants of

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these sites. Local interests, including government, encouraged such investments. Osaka Prefecture and Sanwa Bank were jointly concerned to prevent a decline in the standing of the Hanshin industrial region and encouraged expansion of heavy industry to compensate for cuts in textiles. In the process, they pressed Hitachi Zosen, inconvenienced by physical limitations at Innoshima, to push on with the Sakai yard. In 1961 the Prefectural Office sold them the necessary land. The company’s need to be ‘persuaded’ to this act of industrial faith in the region is indicated in the words it used to describe the decision: ‘While recognising the necessity of the large shipyard strongly, we had not yet reached the stage of concrete planning…However it may be said that the Sakai shipyard was decided by the intention of top management’.4 Central government help has been spasmodic in Britain, better sustained in Japan. From 1920 some financial help was made available to British firms through the investment guarantee provisions of the Trade Facilities Act. Shipping companies made good use of this facility to order new ships; the Cammell Laird board recorded its regret when the scheme was ended in 1926. Between the wars government refused protection to the industry, which for its part was generally in favour of keeping its independence. There were however subsidies to shipping companies for carrying mail, and shipbuilders also benefited directly from the favourable conditions of Admiralty work. Foreign governments often subsidised their own construction industries, and as the impact of this became sharper in the terrible conditions of the early 1930s, the British government extended its assistance, introducing a scrap and build scheme aimed to increase the flow of orders from shipping companies to home yards. For many years after 1945 there was again a lack of strong government policy for shipbuilding. Then in the mid-1960s the rationalisation proposals of the Geddes Report were followed, under the Shipbuilding Industry Act of 1967, by assistance for putting them into practice. Much more relevant to Cammell Laird was the large financial help given to it in 1970 by the Industrial Reorganisation Corporation in order to save it from collapse. This was followed by further direct government help. In 1977 government brought about the nationalisation of the industry as British Shipbuilders. Yet it is important to stress that the reasons for establishing this public company did not include an intention to undertake major positive government action on the industry’s behalf. The first BS corporate plan involved closure and redundancies not a strategy for co-ordinating expansion. When Cammell Laird was privatised in the mid 1980s it was as part of a naval building group. Government later failed to support the stricken company in its wish for the removal of its restriction to this field of work, though such a removal, by making payment of subsidies possible, might have saved it from closure. In the wider arena of the European Community there proved too little power behind the efforts of the Industrial Commission to slim building capacity by something more discriminating than the survival of the fittest. From the beginnings of the modern industry central government played a key role in Japan, though this has not invariably worked for the well-being of the

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shipbuilding companies. From the 1896 Shipbuilding Encouragement Act onwards subsidies were made either directly to builders or indirectly via the Japanese merchant marine. Revised subsidy laws came into operation in 1910. After years of decline, in the 1930s a scrap and build programme resulted in increased orders.5 The consequence was the modernisation of the Japanese merchant marine. Economic recovery after the Second World War and the disruption which followed was associated with a large degree of guidance from the centre. Government ministries are commonly credited with effective intervention whether in good times or in periods of acute recession and need for retrenchment. In fact this oversight has by no means always been as effective as foreign observers have suggested. For example, in 1970 an advisory body of the Ministry of Transport, the Rationalisation Council of Shipping and Shipbuilding. stressed a need for shipbuilders to prepare to build larger vessels than any seriously contemplated until this time, ranging up to 1 million dwt. With this encouragement, that summer Hitachi Zosen decided to postpone a planned new machinery plant and instead to build the 0.8 million-ton Ariake yard, which when completed was at once hard-hit by the effects of the oil crisis. The shipbuilding recession which followed brought another radical response in a different direction: ‘A Stabilisation Master Plan’ from the Ministry of Transport (see Table 7.5). This assigned 40 per cent capacity cut-backs to the seven leading companies, a higher rate than for the smaller companies whose bankruptcy was feared. Large yards with good prospects, including both Sakai and Ariake, suffered disproportionately. A second building dock at Ariake and the prewar yard at Mukaishima, east of Innoshima, ceased to build ships. Most dramatic of all it was decided that Sakai yard should be withdrawn from shipbuilding for 15 years. Overall from 1975 to 1980 Hitachi Zosen reduced its workforce from 24,000 to 17, 000. To the extent that these were in the Osaka area, government-inspired cutbacks frustrated the efforts of local planners to make sure expansion in activities such as shipbuilding counter-balanced decline in textile jobs. Radical action saved the company in subsequent difficulties. At the request of Osaka City the machinery works at Sakurajima have recently been closed for redevelopment as an amusement park. Work which would have been undertaken at this yard is being concentrated at Ariake. The Sakai yard has now been turned over to manufacture of large steel structures such as bridges and floodgates. The role of labour in the growth of shipbuilding in Japan and its decline in the United Kingdom is a matter of keen dispute. For many years it was common in the West to deplore the lower wages then paid in Japan and to represent the work ethic there as a prime cause of the success of its basic industries. Within Japan the availability of good if untrained workers, displaced from agriculture, was one of the factors which eased the spread of shipbuilding to greenfield sites in areas remote from well-established complexes of marine supply trades. In 1945 Hitachi Zosen employed 22,309 workers; a year later, after defeat in war and consequent unprecedented disruption of the economy, the workforce had fallen by 60 per cent. Thereafter it grew, stabilised in the mid-1950s, peaked at 24,415 in 1972, before falling again. In the late 1980s there were large cut-backs, the efficiency of those

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Table 7.5 Targets for reductions of shipbuilding capacity in the Stabilisation Master Plan

Source: T.Takamatsu.

workers who retained their jobs being increased by the hard experiences through which they had passed. In terms of labour productivity, there is no doubt that since the Second World War Hitachi Zosen has achieved much higher output per man and, more significant still, a strong upward trend over the years, whereas Cammell Laird productivity fell. Direct comparisons are impossible for the range and types of vessel built were different as was the very basis of the figures, at Cammell Laird referring only to Birkenhead and at Hitachi Zosen to the whole group. Nonetheless contrasts in their trends are striking (see Table 7.6). In its failure to match the increasing labour productivity of overseas rivals, Cammell Laird was typical of British shipbuilding. Over many years it was common to blame labour, especially the general defects of the workers and the intransigence of their too numerous unions. It is now recognised that, though these were indeed the immediate occasions of many of the difficulties, the root causes lay much deeper. Early in the twentieth century one of the great strengths of British shipbuilding was its freedom from the bureaucracy which then hindered its rivals. A marked division of labour and control of the production process by foremen at the shop-floor level meant that production could go ahead smoothly without a complicated hierachy of control from the top. Men were trained in particular skills and organised in craft unions. New technologies such as block construction and welding made this organisation of work and the old divisions of labour unsuitable. As a result controversies over demarcation of trades became commonplace and the tale of dispute, strike and worker resentment followed out a sorry course year after year. In their annual reports chairmen of shipbuilding companies—including Cammell Laird —regularly deplored the obstinacy and short-sightedness of their men, but failed to acknowledge that the arrangements which were now so troublesome had been put in place by their own predecessors. Some of the worst and most publicised instances of labour troubles were at Birkenhead. A new Cammell Laird Chairman, coming from a completely different business environment, found a great gulf of incomprehension and indeed of lack of contact between the worlds of management and labour.6 It was scarcely a good foundation for the vigorous joint efforts which were essential if the company was to be saved.

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Table 7.6 Indices of labour productivity at Cammell Laird (Birkenhead) and in the Hitachi Zosen Group 1957–80

Sources: CL Annual Reports and A History of One Hundred Years of Hitachi Zosen (quoted Takamatsu and Hirota). Notes: † in addition launched the submarine HMS Conqueror. Hitachi Zosen figures include employment for the group and therefore for non-shipbuilding fields of activity as well.

Consideration of labour conditions leads on to the key sector affecting success, the quality of top management. This may usefully be considered as operating within two main spheres, that of the individual firm and of the national economy as a whole. At Hitachi Zosen, management after the Second World War was operating in a reconstructing industry and national economy. It was overseen by a banking group with which it was closely associated and, like the rest of Japanese industry, was guided and cajoled by major government departments setting the course for a national economic growth which proved to be on an unprecedented scale. Labour was for many years abundant and tractable. As the company spread its operations by the purchase of other companies or yard construction the standards of excellence of its existing operations provided a target and a measuring rod for its new operations. Under these circumstances, as results abundantly proved, the quality of management and of critical decision taking was generally high as compared with Cammell Laird, though Hitachi Zosen was the least successful of the leading Japanese shipbuilders during the disturbed times which followed the oil crises. One factor in this situation was that its chief executive had not changed for twenty-four years and paternalistic management had ensured that restructuring and the dismissal of workers had been slower than at the other companies. In Britain, and in operations at Birkenhead as elsewhere, shipbuilding paid the penalty of what Lorenz has called ‘organisational rigidity’.7 The dynastic principle which has so often proved unfortunate in British business history, long survived at Cammell Laird. Robert Johnson was Managing Director for thirty years to his death in the early 1950s and was succeeded by his son, who remained in control until the middle of the next decade. Early postwar problems were often blamed by the board on poor deliveries of steel; the deepening difficulties of the mid-1950s on labour. It seems not to have been recognised that management might also be defective. In

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1971, a year after the Birkenhead yard was split off from the rest of the operations, which continued as the Laird Group, a 38-year-old Canadian, Graham Day, was appointed to manage the shipyard. He recalled what he found there: It wasn’t focused on basic business principles. The concentration was on technical items. I remember eventually establishing what we called a corporate plan, which said, ‘This is the business we are in, this is the time horizon we are shooting for, these are the capital implications, the people implications, the market implications, these are our selling targets, these are the markets we are going for, here’s our projected cash flow.’ There wasn’t anything like that.8 Before necessary management changes could be effected the shipbuilding depression had arrived. After that Cammell Laird was swept into British Shipbuilders and its production revamped. The downhill movement in its fortunes proved irreversible. Discussing the industry nationally, Lorenz emphasised the three-part nature of the problem. When, belatedly, uncertainty in top mamagement about the need for organisational change was overcome by recognition of the severity of the problems, those in charge faced further obstacles before they could get a consensus for change. By then it was too late to save the company. In short, the full measure of long-term managerial failure was that ‘given the legacy of distrust between labour and management, the precondition for the changes to be seen as legitimate by all was the very process of ongoing bankruptcy and closure.’9 Yet, at the end, failure at Birkenhead was not only the result of deficiencies in a particular shipyard and its equipment, nor of its management or of their employees, not even of a once-great national shipbuilding industry, but rather of the whole traditional economic and social system of Britain, now so clearly out of tune with the age. Similarly, comparative success at Hitachi Zosen resulted not only from newer, better yards, superior management and labour relations, and help from the bank, but also from a major new expansive phase of national evolution. It is difficult for an economy which pioneers in a manufacturing industry to remake itself in the image of a newer one. Indeed, while it has been shown to be imperative to sweep away old baggage rather than preserve it for continuing use, it is far less easy, even if judged desirable, to reshape the whole national ethos, or attempt to remodel an old culture along the very different lines of a quite different one. Ambitions for change in such directions could indeed raise issues far greater, far more important than the competitive position of two eminent shipbuilding companies. In conclusion, a comparative examination of the twentieth century histories of Cammell Laird and Hitachi Zosen suggests that for survival and still more for commercial success the first, if not particularly practical, rule for any entrepreneurial venture must be to choose the right national economy in which to build ships; Britain by preference in the period 1900 to 1940, Japan rather than the United Kingdom from the early 1950s to the present day. A second consideration is the balance between shipbuilding and other interests, choosing the latter carefully, so as

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not to acquire unrelated activities as Cammell Laird did in the 1960s. But the most critical company factor of all, indeed the arbiter of the quality of all other important decisions, is the stature of top management. This must balance the short-term expectations of shareholders against long-term investment and establish wise priorities in extensions. After the passing of the good years of the mid-1950s Cammell Laird failed to give priority to improvement of yard efficiency rather than extending into peripheral and sometimes irrelevant lines of business. Wise long-term stewardship of company fortunes must also take into account the interests of workers as well as investors. Perhaps this has been a British and general Western failure as compared with the traditional paternalism of Japanese companies. Above all top management must activate and steer the whole company rather than accept the less demanding role of day-to-day oversight of stagnation or drift. It is difficult to escape what may appear to be a melodramatic conclusion: the cases under consideration suggest that like humans, businesses mature and are in danger of becoming old and of ossifying. When this happens the next stage is death. For one of the two major shipbuilders of the industrial regions under consideration this has proved to be the case. Acknowledgement Professor Takamatsu wishes to acknowledge the assistance he has received from Mr Yoshito Hirota. Notes 1 S.Yamamoto, ‘Shipbuilding’ in K.Murata (ed.) An Industrial Geography of Japan, London, Bell and Hyman, 1980, p. 167. 2 D.Todd, Industrial Dislocation: The Case of Global Shipbuilding, London, Routledge, 1991, pp. 6,12. 3 Glasgow Herald, Annual Trade Review, January 1952, p. 115; Cammell Laird, List of vessels launched by Cammell Laird, 1986. 4 T.Takamatsu and Y.Hirota, Technological Strategy of a Shipbuilding Company in Osaka: Hitachi Zosen, 1945–1980, c. 1993 p. 7. 5 G.C.Allen, A Short Economic History of Modern Japan, London, Allen and Unwin. 1946, pp. 76, 147. 6 P.Pagnamenta and R.Overy (eds.) All Our Working Lives, London, BBC, 1984, p. 268. 7 E.H.Lorenz, Economic Decline in Britain: The Shipbuilding Industry 1890–1970, Oxford, Clarendon Press, 1991, p. 123. 8 Pagnamenta and Overy, op. cit., p. 274. 9 Lorenz, op. cit, p. 123.

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Sources The main sources were: Takamatsu, T. and Hirota, Y. (c. 1993) Technological Strategy of a Shipbuilding Company in Osaka: Hitachi Zosen, 1945–1980, a paper given to a joint Japanese/ British meeting of business historians. Also later research by Toru Takamatsu, and research by Ken Warren published as Steel, Ships and Men: Cammell Laird 1824–1993, Liverpool: Liverpool University Press, 1998. In addition to the works referred to in the Notes, see the following: Allen, G.C. (1972) A Short Economic History of Modern Japan (3rd edition). London: Allen and Unwin. Woytinsky, W.S. and E.S. (1953) World Population and Production: Trends and Outlook, New York: Twentieth Century Fund.

8 Management education in Japan and the United Kingdom Regional dimensions John F.Wilson and Tamotsu Nishizawa

In trying to explain the contrasting economic records of Japan and the United Kingdom, commentators have focused on a wide variety of factors, including the manner in which industrial investment has been funded, the nature of state assistance, inherent socio-cultural attitudes towards work and employment systems.1 Clearly, though, while a monocausal interpretation would be impossible to achieve, differing attitudes towards human resource management has been accorded considerable importance. With specific regard to management, as long ago as the 1920s G.C.Allen remarked that: Unless a man has received the conventional academic training appropriate to his particular career, then he has little hope of ever obtaining a good position … The banks and business firms recruit themselves very largely from the graduates of the commercial and higher commercial schools, and one rarely meets a bank manager or an important official in a joint-stock company who has not been trained at one of these institutions.2 This theme is also apparent in the work of Ronald Dore, Abegglen and Stalk and Locke,3 among others, all of whom give the development of effective managerial expertise a key role in advancing Japanese economic development at a much faster rate than in Britain, especially over the last fifty years. In this context, while it is by no means clear exactly how important this factor was, one can consequently place management training high on the list of key variables, giving a comparative study of this function a position of some importance in any analysis of business strategies. It would be inappropriate to replicate the work of Locke, of Fitzgerald and of Gospel and Okayama,4 all of whom have drawn useful conclusions from comparisons of attitudes towards management education and training in Japan and the UK. However, by focusing on a regional perspective, we can derive a more detailed insight into how two major industrial centres have approached this key field of endeavour. For the purposes of our analysis, following Handy’s typology,5 we wish to focus attention on three distinct tracks, the educational/academic (especially commercial education in colleges and at universities), the professional (external training schemes, usually initiated by industrial or commercial organisations, or qualifications

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gained as a result of undertaking a course), and the corporate (internal programmes devised to cater for a firm’s specific needs). Our principal aims will be to trace a brief history of these institutional forms in both regions, examining especially the reasons why they were established, their main sources of funding, and the use to which local business put their services. Over the course of this chapter, considerable attention will be given to the two main academic institutions which have at different times played major roles in this area, namely, what in 1949 became Osaka City University and the University of Manchester. At the same time, one must never ignore the activities developed at other levels, especially in pre-1939 Britain and postwar Japan, when in both countries academia was marginalised and the professional and corporate forms of training dominated the respective scenes. This will emphasise how systems have changed or adapted as a result of major shocks like defeat in war or radical re-evaluations of economic performance. Above all, we intend to provide a detailed insight into the difference in attitudes towards training, questioning the classic distinction between, on the one hand an alleged British preference for ‘amateurism’, compared to the apparently more rigorous Japanese belief in preparing for one’s career. The role and impact of education in economic development Before embarking on this comparative analysis, it is first of all useful to assess the extent to which formal education impinges on economic development. In fact, there is little consensus in the debate on this issue.6 While influential bodies like the World Bank frequently exhort less developed economies to invest more in education as an essential prerequisite for modernisation, neither the quantitative nor qualitative evidence demonstrates categorically that this will raise living standards. As Myllyntaus has noted: ‘The widespread ability to read and write is not a magic charm that ignites the Industrial Revolution in any societal circumstances’.7 It is important to stress the limitations in this debate, because rarely do commentators explain precisely how education will impact on either modernisation or economic growth. For example, few agree on the level of intellectual achievement necessary at which education becomes a significant contributor to these processes. Furthermore, a closer understanding of the relationship between practical training and academic education is necessary before investments in either area can bear fruit. Finally, one must also be aware of the subliminal impact of education, either as a means of indoctrinating people to accept their role and position in society, or to support the government’s policies. These, and many other, issues have yet to be fully incorporated into the debate, demonstrating how quantitative precision becomes an impossible aim. Specifically with regard to management education, even less effort has been expended in unravelling these mysteries. Indeed, there appears to be an implicit assumption in the substantial literature describing how different countries trained their managers that management education and training really matters.8 What becomes apparent, however, is the inextricable link between, on the one hand, quantitative issues like

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the amounts invested in systems and the number of people affected, and on the other hand the economic, political, and socio-cultural environments in which this activity takes place.9 Only by assessing all these factors can a rounded view of the issue be achieved, providing an enormous challenge to the historian of management education. Our task is complicated further by seeking to detect a regional dimension to the debate, albeit one which was inextricably bound up with national developments which were inevitably the principal driving force behind the highly varied forms of management education introduced in both countries. The regional and national chronologies are provided in the Appendix on page 249, an illustration which will act as the framework for our assessment of the comparative approaches towards management education in two of the world’s major industrial centres. Attitudes to management education in Osaka prior to 1945 One of the more striking features of the Appendix is the enormous amount of activity in the left-hand column prior to 1945, especially in the development of formal educational facilities. In contrast to what appears to have been a belated and limited British awakening to the need for a formal provision of management training, Japan was ‘desperately anxious…to equip itself for industry and commerce’.10 The respect for education and its general value had actually been a feature of Japanese society since the sixth century, a trend exemplified by the wide diffusion of Terakoya (temple schools) and the various Edo period textbooks known as Shobai-Orai. This belief in the role of education was also very much a component in the modernisation process initiated in 1868 by the Meiji regime.11 As a result of this commitment, the formal education system administered by the increasingly powerful Ministry of Education (Mombusho) produced levels of literacy and numeracy which were much higher than those pertaining in other economies at similar stages of development. School attendance by 1909 had already reached 98 per cent of the under-ten population, while the proportion of illiterate twenty-yearold conscripts in 1912 was as low as 2.9 per cent.12 As Pickering rightly concluded in 1931, when Lancashire cotton manufacturers were beginning to feel the full effect of competition from their Osaka rivals: ‘lt is education, not cheap wages, which makes the Japanese so formidable in the sphere of industrial competition’.13 Although especially after the 1890 Imperial Rescript on Education strict guidelines were laid down which linked nationalistic propaganda with academic and vocational teaching, and during the 1930s even greater functionalism was built into courses as a direct result of the country’s militarist-imperialist tendencies, there is no doubt that both local and national governments and private institutions invested substantially in appropriate educational facilities between the 1880s and 1940s. Crucially, these investments were linked to the functional aims of an educational policy which was used as an instrument of government policy. For example, the University Order of 1918 stipulated that both public and private universities were the place ‘to teach academic arts and technology to meet the requirements of the country.’14 This Act was the culmination of decades of innovation which had seen

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both local and national governments develop a system of functional education unrivalled in the UK. As far as Osaka was concerned, interestingly the first of these investments was a private initiative. The chronology is traced in the Appendix on page 249, which shows how after learning of the benefits derived from similar institutions in Tokyo (founded in 1875) and Kobe (1878), in 1880 the city’s leading businessman, T. Godai, established the Osaka Commercial Training School.15 After the government had in 1884 for the first time issued guidelines on the curriculum to be followed in these institutions, responsibility for the school was transferred to the Osaka prefectural government a year later, when it was renamed the Prefectural Osaka Commercial School. Considerable development of the curriculum followed, culminating in the elaboration of a four-year programme of study during which students learnt a diverse range of subjects, including languages, bookkeeping, mathematics, political economy, history and commercial practice. By the time funding and administration of the school had been transferred to the city of Osaka in 1889, when it came to be known as Osaka Municipal Commercial School, it had also established intimate links with many of Osaka’s leading firms like Sumitomo and Fujita Ltd. Over the following decades, as the school evolved into first a higher commercial school (1901) and then a university of commerce (1928), Godai’s innovation contributed significantly to the creation of a pool of talent from which the region’s businesses could recruit managerial staff. Initially, demand for places at the school had been minimal, with just twenty-six students graduating between 1880 and 1893, only five of whom had come from Osaka. Thereafter, however, the numbers started to grow, from 417 students in 1894 to 589 by 1920, the majority of whom were locals. This expansion was facilitated in 1892 by the provision of a new building, located next to both the Osaka Chamber of Commerce and Osaka Commercial Museum in the city’s Dojima district. These two neighbouring institutions provided not only useful contact with the business community, the latter especially also reinforced the drive to develop an information network which would be of assistance to business during this period of rapid change. While the Osaka Municipal Commercial School was expanding during the 1890s, both municipal and private support was also forthcoming for initiatives which exploited the national government’s drive to develop commercial and technical education for schoolchildren. Of particular importance in this respect was the emergence of industrial schools, following the publication in 1893 (see the Appendix on page 249) of the industrial supplementary school regulations and a boost to industrial education expenditure a year later. The 1893 edict resulted in the conversion of apprenticeship schools into industrial supplementary schools. The Osaka prefecture was particularly well served by these institutions, because although by 1919 seventy-five of its industrial supplementary schools were devoted to agriculture, there were another sixty-two which dealt with commercial education. Moreover, enrolments at the various types of school increased significantly over the

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Taisho era (1912–26), reflecting the increasing demand for qualified individuals from the thriving textile businesses of Osaka.16 The 1899 Industrial Schools Act further strengthened this new feature of the system, especially in the way that A-level (for pupils aged 14–16) and B-level (for pupils aged 10–13) institutions were formed. Initially, while most of these schools were privately-funded, especially after the Russo-Japanese war (1904–5) the municipal authorities took responsibility for substantially boosting both their numbers and enrolments. Large-scale A-level commercial schools superseded the technical schools nationwide. The number of enrolments and applicants in Osaka was outstanding for the commercial schools. In Osaka, only six technical (or manufacturing) schools had been established by the First World War. Thereafter, however, significant expansion occurred, resulting in the opening of ninety-one industrial supplementary schools in the Osaka prefecture by 1922. Backed up by significant national initiatives, Osaka had clearly developed a wide range of training facilities by the interwar era. Crucially, the investment in functional education reflected an effective conjunction of demand-side and supplyside forces, a point well substantiated by the work of entrepreneurs like Kita and organisations like the Osaka Chamber of Commerce. The link between demand and supply was also confirmed by Allen’s comment quoted on page 226, which highlights the direct link which had emerged between educational qualifications and career opportunities. This explains why by 1940 60 per cent of senior Japanese managers were graduates, compared to just 31 per cent in the UK and under 50 per cent in the USA.17 Graduates would appear to have been in especially great demand after the enormous Japanese boom associated with the First World War, when the economy started to expand rapidly as many of its Western counterparts struggled to come to terms with the much-changed interwar economic scene. Applications for places at Osaka Higher Commercial School consequently increased tenfold after 1918. The national government was also once again looking to expand the university system (see the Appendix), encouraging both private organisations and regional authorities to take advantage of the 1918 University Act and establish new institutions which would service business’s increasing demand for graduates.18 The government’s efforts also seem to have met with an enthusiastic response during the interwar era, as the number of universities increased significantly from four in 1914 to forty-six by 1930 and student enrolments expanded from 9,000 to 70,000, respectively. In addition, by the end of Taisho era there were eighteen higher commercial schools, 234 commercial schools and 454 commercial supplementary schools, the principal purposes of which were to produce a broad range of technical and commercial training to augment what was happening in the universities.19 While it is clear that the national government had succeeded in boosting the size of the higher education sector, one must remember that the 1918 Act prevented cities from establishing their own universities. This restriction prompted the establishment of a substantial movement within Osaka which eventually succeeded in overturning this edict. The Mayor of Osaka, Hajime Seki, was anxious that his

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city would not be left behind in the drive to establish universities, supporting the Osaka Higher Commercial School alumni association to build a powerful movement which culminated in this institution’s conversion into Osaka City University of Commerce in 1928.20 In fact, up to 1914 Seki had been based in the Tokyo Higher Commercial School, where his ideas on replicating the Handelshochschule movement in Germany were rejected by the Ministry of Education’s insistence that university status should not be diluted. In 1914, he consequently moved to Osaka, where his ideas proved so popular with the local business community that by 1923 he had been appointed as the mayor of what by then was a thriving industrial and commercial centre. He was enormously assisted in converting the Higher Commercial School into a university by Matazo Kita, chairman of Nippon Menka, who organised the promotion committee and fund-raising activities. The Ministry of Education was consequently forced to accept the logic behind the move to establish a city university in Osaka, leading to a revision of the 1918 Act in 1928 (see the Appendix) which gave Seki and Kita the opportunity to fulfil their educational aims. The creation of Osaka City University of Commerce in 1928 was yet another part of this broad movement both to imitate the most appropriate features of European and American higher education, and boost Japanese economic performance. By that time, the institution’s intake had expanded to almost 1,200 students, compared to under 600 in 1920, while the number of academics rose from 24 to 114. Among the scholars recruited into the new university there were leading Marxist economists, including the institution’s first president, Shiro Kawada, as well as Keizo Fujita, Koji Fukui and Minoru Toyozaki. As a result of a donation of one million yen from Tokushichi Nomura, managing director of Nomura and Co., Kawada was able to establish an Institute of Economic Research, providing the university with a major centre for innovative work to feed the courses in trading, finance, management and municipal administration. Among the most prominent of its publications were Keizaigaku Jiten (Dictionary of Economics) (1930–32), an Annals of Economic Studies (from June 1932) and the Keizaigaku Zasshi [Economic Review] (from 1937). In this context, it is also vital to note that extensive efforts were being made within the Osaka business community to develop management training schemes. For example (see the Appendix), by 1922 the Osaka Management Society had been established, while a year later the Training Centre for Industrial Consultants had been started and in 1925 the Osaka Prefectural Institute for Industrial Management first appeared.21 The courses provided by these centres were largely taught by Yoichi Ueno and Fukumatsu Muramoto, two of the most ardent advocates of introducing American production and management techniques into Japan. Muramoto, professor at Osaka City University of Commerce was actually the first Japanese MBA graduate, after attending Harvard Business School in 1917–18, while Ueno came to be regarded as the pioneer of scientific management education in Japan. This emphasises how while Hitotsubashi was to be closely associated with German

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thinking, the emphasis at Osaka was focused on American ideas, largely as a result of local business interest in the benefits scientific management. Once again, interwar developments reflected the harmony of interests connecting business and academic communities in Osaka. Indeed, across all three tracks identified earlier in the chapter, the educational, professional and corporate, by the 1920s Osaka business was well served by a wide variety of courses and programmes which trained aspiring and actual managers in all of the very latest techniques. This local system was also supported by the national government’s drive to build an education service which was appropriate to the needs of a newly-industrialising economy. Some conservatism can be detected in the Ministry of Education’s attitude towards increasing the number of universities, when Seki and his counterparts were lobbying for a more innovative approach. Notwithstanding this constraint, at every other level the Ministry had encouraged the development of a highly diverse range of functional education, while after 1918 more enlightened national views on the expansion of university-level courses stimulated what was a rapid expansion in institutions, courses and graduates. Judging from the evidence quoted earlier, which indicates that compared to either the USA or the UK, senior Japanese managers were more likely to be graduates, the indigenous business community was also keen to utilise the output of this system, especially after the two major booms following the Russo-Japanese war (1904–5) and First World War (1914–18).22 For example, while in 1913 almost 60 per cent of graduates of the Osaka City Higher Commercial School went into either commerce or selfemployment, between 1932 and 1934 this had fallen to just 36 per cent of the Osaka City University’s graduates as a growing number went into manufacturing and finance. Furthermore, this reinforces Pickering’s claim recorded earlier, that the Japanese economic onslaught of the interwar period was based on a qualitative competitive advantage based on superior training, rather than a simple quantitative factor linked to wage costs. British business and management training prior to the 1940s When Léautey noted in 1886 that while there were already ten commercial schools in Japan, ‘there was no commercial school properly called in England’,23 he was voicing what to many contemporaries was becoming a glaring weakness in the British approach to commercial development. By the time Allen was surveying the Japanese scene in the 1920s,24 it would also be accurate to note that Britain still lagged well behind in the provision of vocational education, whether it be scientific, commercial or managerial. As we shall discover (see the Appendix), some effort was made to establish university-level courses for aspiring managers, especially around the turn of the century. However, not only were these initiatives of marginal influence on British business attitudes, there is also very little evidence of efforts to develop the other two tracks, the professional and the corporate, emphasising how what Coleman describes as a ‘Cult of the Amateur’ prevailed at least up to the 1940s.25

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While it would be extremely dangerous to express a universal generalisation which claimed that up to the 1940s no British firms were interested in management education and training, there is a widespread consensus in the literature which demonstrates a consistent failure on the part of both business and educational communities to forge productive bonds in this period. Keeble, for example, has outlined clearly how: ‘Businessmen and graduates have recorded the fact that higher education was seen quite widely as being a positive disadvantage to a business career.’26 Fitzgerald has similarly described how a ‘tradition of the amateur or the practical man…pervaded the British manager’s self-image’,27 a point further confirmed by Gospel and Okayama.28 It is important to remember, though, that as the Appendix reveals there were efforts within the pre-1914 educational system to overcome this bias against formalised training. For example, there were pioneering schemes like the London Chamber of Commerce’s commercial courses, started in 1887, while around the turn of the century one can find university-level facilities at Birmingham, Manchester, the LSE and Liverpool. Interestingly, these were universities which owed their origins either to local business donations, or to the efforts of those who were devoted to modernising the system of higher education. Sadly, though, the innovators met with a broad sweep of apathy, especially in industry, frustrating the intention to improve the quality of management at a time when Britain’s principal rivals all seemed intent on developing a system of higher education which would benefit their economies directly.29 Although Birmingham University was undoubtedly both the first to initiate commercial education, and under the direction of W.J.Ashley probably the most dynamic of the institutions working in this field, it is notable that following the success of sub-degree level lecture series for railway companies and people preparing for professional examinations, the Victoria University of Manchester (founded in 1903; see the Appendix) in 1904 collaborated with the local Chamber of Commerce to establish a Faculty of Commerce and Administration.30 The key early figure in this experiment was Sydney Chapman, an economic historian whose family firm background convinced him that universities could assist in the training of managers. However, in spite of some generous donations from local cotton manufacturers, and later the inauguration of a Chair of Commerce in 1919, up to the 1940s this Faculty struggled continually to generate either sufficient fee income to cover its costs, or enough interest in its graduates from the business world. The latter especially forced the University authorities to institute separate commerce and administration degrees, resulting in the marginalisation of management-related teaching. Finally, by 1943 the Faculty was given the new name of Economic and Social Science, reflecting the changed emphasis in what had started out as an organisation aimed at training aspiring managers. Although considerable optimism had been expressed, both in 1904 and again at the end of the First World War, that universities could contribute to the process of improving British business performance, the slow demise of Manchester University’s experiment in management education indicates clearly how the ‘Cult of the Amateur’ remained a powerful influence in this field right up to the 1940s.

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The widespread British business commitment to the notion that ‘managers are born, not made’ had evidently undermined the efforts of Sydney Chapman at Manchester. At the same time, as the Appendix reveals, one must remember that the university was not the only Manchester educational institution which innovated in this field. Indeed, by 1918 the Manchester College of Technology (later, UMIST) had opened a department of industrial administration. This institution (see the Appendix) could trace its origins to the Manchester Mechanics’ Institution, founded in 1824.31 Largely as a result of the efforts of J.H. Reynolds, by 1882 this Institution had been converted into the Manchester Technical School. Ten years later, after the local authority had accepted responsibility for financing its increasing range of activities, the Manchester Municipal Technical School was established, while by 1918 after further expansion it had become the Manchester College of Technology. The timing of this change reflected a widespread contemporary interest in the subject of training, a sentiment which persuaded six prominent local businessmen (in cotton and engineering) to fund the new department of industrial administration as a means of providing courses in all aspects of industrial management. Once again, though, in spite of introducing in 1926 what was the country’s first postgraduate management course, as well as raising funds from the city’s education committee in the same year, both fee income and enrolments remained disappointing. The peak year for full-time students was 1938, when twenty-one enrolled, contrasting sharply with the 1,438 students attending Osaka City University of Commerce at that time. As the director of the department of industrial administration noted in 1930: ‘The soil of crass individualism is never friendly to standards and ethical ideas’.32 While it is clear that prior to the 1940s the educational track of management training remained underdeveloped in Britain, those who had attempted to change business attitudes in this respect could take comfort from the thought that their failure was simply an expression of the general reluctance to develop new approaches at all levels, including the professional and corporate. According to Mannari, as we have already noted, by 1940 only 31 per cent of Britain’s business leaders had graduated from university, compared to almost 60 per cent in the USA and in Japan.33 Furthermore, these British graduates would mostly have read subjects in the Arts and Humanities, rather than in the social sciences, while the level of formal training experienced on entering a firm would have been minimal, if it existed at all.34 The most impressive pre-1940 developments in what could loosely be described as management training were in the professional arena, where accountants’ associations especially, both chartered and works (management), had introduced examinations and accreditation systems which were based on rigorous courses.35 Indeed, as Barry noted, ‘as there was no obvious route to a career in management, it is not surprising that…large numbers of people prepared themselves for a managerial career by undertaking training in accountancy’.36 This trend is well substantiated in the work of Matthews, Anderson and Edwards, which reveals the extent to which the accounting profession came to acquire a commanding position

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within the ranks of senior British management, especially among the largest firms.37 Whether this ought to be seen as a positive trend remains open to question, however, especially with regard to the increasingly short-term financial orientation of British business and the failure to develop either other functional skills or those more pertinent to general management. This reinforces the strength of Bowie’s 1930 claim that, as far as management education was concerned, ‘Britain is still at the crowing of the cock’,38 a state which owed much to the highly conservative attitudes of British business in general. Postwar educational reform in Japan and the business response The contrast in British and Japanese attitudes towards management training prior to the 1940s could clearly not have been greater, with the former eschewing the latter’s desire to invest significantly in what was one of the world’s most developed systems of vocational education. After the Second World War, however, it is quite remarkable how each country experienced a change in approach. In Japan’s case, although importantly one must remember that it only affected the role played by the educational track, this transformation was effected as a result of the reforms introduced by the Allied Occupation forces (widely referred to as GHQ) during the late-1940s.39 British education, on the other hand, was expected to play a much more influential role in the training of managers, especially from the mid-1960s, when business schools started to appear on the scene.40 The following sections will consequently be concerned with examining whether or not these changes had a major impact on the general attitudes to management education and training in the two countries, an exercise which will further improve our understanding of the respective business communities. Although one can debate at length the extent to which defeat in the Second World War and the imposition of foreign rule for the following six years influenced the long-term development of Japan’s economic structure,41 there is little doubt that the late-1940s reforms substantially altered the characteristic features of the country’s education system. Having evolved since the 1880s principally with the aim of supporting the modernisation process by a government dedicated to competing on equal terms with the major European and American powers, by 1950 the functionalist nature of higher education in particular had virtually disappeared, to be replaced by a greater interest in academic ideals. In particular, a completely new philosophy was established, the three tenets of which were equal opportunity, broad knowledge aimed at personal enlightenment and respect for academic freedom and autonomy. It is vital to note, though, that participation in further and higher education was also boosted, with high school attendance rising from 40 per cent in 1935 to 80 per cent in 1960, while over the same period university enrolment expanded from 3 to 10 per cent of the 18-year-old population.42 By the 1960s, the term Gakureki-shakai (academic qualification society) had come into common use, reflecting the widespread acceptance that a person’s status was substantially enhanced by their level of educational achievement. A clear example of this was the

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increasing proportion of senior Japanese managers who were graduates, because by the 1960s this exceeded 90 per cent, compared to 46 per cent in the 1920s.43 The American influence was actually paramount in the new system, with the same ‘6–3–3–4’ linear model being imposed, alongside the elimination of any vocational characteristics which had been imbued prior to 1945. Higher education, in particular, was given an entirely new brief, based on the development of general and theoretical courses, rather than the practical and functional approaches which had prevailed under the old system. The conversion of professional schools and commercial universities into institutions based on the American and British models dealt an especially harsh blow to the system’s ability to generate substantial numbers of graduates equipped with practical training and specialised knowledge. Osaka City University of Commerce (see the Appendix), for example, was in 1949 converted into the Osaka City University. Moreover, while its student enrolment expanded from under 1,500 in 1939 to almost 4,800 by 1963, no longer would it aim to provide vocational education. To substantiate this description of developments at Osaka City University, it is also interesting to note that the pre-war influence of Marxist economists was also strengthened after 1945. During the 1930s, President Kawada had continued to recruit economists from his former institution, Kyoto University, from which several academics were expelled after the 1933 Takigawa incident on account of the Maintenance of Public Order Act. During the Pacific War, some of these Marxists were arrested, alongside their student supporters, largely as a result of their secret activities within the so-called ‘Cologne Group’ of political radicals. However, after 1945 progressively most of them returned to Osaka City University, where they established an extensive reputation for highly theoretical and dogmatic Marxist economics. In view of the more general changes to the Japanese education system, which converted universities especially into non-vocational centres of study, it is consequently not surprising that the Osaka business comunity disliked the trends at Osaka City University. Even though Osaka businesses continued to recruit its graduates, many complaints were voiced about the excessively theoretical nature of their eduaction. Crucially for management education, the late-1940s reforms fuelled an extensive debate about the gap between universities and end-users’ requirements. While Japanese business consistently proved willing to recruit the increasing number of graduates produced by the larger higher education sector, bodies like Nikkeiren (the Japan Federation of Management Associations, founded in 1948) voiced widespread business concerns about the burden the reforms imposed on firms. Nikkeiren actually came into existence as a means of coordinating the many training courses and organisations which emerged at that time. Indeed, while business groups scorned government for failing to provide an education system which generated skilled individuals, considerable effort was put into expanding the professional and corporate tracks by both firms and intermediate organisations dedicated to filling the vacuum created by the 1947 reforms. Paradoxically, American influence played a key role in the development of the professional and corporate tracks, especially

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after the civil communication section (CCS) of GHQ-initiated management seminars in 1949. Overall, though, these schemes were adapted successfully to Japanese conditions, limiting the extent to which American ideas were adopted wholesale. As the Appendix reveals, CCS, MTP (Management Training Programme) and TWI (Training Within Industry) programmes were inaugurated in 1949, while largely under the auspices of Nikkeiren a host of new organisations emerged which were designed principally to fill the void created by the educational reforms. American management experts like Deming were also responsible for propagating American management techniques which were largely imbued into personnel either through attendance at external courses or through on-the-job training. At the same time, in spite of this strong American influence, it is noticeable that the business school method of training managers has remained unpopular in Japan. It was actually 1978 before the first Japanese business school came into existence, the Keio Graduate Business School, to be followed a year later by the formation of the Sanno Management School. This indicates clearly how the focus of management education had moved decisively away from the universities and commercial schools to a system built around internal training.44 While prior to 1945 Japan could boast about its substantial investment in management training across all three tracks, clearly by the 1950s further and higher education was no longer regarded as serving directly the needs of business. Even if there were many more graduates entering the job market, after the late-1940s reforms it was accepted that in future employers would have the responsibility to train them in the required skills, either through the professional or corporate tracks. A most significant development in this respect was the creation in 1955 of the Japan Productivity Centre (JPC). This organisation owed much to the Keizai Doyukai or Association of Corporate Executives, a union forged in 1945 of progressive businessmen who recognised the need for radical improvements in Japanese organisational techniques if the economy was ever going to recover from the desolation of military defeat. By 1954, Keizai Doyukai had persuaded other organisations like Nikkeiren and the Japan Chamber of Commerce that the country required a productivity movement, an agreement which a year later resulted in the establishment of the JPC. Although principally concerned with disseminating bestpractice production techniques, by 1958 the JPC had started full-time, one-year management courses, as well as specialised seminars and short courses for practising managers.45 While Japanese business organisations made considerable efforts to fill the void created by educational reforms, the most dramatic expansion in management training came at the level of the firm. Table 8.1 substantiates this point amply, revealing how from the sample of 855 companies prior to 1940 relatively few had invested in formalised management training schemes, in contrast to the enormous expansion especially after 1955. Interestingly, the training of new recruits took off first, with 50.6 per cent of firms having started schemes (largely for graduates) by 1960, while executive-level training was the least developed. During the 1960s,

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Table 8.1 The diffusion of internal management training in Japan by 1970 (percentages)

Source: Japan Society of Industrial Training; The Present State of In-FirmTraining, 1970.

though, management training was extensively adopted for middle and line managers, reflecting the impact organisations like JPC were having on the development of this function at a time of rapid expansion for Japanese business in general. Of course, this trend was also linked with the adoption of lifetime employment and other features of what is now called the Nipponteki keiei (Japanese employment system), with the largest firms especially investing substantially in what were widely regarded as vital human resource skills.46 In evaluating the postwar Japanese approach towards management education, there had clearly been five stages, each of which marked the emergence of a distinctive style which has clearly proved extremely effective. The first phase occurred in the period up to 1955, when Japanese firms vigorously introduced American methods learnt either through courses like CCS, MTP or TWI, or from consultants like Deming. Between 1955 and 1960, however, business recognised the existence of a gap between American theory and Japanese reality, prompting the elaboration of a more pragmatic approach which was propagated by organisations like the JPC. During the third phase, lasting from 1960 to 1973, senior executives pursued what has come to be called ‘Japanese management’, manifestations of which are the enormous investment in internal training systems (see Table 8.1) which taught managers techniques forged in the previous phase. After the oil price crisis of 1973, Japanese management education entered a fourth phase, during which even greater emphasis was placed on radical productivity improvements as a means of surviving in more difficult trading conditions. These pessimistic tones were further reinforced after the second oil price crisis of 1980 coincided with the rapid appreciation of the yen and the internationalisation of Japanese business, leading to a fifth phase which is marked by a growing concern with changing basic features of the Nipponteki keiei like lifetime employment and seniority-based wages.

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The last two of these phases we shall briefly consider during the conclusion. Crucially, though, it is apparent that since the 1940s Japanese business has invested substantially in management education and training, especially through the provision of internal programmes for new recruits and middle and line managers, as well as by sending people on courses provided by organisations like the JPC. Although this investment was largely prompted by a fundamental reform of the higher education sector, one should remember that firms were still keen to recruit the increased number of graduates, whatever their academic qualifications, indicating how education was still accorded significant status in postwar Japan. This demonstrates the tremendous degree of continuity in the Japanese story, because while the late-1940s education reforms resulted in a dramatic reduction in the amount of vocational training conducted in the formal system, the nation’s consistent commitment to personal development remained paramount in the postwar era. This is why contemporaries in the 1960s talked about the Gakureki shakai, placing considerable emphasis on the desire to educate and train. Just as in the pre-1940 era, many authorities also agree that this commitment would appear to have contributed decisively to Japan’s economic development after the crisis period at the end of the war.47 Business schools in Britain: a revolution? While the educational track for training managers was deliberately marginalised in Japan after 1945, and the professional and corporate tracks were boosted, it is remarkable to note that at the same time in Britain considerable efforts were made by both the state and individual businessmen and academics to popularise scholarly management training.48 As we saw in the second section of this chapter, not only had British universities played a minor role in the provision of vocational education, business in general had failed to develop either the professional or corporate tracks into management, preferring instead either nepotism or limited practical, on-the-job training. It was increasingly argued after 1945, however, that improving management skills and organisational capabilities would not only benefit the business community enormously, but also radically increase the country’s wealthcreating potential. Crucially, this process of re-evaluation occurred most notably during periods of intense, introverted examination of Britain’s economic performance, in the late-1940s and around 1960, when the climate for change was most suitable. Of course, as we shall see later when assessing the early-1960s debate about establishing business schools in Britain, conservative tendencies retained a stranglehold on attitudes in certain quarters, leading to some compromises over the nature and funding of the institutions eventually established. Furthermore, with hindsight, one might question the propensity to pursue what was an American solution to the challenge of improving management at a time when the professional and corporate tracks used in Japan (and Germany) were proving far more effective in creating a cadre of appropriately-trained business leaders.49

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The issue of which system of management training Britain ought to have imitated we shall turn to in the conclusion, when a broad overview of the relative merits and achievements of all three tracks will be attempted. During the late-1940s, and again in the early-1960s, however, when contemporaries were looking for means of boosting Britain’s economic performance it would have been logical to look at what was at those times the world’s most successful economy, the USA. As Locke argues, it was also during the late-1940s that what he calls the ‘New Paradigm’ was sweeping through American business schools.50 This trend brought a more scientific approach to management education which British commentators like Lyndall Urwick felt should be imitated in British universities as soon as possible if the economy was going to recover effectively from its postwar difficulties.51 The incumbent Labour government shared Urwick’s belief that greater effort ought to be made in this area, sentiments which resulted in 1948 in the establishment of the British Institute of Management and a scheme devised by Urwick which provided an opportunity to take at a technical college (later, a college of advanced technology) a diploma in management studies. While in the late-1940s the state was willing to sponsor new ideas in this area, it is clear that over the following decade neither the university system nor business provided much support. In fact, by 1962 only 1,500 people had completed the diploma, compared to the annual production of 6,000 MBA graduates in American business schools at that time.52 Moreover, in spite of reforms in 1962 (see the Appendix) it failed to achieve its aim of converting attitudes towards management training.53 Innovative new management-related courses were also being started at universities in Sheffield and Manchester, while an Association of Teachers of Management had been formed in 1957 to act as a vehicle for disseminating new ideas.54 However, by 1960 it was apparent that the highly conservative business and academic cultures were conspiring to thwart the hopes of a small group of reformers, creating the need for a more effective lobbying organisation capable of breaking down these barriers. In this context, the formation in 1960 of the Foundation for Management Education (FME) was undoubtedly the most crucial development in the postwar history of British management education, because its founders (John Bolton, Sir Keith Joseph and J.W.Platt) were together successful in moving the debate about the need for business schools on to a much higher plain.55 As arch advocates of business school training for aspiring and practising managers, Bolton, Joseph and Platt were able to use their financial and political resources so successfully that one can say without fear of contradiction that their lobbying resulted directly in the establishment of two British business schools in 1965. Their first achievement was to persuade the government to appoint Lord Franks to sit in judgement over the business school debate, a rival body, the Savoy Group, having appeared on the scene in 1963 which argued vehemently against the FME’s case. The very existence of the Savoy Group, and the support it raised from leading firms especially in engineering, was confirmation that the traditional approach to management training was still very much supported within British business. Franks was consequently obliged to reach a compromise which, while giving in to the

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FME’s demands for the creation of at least two business schools, effectively tied their financing to the whims of British business. In simple terms, the schools would have to raise one-half of their recurrent income from post-experience courses and other forms of non-governmental funding, posing an enormous challenge at a time when as the Savoy Group demonstrated it was still not clear whether or not British business wanted these new institutions. Although many were well aware of these potential pitfalls, especially after a public appeal raised over £2 million more than its target (£3 million), tremendous optimism was expressed about the prospects for success of this American style of management training. Interestingly, because of the institution’s long-standing position in the field, as well as a series of innovative developments pioneered in the 1950s and 1960s by academics like Teddy Chester, Bruce Williams and Douglas Hague,56 the University of Manchester was chosen as one of the two hosts for the business schools suggested by Franks. (The University of London was the other host, given the generally accepted need for a business school in the capital.) Manchester Business School (MBS) consequently opened its doors in October 1965, recruiting in a small cohort of students for a one-year diploma in management studies which within two years had been converted into a two-year MBA programme. Without delving into an enormous amount of detail on the staff and courses,57 essentially it is important to note that what MBS liked to call a ‘learning-by-doing’ approach was developed as the distinctive feature of its teaching strategy. This approach was based on the premise that students ought to be immersed in real business problems, in order to learn how to apply newly-learnt techniques. Furthermore, a multidisciplinary style of teaching evolved at MBS, once the founders had decided not to erect traditional departmental boundaries around the academic staff. Although the early staff at MBS attempted to devise an innovative approach to management education—contemporaries referred to the ‘Manchester Experiment’— it is patently clear from a brief review of the institution’s early history that it failed to persuade many aspiring or actual managers to attend the courses. Indeed, in the period 1971–73 MBS was in deep financial trouble. Only a loan of £50,000 from the FME kept it afloat. The two main reasons why income growth was so stagnant were, first, that it was 1987 before MBS achieved the target set by Franks of annually recruiting 200 MBA students, while, secondly, not until the early-1980s did income from post-experience courses reach 50 per cent of the total.58 On these criteria, MBS can consequently be regarded as a dismal failure for at least its first fifteen years of existence. Of course, one might argue that judging an academic organisation by financial criteria is misplaced. Nevertheless, on the Franks funding principles, not to mention the MBA target of 200 graduates per annum, MBS was found wanting. London Business School (LBS), incidentally, proved rather more successful, but then its base in Regent’s Park offered more attractive surroundings to (especially overseas) students, compared to the inner-city location of MBS.59 The acute difficulties experienced by MBS up to the late-1970s is further evidence that management education was still regarded with deep suspicion by the British business community. In particular, it raised the question of whether Britain

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ought to have followed the American fashion of using business schools in which to train managers. Widespread criticism of the business schools also resounded from a plethora of reports produced by both public and private sector organisations, the common denominator of which was the reluctance of firms to accommodate the MBA in their career ladders.60 MBS was only able to recover from its financial malaise by, first, reducing its research base, and secondly, building up the postexperience courses along lines which provided for much greater customer involvement in their design. Interestingly, MBS also developed a greater interest in international links, arguing that the north-west of England provided a market which was limited by both its aggregate size and conservative character. Although by the mid-1980s the University authorities were expressing some concern about the marginalisation of research, this strategy actually succeeded in creating a financially viable institution capable of generating what by the late-1980s were substantial surpluses.61 LBS also continued to prosper and expand, providing such a positive inducement to other universities looking to generate new funding streams that by 1990 there were over one hundred business schools or management studies departments attached to British universities.62 In addition, private organisations like Henley and Ashridge provided similar forms of training. Nevertheless, it remains questionable whether British business accepted this university-based form of management training, a point to which we shall now turn in our concluding analysis. Conclusion There is little evidence that until the mid-1990s MBS and its counterparts had succeeded in changing British business attitudes towards management training. What is more interesting is the choice of an ‘academic track’ in the early-1960s, at a time when as the Savoy Group’s existence demonstrates there was no major body of business support for business schools. In retrospect, it is understandable that British politicians and some academics wanted to imitate the management training methods employed in what was at that time the world’s most successful economy. Nevertheless, not only were American ideas anathema to much of British business, it is also notable that two of the most successful economies over the last fifty years, Germany and Japan, preferred instead to rely extensively on professional and corporate tracks to develop its management talent. In this context, in linking British managerial weaknesses with the failure to develop formal management education, Rose seems to ignore the German and Japanese cases, where the American business school approach was largely ignored.63 Furthermore, as Aaronson has noted of the American scene, by the 1980s many were arguing that both the quality and methods of business schools were woefully deficient in preparing managers for Japanese and European (especially German) competition.64 Whether Britain should have developed the academic track in the postwar period remains a source of some conjecture. It is clear, though, that not only was the business community unsupportive of business schools, rarely can one find much

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evidence of any great interest in the corporate tracks. For example, in a survey of 206 large public and private businesses only 29 per cent believed in the value of formal qualifications as an important criterion when recruiting or promoting managers.65 A 1985 survey of over 2,000 firms also discovered that 56 per cent provided no formal management training at all, revealing a dearth of activity which emphasises the scant respect with which this function was held in the UK.66 Even in the late-1980s Handy was able to note that ‘in Britain management education and training is too little, too late for too few’.67 Consequently, as we noted earlier with regard to the interwar era, the professional track, or perhaps more accurately the ‘accountant track’, remained the most popular route into senior British management.68 Again, one can question the merits of this system, in particular because of its alleged impact on strategic planning horizons. On the other hand, the dominance of the accountancy route reflects the failure to develop either of the two alternative tracks, casting doubt on the willingness of British business to invest significantly in management education and training. The sluggish nature of change in Britain stands out in stark contrast to what happened in Japan after the Allied occupation regime had fundamentally reformed the old vocationally-oriented system of education. Indeed, commentators are in universal agreement that the enormous Japanese business investment in human resource development was one of the principal reasons why the economy was able to lever itself out of a major crisis in the 1940s and mount a serious challenge to the advanced industrial nations of the West.69 Even though the training of senior managers was neglected for many years, the in-depth and cross-functional methods employed in Japanese lower- and middle-management training, where firms take on the in-house responsibility for providing this vital means of enhancing skills, has been a source of real strength. Furthermore, these internal systems have been complemented by an extensive range of courses provided by external agencies which were divorced from the formal education system. This should also be allied to what by the 1960s had come to be regarded as the Gakureki-shakai, encouraging more people to take advantage of the state’s substantial investment in higher education as a means of providing an intelligent workforce.70 While the fundamental characteristics of this system have remained in place over the last few decades, it is important to link these to what has been happening to the Japanese economy since the mid-1970s. In the first place, as a result of both lowering its trading barriers and experiencing an increase in the value of the yen, Japan has been forced to participate much more extensively in the global economy.71 The most visible manifestation of this trend has been the expansion overseas of many manufacturing and service sector firms, establishing global networks of plants, suppliers and distributors which have seriously challenged the basic tenets of Japanese management style. When this is linked with the calamitous problems which beset the Japanese economy after the collapse of the late-1980s speculative boom, it is clear that traditional approaches to recruitment, training, promotion and tenure are being radically revised.72 While the death-knell of the Japanese employment system can hardly yet be heard, more meritocratic and performance-

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related systems are being introduced by many large firms as a means of equipping them for the challenges ahead. If these changes are adopted universally, this will represent a third evolutionary stage for Japanese capitalism, following the distinctive pre-1940 and post-1945 stages. Whatever the pace of these changes, though, and whether or not they help to overcome the serious financial crisis affecting banks and other financial institutions, they will simply reinforce the competitive advantage gained by Japanese business through the development of its particular style of employment and human resource development strategies. The principal theme of this study of Japanese and British management education and training systems has been one of contrasting styles and attitudes. As we noted earlier, it is difficult to be certain about the actual influence education has had in determining an economy’s competitiveness. Indeed, factors like a conducive market and policy environment and the availability of adequate investment capital have played much more important roles in stimulating entrepreneurship. Moreover, it has often been argued that formal management education is anathema to inculcating entrepreneurial attitudes into management, given its propensity to focus on abstract, theoretical approaches.73 At the same time, it is difficult to avoid the conclusion that the consistent emphasis placed on personal development throughout Japan’s emergence as a modern industrial power has contributed to improved business performance. Whether it be through public or private schemes, management education and training have remained major priorities. In contrast, British attitudes have been built around what can only be described as an ‘amateurish’ culture,74 limiting the impact of educational innovations attempted at various junctures over the last 120 years. While Manchester has been the base for many of these innovations, just as Osaka benefited from the efforts of several prominent pioneers in this field, the contrasting impact has been highly visible in the respective recruitment and career progression patterns of the two business communities. One might well conclude, then, that if management education and training can be regarded as a positive influence on business performance, Northwest businessmen since the 1880s have only themselves to blame for failing to exploit the opportunities created by various institutions. Osaka businessmen, on the other hand, were not only anxious to take advantage of any local facilities, they also developed their own in-house systems as a means of providing the kind of managerial skills required to deal with the varying economic challenges faced in different periods. Although one can hardly regard this as a decisive factor in explaining the relative economic and industrial records of these two regions, it is part of a scenario which begins to provide insights into this difficult question. Notes 1 For a detailed analysis of this subject, see Kenneth D.Brown, Britain and Japan. A Comparative Economic and Social History since 1900 (Manchester: Manchester University Press, 1998).

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2 G.C.Allen, Modern Japan and Its Problems (London: George Allen & Unwin, 1928), pp. 78–82. 3 R.Dore, British Factory—Japanese Factory (Berkeley: Allen & Unwin, 1973); J.C. Abegglen and G.Stalk, Jr., Kaisha, The Japanese Corporation (New York: Basic Books, 1985); R.R.Locke, Management and Higher Education since 1940: The Influence of America and Japan on West Germany, Great Britain, and France (Cambridge: Cambridge University Press, 1989). 4 R.Fitzgerald, ‘Industrial Training and Management Education in Britain: A Missing Dimension’, in N.Kawabe and E.Daito (eds.), Education and Training in the Development of Modern Corporations (Tokyo: Tokyo University Press, 1993), pp. 77– 103; H.F.Gospel and R.Okayama/Industrial Training in Britain and Japan’, in H.F.Gospel (ed.), Industrial Training and Technological lnnovatwn: A Comparative and Historical Study (London: Heinemann, 1991), pp. 13–37. 5 C.Handy, Making Managers (London: Pitman, 1988). 6 For a survey of this literature, see D.H.Aldcroft, ‘Education and Development: The Experience of Rich and Poor Nations’, History of Education, Vol. 27 (1998), pp. 235– 54. 7 T.Myllyntaus, ‘Education in the Making of Modern England’, in G.Tortella (ed.), Education and Economic Development since the Industrial Revolution (Valencia: Generalitat Valenciana, 1993), quoted in ibid. 8 An example of this unquestioning approach can be found in T.R.Gourvish and N. Tiratsoo (eds.), Missionaries and Managers: American Influences on European Management Education, 1945–60 (Manchester: Manchester University Press, 1998). 9 For an analysis of this conundrum, see John F.Wilson, ‘The Relative Benefits of Internal and External Management Training, 1920–1998: Some Comparative Notes’, paper given to the European Business Historians Association conference, Terni, 1998. 10 E.Pickering, Japan’s Place in the Modern World (London: Harrap, 1931), p. 74. 11 See Locke, Management and Higher Education since 1940, pp. 47–55. 12 T.Inoki, Gakko to Kojo: Nippon no Jintekishigen [Schools and Factories: Human Resources in Japan] (Tokyo: Yomiuri Shimbunsha, 1996), pp. 26–27. 13 Pickering, Japan’s Place, p. 94. 14 S.Yonekawa, T.Yuzawa and T.Nishizawa, ‘The development of economics and business education in Japan’, Hitotsubashi Daigaku Gakusei-shi Shiryo. Supplement (Tokyo: Hitotsubashi University, 1990), p. 6. 15 This section is based on S.Sugihara and T.Nishizawa, ‘In the “Commercial Metropolis” Osaka: Schools of Commerce and Law’, in C.Sugiyama and H. Mizuta (eds.), Enlightenment and Beyond (Tokyo: Tokyo University Press, 1988), pp. 189– 200. 16 T.Takeuchi, ‘Development of business education in Osaka Prefecture and Osaka Municipal Industrial School’, Report for Grant-in-Aid for Scientific Research (A), Ministry of Education, 1996. 17 H.Mannari, Japanese Business Leaders (Tokyo: Tokyo University Press, 1974), pp. 197– 98. 18 On the growing number of professional managers employed in Japanese business, see T.Yui, ‘Development, Organisation, and Business Strategy of Industrial Enterprises in Japan (1915–1935)’, Japanese Yearbook on Business History, 8 (1988), and H.Morikawa, ‘The Role of Managerial Enterprise in Post-War Japan’s Economic Growth: Focus on the 1950s’, Business History, 37 (2), 1995.

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19 S.Yonekawa, T.Yuzawa and T.Nishizawa, The Development of Economics and Business Education in Japan, pp. 1–7. 20 This section is derived from T.Saito, Ueno Yoichi: Person and His Achievements (Tokyo: Sangyo Noritsu Daigaku, 1984), pp. 44 and 224–33. 21 See T.Nishizawa, ‘Business Studies and Management Education in Japan’s Economic Development’, in R.P.Amdam (ed.), Management, Education and Competitiveness. Europe, Japan and the United States (London: Routledge, 1996), pp. 102–3. 22 See Yui, ‘Development, Organisation, and Business Strategy’, pp. 62–72. 23 E.Léautey, L’Enseignment Commercial et les Écoles de Commerce en France et dans le Monde Entier (Paris: 1886), p. 535. 24 Allen, Modern Japan and Its Problems. 25 D.C.Coleman, ‘Gentlemen and Players’, Economic History Review, 26 (1973), p. 103. For a full discussion of this issue, see John F.Wilson, British Business History, 1720– 1994 (Manchester: Manchester University Press, 1995), pp. 113–19 and 141–57. 26 S.Keeble, The Ability to Manage (Manchester: Manchester University Press, 1992), p. 85. 27 Fitzgerald, ‘Industrial Training and Management Education in Britain’, pp. 89– 90. 28 Fitzgerald, ‘Industrial Training in Britain and Japan’, pp. 15–16. 29 This failure is well illustrated in Keeble, Ability to Manage, pp. 93–122. 30 Keeble, Ability to Manage, pp. 103–7. See also John F.Wilson, ‘The Manchester Experiment’: A History of Manchester Business School, 1965–90 (London: Paul Chapman Publishing, 1991), pp. 1–3 and 18–20. 31 For a detailed chronology of these developments, see Alan Fowler and Terry Wyke, Many Arts Many Skills. The Origins of The Manchester Metropolitan University (Manchester: The Manchester Metropolitan University Press, 1993), pp. 14–21 and 37–42. 32 J.A.Bowie, Education for Business Management (Manchester: Manchester University Press, 1930), p. 59. 33 Mannari, Japanese Business Leaders, pp. 197–98. 34 For further detail on this, see Keeble, Ability to Manage, pp. 38–61; Wilson, British Business History, pp. 153–54. 35 D.Matthews, M.Anderson and J.R.Edwards, The Priesthood of Industry. The Rise of the Professional Accountant in British Management (Oxford: Oxford University Press, 1998), pp. 1–13. 36 B.Barry, ‘Management Education in Great Britain’, in W.Byrt (ed.), Management Education: An International Study (London: Routledge, 1989), p. 58, quoted in ibid., p. 261. 37 Matthews, Anderson and Edwards, The Priesthood of Industry, pp. 125 and 261–62. 38 Bowie, Education for Business Management, p. 89. 39 On the impact of these changes, see T.Nishizawa, ‘Education Change and InFirmTraining in Post-War Japan’, in E.Abe and T.Gourvish (eds.), Japanese Success? British Failure? Comparisons in Business Performance since 1945 (Oxford: Oxford University Press, 1997), pp. 101–18. 40 See Wilson, ‘Management Education in Britain—A Compromise Between Culture and Necessity’, in Amdam (ed.), Management, Education and Competitiveness, pp. 133– 49. 41 See Brown, Britain and Japan, pp. 131–34. 42 Gospel and Okayama, ‘Industrial Training in Britain and Japan’, p. 27.

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43 This section is based on Nishizawa, ‘Education Change and In-FirmTraining in PostWar Japan’, pp. 102–8. 44 See Nishizawa, ‘Business Studies and Management Education in Japan’s Economic Development’, pp. 96–109. 45 Ibid, pp. 103–9. 46 For more information on these systems, see K.Nagaoka, ‘The Japanese System of Academic Management Education’, in L.Engwall and E.Gunnarson (eds.), Management Studies in an Academic Context (Uppsala: Uppsala University Press, 1994), pp. 144–49. See also K.Collins, ‘Management Education in Japan’, in Byrt, (ed), Management Education, pp. 172–203. 47 R.R.Locke, ‘Higher Education and Management: Their Relational Changes in the Twentieth Century’, in Kawabe and Daito (eds.), Education and Training, pp. 38– 45. 48 N.Tiratsoo, ‘“What You Need is a Harvard.” The American Influence on British Management Education, c.1945–65’, in Gourvish and Tiratsoo (eds.), Missionaries and Managers, pp. 140–54. 49 Wilson, ‘The Relative Benefits of Internal and External Management Training’. 50 Locke, Management and Higher Education since 1940, pp. 1 and 114. 51 For an insider’s view of this movement, see E.F.L.Brech, A History of Management, Vol. I, The Concept and Gestation of Britain’s Central Management Institute: 1902– 1976 (London: Institute of Management, 1997), pp. 98–118. 52 Wilson, ‘The Manchester Experiment’, pp. 3–5. 53 Brech, A History of Management, pp. 129–31, and Matthews, Anderson and Edwards, The Priesthood of Industry, pp. 255–56. 54 Wilson, ‘The Manchester Experiment’, pp. 7–9, and Keeble, Ability to Manage, pp. 150– 54. 55 This section is based onWilson, ‘The Manchester Experiment’, pp. 9–15. See also P.F. Nind, A Firm Foundation. The Story of the Foundation for Management Education (London: Foundation for Management Education, 1985). 56 Wilson, ‘The Manchester Experiment’, pp. 18–22. 57 Ibid., pp. 22–42. 58 Ibid., pp. 36–40. 59 W.Barnes, Managerial Catalyst. The Story of London Business School, 1964–89 (London: Paul Chapman Publishing, 1989). 60 Wilson, ‘The Manchester Experiment’, pp. 69–70, idem., British Business History, pp. 218–23, Keeble, Ability to Manage, pp. 154–60. 61 Wilson, ‘The Manchester Experiment’, pp. 108–19. 62 Matthews, Anderson and Edwards, The Priesthood of Industry, p. 257. 63 M.B.Rose, ‘Education and Industrial Performance: Influences on British Experience since 1945’, in Abe and Gourvish (eds.), Japanese Success? British Failure?, p. 131. 64 S.Aaronson, ‘Serving America’s Business? Graduate Business Schools and American Business, 1945–60’, Business History, 34, No. 1 (1992), pp. 160–82. 65 T.Constable and R.McCormick, The Making of British Managers (London: British Institute of Management, 1987), p. 85. 66 I.L.Mangham and M.S.Silver, Management Training (London: Department of Trade and Industry, 1986). 67 Handy, Making Managers, p. 164. 68 Matthews, Anderson and Edwards, The Priesthood of Industry, p. 261. See also Keeble, Ability to Manage, pp. 158–62.

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69 70 71 72

See especially Locke, ‘Higher Education and Management’, pp. 38–45. Nishizawa, ‘Business Studies and Management Education’, pp. 96–110. Brown, Britain and Japan, pp. 195–201. For a review of these issues, see M.Sako, ‘Introduction’, in M.Sako and H.Sato (eds.), Japanese Labour and Management in Transition. Diversity, Flexibility and Participation (London: Routledge, 1997), pp. 8–18. 73 See Aaronson, ‘Serving America’s Business?’. 74 Wilson, British Business History, pp. 221–22.

Appendix: Key regional and national developments in the emergence of management education: Japan and the United Kingdom, 1880–1970 Japan

United Kingdom

1880 Osaka Commercial Training School 1882 Manchester Technical School (formed from the Mechanics’ Institute’s courses, which date back to 1824) 1884 Ministry of Education guidelines on commercial education curriculum 1885 Renamed Prefectural Osaka Commercial School 1886 Imperial University Act (setting up Imperial universities) 1887 London Chamber of Commerce school for commercial education 1889 Osaka Municipal Commercial School takes over from prefecture 1890 Osaka Commercial Museum set up by Osaka Chamber of Commerce 1892 Manchester Municipal Technical School 1893 Industrial Supplementary School Regulations (establishing industrial supplementary schools) 1895 LSE established (Railway Dept. by 1904) 1899 Industrial Schools Act (A-and Blevel commercial schools authorised) 1901 Osaka City Commercial School converted to the Higher Commercial School 1902 Faculty of Commerce formed in University of Birmingham 1903 Industrial Colleges Act authorises higher commercial schools

1903 Victoria University of Manchester granted charter (originated out of Owen’s College, formed in 1851) 1904 Faculty of Commerce & Administration formed in University of Manchester 1910 Liverpool University starts a Commercial Science degree

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1918 University Act boosts number of specialised universities

1918 Manchester College of Technology starts Dept. of Industrial Administration

1919 Osaka City Higher Commercial School 1920 University Act sponsoring local universities 1921 Osaka Chamber of Commerce sponsors lectures on scientific management 1922 Osaka Management Society 1925 Osaka Prefectural Institute for Industrial Management 1926 Rowntree’s Management Research Groups 1928 University Order Revision allows municipal universities Formation of Osaka City University of Commerce World War Two, 1939–45 1947 New education code imposed by GHQ after American Education Mission enforces radical changes in the system

1947 Urwick Committee on management education leads to start of Diploma scheme (to be supervised by newlyestablished British Institute of Management)

1948 Japan Federation of Management Association (Nikkeiren) formed 1949 CCS, MTP and TWI programmes started by GHQ. 1949 Osaka City University inaugurated 1950 Dr W.E.Deming’s lecture tour 1955 Start of Japan Productivity Centre; Japan Society for Industrial Training 1956 Nikkeiren submission on educational requirements of Japanese industry 1960 Foundation for Management Education established. Sponsors new postgraduate management work at several universities 1961 BIM Diploma converted to Diploma in Management Studies. CNAA starts approval of business studies degrees in Colleges of Advanced Technology.

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1963 Ministry of Education report on manpower development

1963 Franks Report 1965 Manchester Business School, London Business School and Oxford Centre for Management Studies opened

9 Industrial research in Osaka and North-west UK from the 1920s to the 1960s Minoru Sawai and Geoffrey Tweedale

Introduction Despite the acknowledged importance of the relationship between science and industry, only in the last decade or so has the subject of research and development (R&D) been intensively researched by historians. This area is now attracting more attention through national and industry-wide surveys— even monographs on R&D in individual firms—but many facets remain to be explored, especially at a regional level.1 In the UK and Japan, no comparative studies have looked at R&D; certainly an Anglo-Japanese regional study has never been attempted. It is easy to see why. Historical data on levels of R&D are sparse and very difficult to find. The number of firms involved in industrial research, the resources they deployed, and the numbers of scientists they hired are often unknown. Not surprisingly, an element of secrecy has often pervaded the whole field of industrial research. The subjective element adds other problems. How is one to define ‘research’, which can be fundamental or applied? Research itself often merges imperceptibly into development, which in turn shades into ordinary production processes. Moreover, how are we to quantify the level and quality of R&D—by the resources committed to the field, by the number of research institutions, by the total of key innovations, or by increased profits? Perhaps the most difficult question of all, is how industrial research relates to the broader themes of economic growth and decline. Despite these problems, historians and the public appear to have reached a consensus on British and Japanese performance in R&D. It has become the accepted wisdom that Britain’s economic decline was partly due to the country’s failures in exploiting innovation and in investing enough in industrial research. This view has been detailed—or implied—in a number of influential studies.2 Thus Britain’s lag in R&D, which is again being publicised as this chapter is written,3 can be viewed as a long-term historical failing. Evaluations of the R&D capabilities of Japan, a late industrialiser but a high-performer in the modern era, have also been typically low. Japan’s success has been attributed mostly to native ingenuity in imitating foreign technology and/or licensing agreements with overseas companies.

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No matter that imitation itself is an important capability, which implies an ability skilfully to select foreign technologies and then improve them in a local context.4 In this chapter, we examine critically these views of ‘decline’ and ‘backwardness’ in Osaka and the north-west of England. The discussion is split broadly in two: the first section looks at public research institutes in Japan and the UK; and the second examines private industrial research organisations. Public research organisations The UK In the UK, the approach to publicly-sponsored R&D has been fundamentally different from Japan. In Britain, private industry has always been expected to take the initiative (and pay the cost) for industrial research. To be sure, the government has provided important leads. Some initiatives—such as the National Physical Laboratory at Teddington, founded at the turn of the century—were a direct response to the fear of Germany’s scientific dominance. In the First World War, state concern at the lag in certain British industries led to the creation of a Department of Scientific & Industrial Research (DSIR), along with various industrial research organisations which it partly funded. But it was private industry which was expected to finance and conduct the bulk of industrial research. Thus, in North-west UK, there was no equivalent of Osaka’s public research organisations. Aside from its own resources, the only public bodies that North-west industry could call upon were the leading higher educational establishments in the region—notably, Manchester University, Manchester College of Science & Technology (UMIST), Salford University and Liverpool University. Owen’s College, Manchester (the future University), opened in 1851 and aimed at university level teaching. It thus had a bias towards the arts, but students’ demands soon forced it in a scientific direction. The ‘civic’ universities, of which Manchester was the largest and richest by 1914, became different in conception to Oxford and Cambridge. The emphasis from the start was on science and its practical application—an outlook strongly linked to the German model. It was Henry Roscoe, professor of chemistry from 1857, who did most to develop that vision, linking it to the practical concerns of local industrialists. He developed his own chemistry department into the finest school in the country. By the First World War, several other departments in the university had established solid foundations: the physics department had a good reputation for teaching—several of its pupils, including J.J.Thompson and Arthur Schuster, had gone on to the new Cavendish Laboratories at Cambridge. In natural sciences, Professors Williamson and Dawkins had presided over an expansion of facilities (the latter as curator of the Museum and Professor of Geology). These were the type of men who introduced the new twentieth-century scientific and technical advances— electricity, X-rays and radioactivity. In these innovations, the university worked with local industry and

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authorities, providing both trained personnel and offering analysis and testing facilities.5 Roscoe was one of the ‘first professor-industrial consultants in England in the nineteenth century,’6 and he undertook a wide range of advisory work for chemical firms around Manchester and elsewhere. Arthur Schuster’s plans for a great school of physics resulted, inter alia, in a pioneering electrometallurgy department under Robert Hutton. This stimulated interest in other industrial districts, such as Sheffield.7 The professor of chemistry, W.H.Perkin Jnr. (son of the famous originator of analine dye), also consulted for local chemical firms.8 Boyd Dawkins undertook a wide range of industrial consultancy before 1914: he had a hand in the discovery of the Kent coalfield and also advised a wide range of local consultancy for water-supply and chemical companies.9 The capital for new buildings and new appointments had come mainly from industrialists. Finance from local authorities, which increased after 1890, was directed mainly towards the Technical College (the former Mechanics’ Institute), which had been taken over by the city in 1892. Under the self-taught educationalist, J.H.Reynolds, it prospered enough to gain a new building in 1902 and rival Owens in engineering research and teaching.10 Local firms such as Armstrong Whitworth soon made use of the facility for pioneering work on tool steels, organised by the Manchester Association of Engineers.11 In 1905, senior staff in the Municipal College were recognised as constituting the Faculty of Technology of the newly-independent University of Manchester. Amongst the local firms which used the night schools there to train its chemists was Crosfields, the Warrington chemicals company. Industry was also closely linked with the university at Liverpool, which drew support from industrialists at a level second only to Manchester. With the support of leading families, such as the Muspratts in chemicals and the Rathbones in trade, the university was incorporated in 1881. In the list of donors to Liverpool before 1914, were the leading figures in the chemical and food industries in the area—Brunner, the Gambles, Gossage, Bibby, Lever, Walker, HenryTate, Jacob and many others. These men made Liverpool the second best endowed civic university before 1914. The research at the university reflected this industrial support and the activities of Liverpool University’s hinterland. E.K.Muspratt, the chemical manufacturer, had endowed the Muspratt Laboratory for Physical Chemistry in 1906. In 1910, a group of local shipowners from the firm of T. & J.Harrison endowed new engineering laboratories. The Harrison Hughes laboratories were to be especially strong in their work on such projects as engines and oil and gas for marine propulsion. The shipowner, Sir Alfred Jones, helped establish a School of Tropical Medicine.12 The university also became allied with the work of local pharmaceutical companies, such as the Evans Medical Company (Evans, Sons, Lescher & Webb of Speke). This company maintained close contact with the expanding Liverpool University Medical School, especially with its Incorporated Liverpool Institute of Comparative Pathothology. Evans financially supported the creation of this

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Institute, which served Evans well by helping the company research and market vaccines, sera and other drugs to combat diseases such as anthrax and smallpox.13 These promising beginnings were maintained during the more difficult interwar years. At the universities, this was a time of consolidation, rather than expansion. But in practical and professional fields, the north-west’s reputation continued to grow. At the Technical College in Manchester, Miles Walker developed electrical engineering in association with Metropolitan-Vickers; Willis Jackson in the Faculty of Science, continued this association around the Second World War. The Rochdale asbestos firm, Turner & Newall, helped found a pioneering department of Industrial Administration at the College in 1918. At Manchester University, MetropolitanVickers helped professor of applied mathematics Douglas Hartree build one of the best and largest mechanical calculators (a differential analyser) in 1935. In the medical field, too, links permeated Manchester industry: Harry Platt in orthopaedics and Ralston Paterson at the Christie cancer hospital achieved international reputations. At Liverpool University, Arts remained the largest Faculty in the interwar period. However, the science departments continued to expand, partly through further support from firms such as ICI and Lever Bros. In the 1920s, a chair of industrial chemistry was established. T.P.Hilditch, a research chemist at Crosfields, became the first to hold the chair, with the designation of Professor of Oils and Fats. The region’s traditions in chemistry, physics and engineering, plus its size and regional focus, meant that it played an important role in government projects during the Second World War and in the 1950s. Several key strands can be identified: radar studies for military use, which were linked also to astronomy; computing, which had some of its roots in the activities of the code-breakers at Bletchley Park; nuclear physics, which stemmed from the atomic bomb project; and pharmaceutical research, drawing from wartime experience with antibiotics. In all of these areas, Manchester especially was able to increase its national— and international—reputation. Sir Bernard Lovell’s radio-telescope at Jodrell Bank became a major symbol for space-exploration. A notable ‘first’ was the world’s first stored-program computer, operational in 1948. This machine—known as the Mark I computer—was the work of Tom Kilburn and (Sir) F.C.Williams, who built upon their wartime work in electronics and mathematics. With government support, this led immediately to a link with Ferranti to make a production model of the machine. The first Ferranti Mark I was installed at Manchester University in February 1951, thus becoming the world’s first commercially available computer to be delivered. The University’s involvement with Ferranti continued into the 1950s, when the design team (increasingly headed by Kilburn) was working on a Mark II computer nicknamed MEG (megacycle engine). In the 1950s and 1960s, north-west educational institutions enjoyed considerable expansion in staff and student numbers. Expansion was particularly notable in the Faculty of Technology, which under its principal Vivian (later Lord) Bowden, became a full university in 1956.14 During the 1960s, UMISTexpanded its research commitment, especially in the field of chemical engineering. Projects into the

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improved control of gaseous wastes and corrosion were amongst the major initiatives.15 This era also brought new opportunities to the older universities. Nuclear engineering became another speciality at both Manchester and Liverpool universities: along with Lancaster (and Glasgow and Sheffield), they were linked with the National Physics Laboratory at Daresbury in Cheshire, which operated from 1966 until 1975. These linkages extended to several nuclear establishments in the North-west region. The inheritance of the local dyestuffs industry also played its part in establishing new university/industry links. ICI Pharmaceuticals, operating first at Blackley and then Alderley Park, collaborated with Manchester University. At Liverpool, in 1974 an Environmental Rehabilitation Unit was established which worked with local authorities on Merseyside and many industrial concerns.16 Japan Attempts to begin original R&D activity began in Japan in the interwar period and by the Second World War both public institutes and private industry had accepted the need for industrial research based in three areas: fundamental, applied and practical (i.e., industrial experimentation for manufacturing). The initial central government agency for the promotion of science and technology was the Agency of Technology, established in February 1942.17 During the long and controversial process leading to the agency’s establishment, the Ministry of Education indicated that scientific research should be divided into the three categories of fundamental, applied and practical research. The Ministry also insisted that control of the former two (as scientific research in a narrow sense) should be placed under its authority, while allowing that practical research could be defined as industrial (or technical) research.18 It was largely through such intensive efforts to promote the independence of science and tcchnology in Japan from advanced/industrialised countries during the war that the conceptualisation of the stages of industrial research into set categories became firmly established. In August 1948, the Agency of Technology, which had been abolished just after the Pacific War, was replaced by another central body known as the Agency of Industrial Technology. This new agency published a White Paper on Research in 1951, in which four classifications were distinguished: (a) genuine fundamental research and applied fundamental research, (b) applied research, (c) industrial experimentation for manufacturing and (d) manufacturing research (research for improvement of products and manufacturing methods). True to its name, the agency also announced that its domain referred to all of these categories except genuine fundamental research.19 By April 1943, the existence of nine public research institutes in Osaka can be identified.20 Of these, the following were especially important as industrial research centres: • Osaka Industrial Research Institute (OIRI), which was nationally administered and was established in 1918.21

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• Osaka Municipal Technical Research Institute (OMTRI), established in 1916. • Osaka Prefectural Industrial Research Institute (OPIRI), established in 1929. In addition, although it was not primarily an industrial research organisation, the role of Osaka University—established in 1931 as Osaka Imperial University— should be emphasised. So too should the Osaka Technical School, a higher technical educational organisation, established in 1896, which later formed the faculty of engineering of Osaka Imperial University in 1933.22 OIRI, after its establishment by the Ministry of Commerce and Industry, was composed of three departments and one section (general affairs).23 The first department was for analysis and testing; the second for general industrial chemistry (with individual subsections for soap, oil and fats, matches, leather, carbonisation, insulating materials, fuels, electro-chemistry and synthetic products), and the third for ceramics (glass, enamel and fire-resistant materials). A fourth department for synthetic chemistry and a fifth for machinery, electricity and metallurgy were added in 1925, and a special laboratory under the director of OIRI—researching colloid and photographic chemistry and optical instruments —was set up at the same time (but abolished in 1938). An open laboratory system (with 89 laboratory rooms), where researchers from private companies could engage in research, was adopted in 1926, and a factory for experimentation on the results of basic research was launched in the following year. As shown in Table 9.1, the number of OIRI staff exceeded 200 by the end of the 1920s, and, by about 1935, some 90 per cent of engineers and assistant engineers were university graduates. The war period showed a rapid increase in the number of staff in the ‘others’ category, and the budget of the Institute expanded. Immediately after the war, the number of ‘others’ reached a peak because of the acceptance of many repatriates, but the decrease of ‘others’ continued after 1948, accompanied by a steady increase in the number of ‘technical officials’ or researchers; the total number of OIRI staff began to increase again from the 1960s. From the beginning, OIRI targeted research in inorganic and organic applied chemistry, although the Institute also eagerly proceeded with research and testing activities in ceramics, machinery and electricity. Although OIRI initially focused on various exported projects (such as matches, enamelled ironware and glass products), which were also staple products of Osaka manufacturing, it later favoured big projects connected with the national policy aims of Ichitaro Shoji, the Institute’s first director (1918–38). Linkages between the Institute and local medium- and smallenterprises (MSEs) accordingly declined in importance. National policy projects included the development of optical glass and synthetic rubber, and OIRI worked on the development and trial manufacturing of lenses for use in periscopes and range-finders. Toru Takamatsu, the third director (1943–48), who headed this research, was awarded the highest Army prize in 1943.

Table 9.1 The number of staff, patents obtained and value of budget and expenses settled of Osaka Industrial Research Institute, Osaka Prefectural Industrial Research Institute and Osaka Municipal Technical Research Institute, 1918–65

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Sources: OIRI: OIRI (ed.), Osaka Kogyo Gijutsu Shikensho 50-nen Shi [A 50-year History of OIRI], (Osaka, 1967), pp. 36–39, 41–42, 550–59; OPIRI: Osaka Prefectural Government (ed.), Osaka Fu Tokeisho [Statistics on Osaka Prefecture], each year, idem, (ed.), Osaka Fu Sainyu Saishutsu Kessansho [Statement of Accounts on Revenue and Expenditure of Osaka Prefecture], each year; idem, (ed.), Osaka Fu Sainyu Saishutsu Yosansho [Budget on Revenue and Expenditure of Osaka P efecture], each year; idem, Osaka Fu Shokuinroku[Osaka Prefecture Staff Listing], each year. OPIRI (ed.), Jimu Jigyo Gaiyosho [Outline of Activities of OPIRI], each year; idem, Nobiyuku Kogyo Shoreikan: Soritsu 30 Shunen Kinen [A 30-year History of OPIRI], (Osaka,1960), p. 7; OMTRI: ‘Osaka Shiritsu Kogyo r Kenkyusho Soritsu 20-nen Shi’ [A 20-year History of OMTRI], Kagaku to Kogyo [Science and Industry] 11/5, May 1936; OMTRI (ed.), Soritsu 50 Shunen Kinenshi [A 50-year History], (Osaka, 1966), pp. 58, 60–61, 193–96. Notes 1. Blank columns of the staff of Osaka Industrial Research Institute (OIRI) are unknown, and ‘Others’ which include a quota based on budget, are different from the actual number. 2. The budget of OIRI in 1943 and 1944 is unknown. 3. Three patents obtained by OIRI, for which year of public announcement is unknown, are excluded. 4. Fiscal 1929 and 1936 of the Osaka Prefectural Industrial Research Institute (OPIRI) are for budget, and the budget figures after fiscal 1947 are the total of personnel and working expenses. 5. The number of staff of Osaka Municipal Technical Research Institute (OMTRI) are quota based on budget, different from the actual number. 6. OMTRI after fiscal 1937 is for expenses settled, while personnel expenses from 1942 to 1957 are estimates.

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In addition to research and trial manufacturing, OIRI provided technical support to Fuji Photo Film Company, Konishiroku Photo Industry Company, and Chiyoda Optical Company when they started production of optical glass during the war. Meanwhile, the department of organic chemistry’s big project was the development of synthetic rubber, and OIRI succeeded in interim industrial experimentation, achieving a daily output of butadiene of 10kg per day in 1940. Nippon Chemical Industries (becoming Mitsubishi Chemical Industries through amalgamation with Asahi Glass Company in 1944) manufactured synthetic rubber for wartime use with OIRI technology.24 Postwar research activities were accelerated after about 1948, when OIRI was placed under the Agency of Industrial Technology. Synthetic rubber and heatresistant enamel were designated as special research projects in 1953 and 1954 respectively, receiving large special research budgets. A typical big project in the high-growth era was research on synthetic macromolecules, which occupied slightly less than 30 per cent of total research expenditures in fiscal year 1961–2. Even before the war, many private companies have achieved manufacturing success based on the results of OIRI research, and this provided a foundation for postwar activities. The number of research projects commissioned by private companies totalled 59 between 1956 and 1966, and the number of instances of technical guidance to private companies concerning core technologies developed by OIRI reached 842 between 1952 and 1966.25 In spite of its 1923 expansion, the size of the staff (engineers and assistant engineers) of the Osaka Municipal Technical Research Institute (OMTRI) remained around half that of the nationally-administrated OIRI, with a comparatively smaller budget (as shown in Table 9.1).26 However, OMTRI was successful in promoting various activities in support of Osaka MSEs, despite its budget constraints. OMTRI’s basic management policy, as expressed by Hitoshi Takaoka, the second director (1920–34), was that, ‘The staff of the Institute must serve the public, as the citizens are important customers.’27 OMTRI was established with a research department (investigating organic, inorganic, and electro chemistry, machine efficiency, machinery structure and materials, and architectural and furniture materials) and a general affairs department. The Institute for the Promotion of Industries was attached in 1925, and OMTRI’s expansion continued thereafter. There were several postwar reorganisations, and by 1965 the Institute had seven sections: general affairs, organic chemistry (a double section), plastics, biochemicals, inorganic chemistry and machinery. As Table 9.2 shows, OMTRI’s activities were quite diverse. The amount of ‘requested tests and research’ (free testing and technical guidance, as well as paid analysis and research) grew significantly, and this system made a major contribution to the technological upgrading of Osaka MSEs, which typically could not afford to maintain their own research facilities. ‘Special research’— which was modelled on the Mellon Institute of Industrial Research in Pittsburgh28—continued from 1921 to 1941. It became more significant

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from the mid-1920s. Under this system, OMTRI staff carried out research at the request of private companies, trade associations, and individuals, who might be permitted to use Institute facilities under the guidance of the staff on payment of research expenses. Thus, preliminary industrial experimentation could be conducted at the Institute prior to actual manufacture. In the postwar period this system was resumed, and was divided into (a) in-house research conducted by Institute staff, and (b) research based on a system of commissioned researchers, who were dispatched to the Institute by clients. The cumulative number of instances of requested research reached 1,245 from 1957 to 1965, of which 557 were based on the the system of commissioned researchers (the total number of researchers was 704).29 ‘Ordered testing and research’ consisted of research ordered by the Institute director and based on its own budget. Table 9.2 shows that this also became significant. The effectiveness of the research activities conducted by OMTRI is also reflected in the number of patents granted (see Table 9.1). OMTRI’s 50-Year History illustrates the content of the main research projects (including special and requested research) for which the results were subsequently applied to the private manufacturing of industrial goods. The cumulative number of such projects reached 147 from 1923 to 1965, and were composed of 53 research projects concerning plastics, 20 related to foodstuffs and enzymes, 18 for organic chemicals, 17 for machinery and 17 for dyes and textiles.30 OMTRI’s activities were not only Institute-based; its staff eagerly conducted factory guidance or diagnosis outside, particularly during the Great Depression. As far as can be confirmed, 3,142 instances of factory guidance/diagnosis for 890 factories were executed from 1923 to 1935.31 The provision of facilities for private enterprises unable to afford their own laboratories began in 1917. It became quite popular, especially among MSEs, and 218 clients had used the facilities through 1935. The number of clients using the facilities was between 60 and 80 every year in the postwar period. In fact, OIRI’s open laboratory was actually modelled on the practices of OMTRI, following the recognition of the popularity of the OMTRI facilities.32 OMTRI frequently sponsored exhibitions, and it also displayed the results of its research at outside exhibitions. In addition, it funded lectures and technical courses to promote upgrading, the diffusion of new knowledge, and the training of technicians. The Osaka Industrial Research Association was established in conjunction with OMTRI in 1926. The association not only sponsored various lectures and technical courses, but also published a monthly bulletin entitled Kagaku to Kogyo [Science and Industry], greatly contributing to the dissemination of research results.33 Unlike the nationally-administrated and nationally-focused OIRI, OPIRI was consistently targeted on the development of Osaka-based MSEs and the technological upgrading of their products. It was established with a general affairs section and three departments for industrial promotion, invention and textile testing. Expansion and reorganisations continued thereafter.34 A department was

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Table 9.2 Number of tests and research by Osaka Municipal Technical Research Institute, 1916–65

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Sources: OMTRI., op. cit, A 20-year History of OMTRI, pp. 20–23; OMTRI (ed.), op. cit, A 50-year History, pp. 66–76, 78–80. Notes 1. ‘Requested Tests and Research’ is the total of testing, technical guidance, etc. 2. ‘Special Research’ is up to 1941, while ‘Requested Research’ is after fiscal 1946. 3. ‘Ordered Testing and Research’ is research based on the budget of OMTRI, ordered by the director of OMTRI. 4. Research over two or more years is classified by the year of acceptance or start of the research.

added in 1932 for the promotion of craft industries, and the Osaka Prefectural Metal Materials Institute (which was absorbed into OPIRI in 1936) was relocated to OPIRI facilities in the same year. The Otsu branch of OPIRI (where the equipment of the department of textiles testing was transferred) was set up in 1934 and other departments were added over the years. These included machinery improvement and guidance (1935), and technical guidance concerning metal materials (1936). While OMTRI mainly emphasised the development of chemical industries, OPIRI focused on fostering Osaka MSEs in the fields of metals, machinery, textiles and crafts. It was only in 1948 that the research department for applied (i.e. industrial) chemistry was established in OPIRI. OPIRI’s activities were also not only Institute-based. It also offered technical guidance by letter, telephone and in discussions with visitors from MSEs; recommended suitable manufacturers; provided expert consultancy by Institute staff who were dispatched to private firms; executed tests and design; and processed requests from MSEs and trade associations. All of these activities supported the development of Osaka-based MSEs. In 1936, for example, OPIRI responded to 2, 011 technical questions, conducted 965 surveys (such as one on electric welding); even as late as 1943 the number of technical questions and instances of requested testing/experimentation reached 1,702 and 2,359 respectively.35 Furthermore, with subsidies from the Ministry of Munitions (established in November 1943), OPIRI engineers were dispatched to locations ranging from the Kanto region36 to the southernmost main island of Kyushu (and, of course, to industrial sites in Osaka and Kobe). At these locations, OPIRI engineers advised on such matters as methods for setting machine tools, upgrading products, and repairing used machine tools. Some 300 factories received such technical advice/diagnosis, and, through these activities, OPIRI staff steadily accumulated MSE diagnostic skills and techniques. As clearly indicated in Table 9.3, instances of guidance and testing in the postwar period were also quite numerous, and probably contributed significantly to the postwar technological upgrading of Osaka-based MSEs. As shown in Table 9.1, OPIRI, which increased the number of its staff in the postwar period, promoted various kinds of research in the fields of machinery, electricity, metals, chemicals, electrochemistry, crafts and heat control. In

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Table 9.3 Number of guidance, tests and other activities by Osaka Prefectural Industrial Research Institute, 1953–70

Source: Osaka Prefectural Industrial Research Institute (ed.), Osaka Fu Kogyo Gijutsu Kenkyusho Sontsu 50 Shunen Kinenshi [A 50-year History of Osaka Prefectural Industrial Research Institute] (Osaka, 1980), pp. 41, 45–46. Note 1. The large decrease in the number of requested tests after 1959 is due to the change of calculation method.

machinery, for example, impressive successes were achieved in research on domestic sewing machines and bicycle parts. Immediately after the war, OPIRI joined with the sewing machine industry to promote standardisation for domestic sewing machines, and took charge of drawing standard designs and trial manufacturing of standard products. Parts standardisation led to mass production, thereby providing the technological basis for the remarkable subsequent progress of the sewing machine industry.37 Research on cold forging started with essential bicycle components, with the result that the majority of such parts were being cold-forged by 1960.38 Osaka Imperial University’s Faculty of Science initially started with the three departments of mathematics, physics and chemistry. The Faculty was later expanded with the addition of the department of biology in 1949 and of macromolecular science in 1959. As demonstated by the works of Dr Hideki Yukawa, the 1949 Nobel laureate in physics, the faculty of science showed remarkable achievements in various fields of fundamental research, and in applied research as well. Hidetsugu Yagi, already well-known for his brilliant work in the field of ultra-short wave communications, was the first director of the department of physics and led

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applied research.39 Magnetron-related research conducted by Kinjiro Okabe, who was associated with the first chair of the department of physics together with Yagi, also acquired a world-wide renown, and he worked on a joint research project with the Army during the war to develop aircraft detection equipment.40 Tsunesaburo Asada, associated with the third chair of the department of physics and known for various achievements in the fields of experimental and applied physics, began research on a type of proximity fuse (dubbed the ‘seeing-eye fuse’), officially commissioned as a ‘wartime research’ project41 by the Naval Research Institute of Aeronautics from November 1943. As a result, ‘seeing-eye fuse’ production began in 1944, undertaken by Kobe Steel and other companies.42 Meanwhile, Seishi Kikuchi spearheaded fundamental research into atomic nuclei in the department of physics, where his work led to the building of a cyclotron in 1937 after a 80,000-yen donation from the Taniguchi Foundation for Industrial Research.43 The result was the formation of a major research centre for nuclear physics and promising projects led by the younger generation of theoretical physicists (such Hideki Yukawa and Koji Fushimi). The faculty of engineering of Osaka Imperial University was initially composed of seven departments: mechanical engineering, chemical technology, zymotechnology (becoming the department of fermentation in 1943), metallurgy, shipbuilding, electrical engineering and applied science. The number of departments was expanded after the war as twentieth-century engineering became more sophisticated. Departments of nuclear and environmental engineering, for example, were added in the 1960s. Furthermore, when the government proposed a new national technical university in Osaka in 1958, Osaka University made a counterproposal for a new faculty of engineering within the university, created specifically to bridge the gap between science and engineering and to address the shortcomings of traditional engineering education. As a result, the faculty of engineering science came into existence in 1961, with departments of mechanical engineering, electrical engineering, and synthetic chemistry. Later departments were added for control engineering and material engineering in 1962 (the latter becoming the department of material physics in 1971), chemical engineering in 1963, biophysical engineering in 1967, and information and computer sciences in 1970.44 With these additions, the faculties of engineering and engineering science educated a large number of graduates every year. The number rose steeply during the war and continued to expand during the postwar period of economic reconstruction, stabilising at 300 to 400 a year. Accordingly, the cumulative number of engineering graduates from 1933 to 1967 exceeded ten thousand. Next, let us take a closer look at the department of welding engineering, established in the faculty of engineering in 1944. Its origins can be traced to the donation of 500,000 yen from Isamu Otsu, the president of Osaka Electric Company in 1940. A chair of welding engineering was initially set up in the department of metallurgy in 1941, becoming an independent department three years later. In the postwar recovery period, the department of welding engineering not

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only promoted academic research but also maintained close relationships with industry. This is reflected in a contemporary description that ‘all staff members of the department are jointly making efforts to proceed with technical guidance for factories’.45 Particularly effective was the dispatch of faculty members to an annual summer seminar on welding, sponsored from 1952 by the Kansai branch of the Japan Society for Welding Technology,46 and the cumulative number of participants in the seminar (consisting of twelve-day sessions from 1952 to 1954, and six-day sessions from 1955 onward) had reached 2,267 by 1974.47 Furthermore, the department of welding engineering implemented a system in 1945 whereby prominent engineers from private companies such as Fujinagata Shipyard Company, Kisha Seizo, Hitachi Shipbuilding & Engineering Company and Kawasaki Heavy Industries were invited as adjunct lecturers, and, from 1958, the department accepted engineers from many companies as commissioned researchers for periods of six months to two years, thereby giving them valuable opportunities to undertake intensive research.48 Graduates of the department of welding engineering (both undergraduate and higher degree programmes), from the first class in 1947 through 1974, surpassed a thousand. Many of them found jobs in large Japanese shipbuilding, machinery, and metal companies. In particular, large shipbuilding companies such as Mitsubishi Heavy Industries, Ishikawajima-Harima Heavy Industries Company, Kawasaki Heavy Industries and Hitachi Shipbuilding & Engineering Company, employed large numbers of graduates. By the mid-1950s Japan had firmly supplanted Britain as the world’s largest producer of merchant ships. This was accomplished by innovations such as the ‘block’ building method, a kind of prefabrication technique, which was realised by the rapid introduction of electric welding in place of traditional riveting.49 The graduates of the department of welding engineering made substantial contributions to this impressive process. As for the Osaka University research institutes, the Institute of Scientific and Industrial Research (ISIR) has been the most important as an industrial research organisation. Even from the outset of the establishment of Osaka Imperial University, a concerned circle of businessmen in Osaka set up a ‘League for the Establishment of the ISIR’, and Masatsune Ogura (president of Sumitomo Head Office), Chubei Itoh (president of C.Itoh & Company), Yasushi Kataoka (president of the Osaka Industrial Association) and other prominent businessmen were elected as representatives.50 Their aim was to establish an institute (patterned after the Institute of Physical & Chemical Research in Tokyo) for the promotion of basic industrial research in Osaka. Although the Diet approved the establishment of ISIR as a result of this campaign, funding totalled only 523,000 yen (250,000 yen from government sources, and 273,000 yen from private sector donations)—rather less than the initial plan. As a sponsor organisation for the ISIR, a foundation known as the Association of Scientific & Industrial Research was established in May 1938, and began a fund-raising campaign with a goal of 5 million yen. A donation of 1 million yen was received from the Sumitomo Zaibatsu (head office and affiliated

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companies), followed by 500,000 yen each from C.Itoh & Company and Kubota Ironworks Company, with total contributions of 3,460,000 yen through fiscal 1941.51 ISIR was officially founded in November 1939 with the three research divisions of radio communications, organic macro-molecular compounds and metallic materials chemistry. Three more divisions (metallic materials physics, fuels and acoustical science) were added in the following year, and subsequent wartime expansion resulted in a total of fourteen research divisions by the end of the war. The division of acoustical science, which favoured military research projects such as supersonic finders, was separated from ISIR as the Acoustical Science Laboratory in 1944 at the request of the military, and then reabsorbed by ISIR in 1951. Financial support to ISIR from the sponsoring Association of Scientific & Industrial Research continued through fiscal year 1947, and funding from the Association substantially exceeded that from the government every year until fiscal year 1942.52 Private industrial research UK In the north-west of England, research through public institutions provided some important breakthroughs and linkages between higher education and industry. The fact remains, however, that in the UK the majority of industrial research was ‘inhouse’—conducted by the firms themselves; or it was the result of research within sectors, which conducted research through trade associations or through networks of technical experts. This presents a problem. Few surveys were conducted into British R&D until after the Second World War and even then the results cannot be entirely relied upon to give a true picture. Information on research has to be collected piecemeal using imperfect sources. Michael Sanderson has published the most comprehensive account of research in individual firms in the interwar period;53 and his work has been further refined.54 A regional evaluation is also complicated by the fact that large firms, such as ICI, have production and research facilities spanning the country. Others, such as Kellogg’s in Manchester, were foreign-owned multinationals that drew from research conducted overseas.55 As far as can be ascertained, the North-west’s research effort in the early 1920s seems to have matched that of Osaka. Table 9.4 lists 15 North-west firms which can be identified as having a strong interest in research (often with a fully-equipped laboratory), a number that is likely to be an underestimate. A comparison of Osaka and the north-west shows that the textile industry, still the largest industry in these regions, was not a major player in industrial research. This should not be too surprising: the industry until the First World War was dependent on the rule of thumb and was basically pre-scientific. In the UK, one expert noted that the textile industry, ‘though second only to the agricultural industry…possessed no scientific society of note. The industry was scarcely recognised as having a scientific basis of its own; it possessed no technical journal outside the privately-

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Table 9.4 R&D in north-west England, 1920

owned trade papers; no common ground existed where Yorkshire and Lancashire, or Silk and Linen, could be mutually helpful or where their scattered legions could be brought into co-operation.’56 Instead, in both Osaka and north-west UK it was the chemical industry which was predominant in research. Chemical manufacture was partly an offshoot of textiles, which needed dyes and chemicals for finishing, but in the twentieth century it offered greater scope than its parent for research and industrial expansion. The story of the way in which Britain discovered analine dye in the midnineteenth century and then lost the commercial lead in coal-tar technology to science-based German competitors by 1914 is well known.57 However, the Northwest chemical industry recovered strongly in the early twentieth century, albeit with some help from immigrant German chemists and entrepreneurs. These included Ivan Levinstein (1845–1916), who founded the chemical firm that became British Dyestuffs Corporation; and Ludwig Mond (1839–1909), whose partnership with John Brunner launched a chemical business at Winnington, near Northwich. The United Alkali Company (founded by the Muspratt family in Widnes) established a research laboratory in 1891, with a Swiss chemist Ferdinand Hurter as its first head.58 The Clayton Analine Company in Manchester was founded by Charles Dreyfus from Alsace. Another firm founded by an immigrant —this time from America—was the Castner-Kellner Company with alkali works at Weston Point in Runcorn. However, Claus & Company owed its development to local Manchester men: it was at the forefront of vat dyes. These technically- and research-minded men bred a strong research tradition in the North-west. Professor W.H.Perkin Jr., for example, consulted for the Clayton Aniline Company on camphor—work that was

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continued by Chaim Weizmann between 1906 and 1908. During the First World War, Levinstein’s research staff at the firm’s Blackley Laboratory included some thirty chemists—a number that had risen to seventy-five by 1919—and links had been forged with the College of Technology in Manchester and also the University. A brilliant research partnership developed under James Baddiley and Professor A.G.Green from Leeds.59 The research staff at Blackley fell in the early 1920s, despite the opening of a new laboratory; however, better times were ahead after 1926 when BDC, Brunner Mond, Castner-Kellner and the United Alkali Company became part of Imperial Chemical Industries. Although ICI was a national firm, with a London head-office, its centre of gravity was the North-west in Winnington (Brunner), Runcorn (Castner-Kellner) and Widnes (United Alkali Company). In the 1920s, this area included virtually the entire heavy chemical industry of the UK. Each of these sites had a research laboratory; and there was also the Blackley laboratory, which was not yet a major spender. In the interwar years, ICI emerged as leading investor in R&D. Its commitment had surpassed £1 million in 1930 and though this was later reduced, in 1936 a proper Central Research Committee was formed at the company. The biggest research division at ICI emerged at Blackley, which became the research centre of the ICI Dyestuffs Group: it had 195 research staff in 1938 (from a company total of 615). The Dyestuffs budget had increased from about £27,000 in 1931 to £262,000 in 1938. The Alkali Group, centred around the old Brunner Mond business, had fifty-nine research staff in 1938. Together Dyestuffs and Alkali researchers in the North-west accounted for at least half of ICI’s research staff. ICI was easily the largest R&D spender in the area.60 Between the wars, ICI made some outstanding contributions. Work on high-pressure chemical reactions at Winnington had led by the end of the 1930s to a major discovery in the plastics field —polythene. It was produced commercially by 1939, with one of its first uses as an insulator for submarine cables. The Dyestuffs Division was also making a promising, if slow start in pharmaceuticals after ICI’s decision to launch a full-blown Medicines Section in 1936. Linked to the chemical industry was soap and detergent manufacture and foodstuffs. Again, the centre of gravity of the national industry lay in the Northwest. Port Sunlight was home to Lever Bros, the multinational soap manufacturer, which by 1929 had merged with Dutch margarine interests to form Unilever. This was not quite such a research-based industry as heavy chemical and pharmaceutical manufacture. The oil and fats industry had been relatively undisturbed by science and innovation. The hydrogenation process (which enabled oils to be turned into hard fats) before the First World War, and the possibility of adding vitamins to foodstuffs in the 1920s, had ruffled the tranquillity of the soap and margarine manufacture. But these innovations had come from outside the industry and Unilever was essentially a marketing company. Writes the company’s historian: ‘Many Unilever factories possessed works laboratories, but they were small, few of the staff had university training and their work was mainly routine work of the analytical kind. Port Sunlight had a laboratory of this kind which might well claim to be the

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“mother” of the other Unilever research establishments in Britain, for it could trace its history back to the 1920s, but even here the cost and impact of research was very modest before the late 1940s.’61 Other companies in the North-west, however, were more research-oriented. This was particularly true of Joseph Crosfield & Sons, a Warrington soap and chemicals company, which had been founded in the early nineteenth century and was absorbed by Lever Bros in 1919. This history of this firm highlights a familiar reliance on immigrant German chemists before 1900, but a talented team of English scientists—including Dr T.P.Hilditch, Dr C.W.Moore and Dr C.H. Clarke—soon staffed its research laboratory (founded in 1907). By the 1920s these men had carried out fundamental research on the constitution of oils and fats. In the early twentieth century, the firm researched soapmaking, perfumery, fats, oils and hydrogenation. The company expanded its production of caustic soda and silicate of soda, and utilised these in new products such as ‘Carbosil’, an improved washing and bleaching powder.62 Other companies linked with foods and chemicals began serious research in the interwar period. Amongst them were J.Bibby & Sons, the Liverpool-based feedingstuffs and food manufacturer: its major money-spinner ‘Trex’, the wellknown vegetable cooking fat, was marketed at this time. The date when its research became formalised, however, is not known. Pilkington Brothers, the St Helens glass manufacturer, employed research staff in the 1920s and 1930s, though it did not decide to centralise and expand research until 1935, partly as a response to competition from plastics. In 1936 a Central Research Department was established at St Helens, with Dr Harry Moore (a former director of the Scientific Instrument Research Association) as first director.63 Another leading sector for industrial research was in engineering, especially electrical engineering. Here, too, foreign influences were apparent. Perhaps the most renowned research-oriented firm was Metropolitan Vickers Electrical Company, which originally was the UK subsidiary of the Pittsburgh-based Westinghouse company. After the war, control passed to the English arms conglomerate Vickers. At about the same time as the sale in 1917 Metrovic was finalising its plans for a new research laboratory, which drew on the ideas of Sir Arthur Fleming (1881–1960). The latter had joined British Westinghouse in 1900, had been trained at the Pittsburgh works (where he was heavily influenced by American ideas on research and industrial efficiency), and rose to prominence in the transformer department. Fleming drew up the blueprint for the new laboratories (which started with about 130 staff), became its first manager and then its research director between 1931 and 1954. Besides directing the work of the laboratory, which was aimed at ‘such fundamental research as is most likely to lead to discoveries resulting in new products giving a yield of profit comparatively much greater than that secured on the company’s regular lines of business’,64 Fleming became one of the country’s leading proponents of science-based industrial research.65 An in-house company history described Metrovic’s research facility as ‘probably the best designed and equipped laboratories for industrial research in the

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kingdom.’66 This was not entirely hyperbole. Fleming’s creation became a leader in electrical engineering investigations notable for their quality and wide-ranging nature. The laboratories conducted fundamental research into steel melting, vacuum distillation and acoustics. Heavy investment in a new advanced high-voltage laboratory led in the 1930s to research into arc discharges and lightning; highvoltage X-rays; radio valves; and radar. On the materials side there were further advances in magnetism, crack detection, hard metals, and insulating materials. The research department was spending over £1–2 million by 1948, and over £88,000 was on ‘long-range research’. The research environment created by Fleming was responsible for the laboratory’s other feature—the outstanding nature of its personnel. Sir John Cockcroft was a staff member before he undertook his pathbreaking atomic research in Cambridge. Fleming’s assistant was Willis Jackson (later Baron Jackson of Burnby), a leading electrical engineer and educationalist.67 Another national leader in high-technology electrical engineering research was Ferranti, which built up its business in transformers alongside the development of the national grid. In the 1930s, the company also invested in research into radio technology; made advances in special valves, cathode-ray tubes, X-ray tubes; and it led the way in radar technology. In the rearmaments drive, it also produced fuses for the War Office and the Admiralty.68 Siemens also had an influential lamp works at Preston, operational from 1923. The laboratory at Preston was only tiny—the number employed in the late 1930s did not exceed thirty—and the organisation was tolerated rather than actively supported by the parent company. Nevertheless, with the help of the Harris Technical College in Preston, fundamental research was conducted into the glass, seals and fluorescent powders used in electric discharge lamps.69 In engineering, several companies were research-based. Among them was Simon Engineering, which continued the policies and interests of its Silesian-born founder, Henry Simon (1835–99)—the application of scientific invention to enhance industrial efficiency and standards of living. In the twentieth century, under one of Henry’s sons—Ernest Simon (later Lord Simon of Wythenshawe)— a research organisation developed that reflected the numerous Simon specialities, especially flour-milling engineering and coke ovens. The organisation relied upon a number of small research units at Cheadle Heath, rather than a large flagship laboratory.70 Lord Simon wrote: ‘I am inclined to believe that a relatively small and completely independent research organisation such as those of our Coke Oven and Milling Departments may be an almost ideal unit for practical industrial research and development—at any rate for our kind of engineering contracting.’71 Other Northwest research organisations developed—as Michael Sanderson has highlighted—to replace some heroic inventor-founder. The Manchester chain manufacturer Hans Renold, who had formerly conducted his own design, retired in 1928. This led to the establishment of a development department for the retooling necessary for the mass production of standardised articles. The merger with the Coventry-Brampton companies in 1930 widened the scope for research.72

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Only by the 1940s is it possible to give a reasonably detailed overview of industrial research in the North-west, though exact quantification is still difficult. Table 9.5 estimates North-west firms involved in industrial research in the 1930s and 1940s, based mostly on data generated by a survey of British R&D conducted by the Federation of British Industries. The Second World War had heightened interest in Britain’s research capability. The FBI tried to estimate spending and staffing, though the data has some drawbacks. The FBI was dependent on firms replying to its questions and several companies—especially those in the defence industry—did not supply information. Since these included some of the leading firms, such as Ferranti and Metrovic, this led inevitably to some patchiness and underestimation. Moreover, data that was collected was not checked by the FBI and firms may have overstated their commitment to research. The disruptions of wartime also distorted the results of the sample. That said, Table 9.5 (supplemented by data from one of the first published surveys of British industrial research in 1947) gives a broad picture and helps identify many of those firms most closely involved with R&D by about 1947. The number of industrial laboratories in the North-west—approaching seventy— compares quite well with those in Osaka. One is struck by how many firms were involved in research, across a wide range of textile, engineering and chemical industries. To be sure, many firms only employed one or two full-time qualified research staff. On the other hand, some firms were big R&D spenders. The FBI figures confirm the dominance of ICI—much of whose research budget was spent at Blackley, Winnington, Widnes and Runcorn—and other chemical and oil companies, such as Unilever and Shell. Pilkingtons were also notable investors in R&D. Not surprisingly, the engineering companies, such as Metrovic and A.V. Roe, were heavy spenders on industrial research. The other significant research cluster was in textiles, where the Bleachers’ Association, the Calico Printers and Tootal led a significant effort. The Second World War had given an impetus to some of these industries. Metrovic’s radar advances were vital for the national defences.73 ICI took up a polymer idea from researchers at the Calico Printers’ Association and used it after the war to introduce terylene, a new artificial fibre. ICI’s pharmaceutical division helped launch the production of penicillin and also began developing its own products, such as ‘Paludrine’, an important anti-malarial drug. Further data on the Northwest was provided by the Manchester Joint Research Council (established in 1944 as a co-operative effort by the University and Manchester Chamber of Commerce). In a survey published in 1954, the Council reported on an investigation into 225 firms in the Greater Manchester area.74 The survey found that of the 225 firms (which it unfortunately did not name), 118 (52 per cent) employed at least one scientist/technologist and that such qualified men totalled 1,297 (of which 684 were graduates and 613 diploma-holders). The investigators found that 43 firms had formal research departments; also that 77 firms who were undertaking development from their own original research and new ideas. The survey highlighted the importance of research associations.

Table 9.5 R&D in north-west England, 1930–47

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Source: Warwick Modern Records Centre: Federation of British Industries Records MSS 200/F/3/Tl/127(c); MSS 200/F/3/T2/7/1 (a-z)-2 (c); Percy Dunsheath (ed.), Industrial Research (London, 1947). cited figures from Edgerton and Horrocks, ‘British Industrial Research’; Siemens’ figures from J.D. Scott, Siemens; Ferranti information from John Wilson, Note In some cases, figures cited (such as those for ICI) refer to UK, not simply the North-west.

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One other facet of British industrial research remains to be explored, which has particular relevance to the North-west textile industry. Although many small firms did not conduct research themselves, they nevertheless were often members of research associations. Of the 225 firms interviewed by the Manchester Joint Research Council, 151 firms supported the research association movement (and several firms belonged to more than one).75 The latter provided (for a fee) trained technical staff. facilities and information services. These associations are often neglected in discussions of R&D, but were once seen as fundamental by Britishindustry. It was in the North-west textile industry where the research associations were especially important. Few firms involved in textiles (or textile machinery) were large enough to support their own research laboratory. Firms that did included: the Bleachers’ Association;76 Horrocks & Crewdson; Calico Printers’ Association; Fine Cotton Spinners & Doublers; the Lancashire Cotton Corporation; Platt Bros & Company;77 and Textile Machinery Makers.78 However, most drew on the major co-operative effort in the region—the Shirley Institute. The First World War had focused attention on the backward state of scientific knowledge in the textile industry. With the prompting of the DSIR, a British Cotton Industry Research Association (BCIRA) was established in 1919, funded mostly by the industry. By 1920, it was based at ‘The Towers,’ a country house at Didsbury, south Manchester, and named the Shirley Institute (after a daughter of one of the founders). Its laboratories opened in 1922.79 Research was disseminated by the Shirley Institute Bulletin, published after 1928. By 1936, the British Silk Association was also based there. Mills would send in problems; and high-flyers would be sent to Shirley for a few months’ training. Most of the research was practical, though some success was achieved with the new Shirley Analyser and ‘Shirlan’ fungicide. By 1939, the staff was 200. Helped by a compulsory levy on the industry, the Shirley expanded in the 1950s, with a new research block and a directorate anxious to increase contact with the mills. Half the expenditure at this time went to pure and applied research; the other half to dissemination and service work. BCIRA had a strong bias to academic and fundamental research. The research work of the Shirley remains to be evaluated: but several of its projects were important, such as drafting. Shirley Developments was formed in 1951 as an independent private company that marketed instruments. Overall, considering the lack of any research tradition before 1918, the textile industry could subsequently point to some notable successes, both by the Shirley Institute and also by private firms. As Tootal Broadhurst & Lee pointed out in 1943, Britain had helped elucidate the chemical and molecular structure of cotton and wool and made notable innovations, such as crease-resistant fabrics.80 A similar organisation to BCIRA—the British Rayon Research Association (BRRA)—had been established in 1946 at nearby Heald Green. BCIRA and BRRA merged in 1961 to form The Cotton Silk & Man-Made Fibres Research Association, based at the Shirley. By the early 1960s, the staff was about 500; however, with the decline of the industry this began to contract. By 1966, 390 were employed, the

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work became more commercial and charges were introduced. In 1971, the industry’s statutory levy to fund the Shirley was ended and the Institute was forced to consider closer ties with the Wool Industries Research Association (WIRA); and Hosiery & Allied Trades Research Association (HATRA). What of private industrial research in the north-west between the 1950s and 1960s? It began promisingly with research investment and innovations still clustered in those areas where the region had been traditionally strong, especially chemicals. ICI’s new Pharmaceutical Division opened in 1957 at Alderley Park, near Macclesfield, was an undoubted success story. In the 1950s it marketed ‘Hibitane’, a hospital antiseptic, and ‘Fluothane’, an anhalational anaesthetic. Its major technical and commercial successes were in a range of new cardiovascular drugs, particularly beta-blockers, which were the result of the pathbreaking work of James Black. ‘Inderal’ (propranol) was marketed in 1965, and its successor ‘Tenormin’ (atenolol) became one of the world’s most prescribed beta-blockers after its introduction in 1976.81 Unilever began overhauling and expanding its research and development at the end of the 1950s. For a time, electrical engineering and aerospace remained strong. At Ferranti, collaboration with Manchester University resulted in the Atlas computer, an ambitious project that pioneered many important concepts in storage and addressing which are in common use today. On its official inauguration in 1962, it was considered to be the most powerful computer in the world.82 The nuclear power industry began expanding after the 1950s, with the North-west as a major centre of production at Risley. In 1951, an R&D branch was founded with laboratories at Risley, Culcheth and Capenhurst.83 In glass manufacture, Pilkington’s continued to lead the way. In the 1950s, the company developed the revolutionary float glass process, by which sheet glass was made by floating the material on a bath of molten metal (thus ensuring a polished surface without the need for grinding). This innovation was to be licensed world-wide. Nevertheless, other long-term trends were unfavourable to the North-west. Although the period since 1945 has seen a steady growth in the amount spent in the UK on private industrial research, this has become increasingly concentrated in the South-east and west Midlands.84 A weakening of R&D is evident in the north-west of England by the early 1960s. The number of firms actively involved in industrial research had fallen by about a third compared with the late 1940s: about sixty firms to about forty (see Table 9.6). Many of the textile firms had disappeared and the engineering industry was also in crisis, especially shipbuilding. The only sector to maintain its traditional strength in R&D in the North-west was chemicals, with ICI increasing its relative dominance. In 1964, ICI’s number of qualified staff easily outranked any other firm, apart from Unilever: indeed its 700 research staff in the region was a bigger total than all the other firms combined (if Unilever is discounted).

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Table 9.6 R&D in north-west England, 1964

Sources: Industrial Research in Britain (London, 1964). No data published for some firms. Unilever figures from Wilson, Umlever, III, p. 68.

Table 9.7 List of private industrial research organisations in Osaka (at the end of 1923 and in April 1943)

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Source: The first department of the Agency of Technology (ed.), Bumonbetsu Zenkoku Shiritsu Kenkyukikan Ichiran-an [List of Private Industrial Research Organisations by Industry (draft)] (Tokyo, 28th February 1943), idem (ed.), Shiken Kenkyukikan Ichiran (Minkan no Bu) [List of Industrial Research Organisations (in the Private Sectors)], (Tokyo, 1st April 1943); Japan Society for the History of Science (ed.), Nippon Kagaku Gijutsu Taikei [History of Science and Technology], Vol. 3, (Tokyo, 1967), pp. 175–79. Note * Annual expenses and the number of staff for 1923 is unknown.

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By the end of the 1980s, industrial research in the North-west had shrunk even more. One estimate lists only thirty-seven research establishments (four of those belonged to ICI).85 Of the North-west’s traditionally strong clusters, only the chemical industry remained a major world-player in research. The only industry to gain ground in the region was nuclear fuel technology—with research establishments at Warrington—though its expenditure and numbers of qualified staff are not known. Also striking is the failure of the North-west to establish securely or build upon the newer technologies in computers. Ferranti were bankrupt by the end of the 1980s after a well-publicised fraud case; while ICL (which contained the rump of Ferranti computers) had been taken over by Fujitsu of Japan. Japan Japan had 162 private industrial research organisations by 1923.86 Forty-two of these were in Tokyo; and 17 were in Osaka. Both nationally and locally in Osaka, most of these organisations were in chemicals (see Table 9.7). These numbers are likely to have been underestimates. By 1930, the number of private organisations had reached 300.87 The war period saw a rapid expansion of private industrial research. According to a 1942 survey, there were 73 national, 370 public, and 711 private organisations having a combined research staff of 49,000, or nearly twice the 1935 figure.88 As indicated in Table 9.7, the number of private industrial research organisations located in Osaka by 1943 was 68, composed of 59 organisations of private companies, 8 foundations and corporations, and one other. Following defeat in the Second World War and the subsequent economic recovery, on the eve of the highgrowth era between 1953 and 1955, there were 88 research organisations run by private companies, 13 of which had 16 or more researchers (see Table 9.8). Due to the new establishment and expansion of research organisations during the highgrowth era, the number of company-based research organisations in Osaka with 16 or more researchers reached at least 58 in 1966.89 As noted, at least 17 private industrial research organisations existed in Osaka by the end of 1923, of which 10 were associated with chemical companies. Among these companies, the research department of Takeda Pharmaceutical Company has particularly deep roots. A Takeda Pharmaceutical Research Center had been founded as early as 1907 and its development was boosted during the First World War when German pharmaceutical imports ended and domestic medicines were given priority. The research department of Takeda gradually expanded, followed by the establishment in 1932 of a research factory, operating between research and production. The number of patents acquired by Takeda between 1926 and 1943 reached 150, reflecting the active research and development stance of the company.90

Table 9.8 List of private industrial research organisations in Osaka (postwar period)

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Source: The Science Council of Japan (ed.), Zenkoku Kenkyukikan Soran [Directory of the Research Institutes and Laboratories in Japan] (Tokyo, 1956 and 1967). Notes 1. The survey in 1966 covers industrial research organisations with 16 full-time researchers or more, and only organisations which appear in the 1955 survey are shown. 2. The number of staff of organisations which are presumed to be successors are shown, though the names of organisations are changed.

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The importation of machinery and equipment and the introduction of technology from the advanced western countries gradually decreased. It ended completely in 1939 with the US embargo on exporting strategic goods to Japan and the subsequent war between the two countries. Japan now had to grapple with the huge problems of import substitution and the necessity of technological independence. Science and technology were eagerly mobilised for the total war effort, and private companies actively stepped up their research work in response to requests from the military. Table 9.7 shows the 68 private industrial research organisations located in Osaka in 1943, of which 34 were in the chemical industry, 11 in machinery, 10 in electric-related areas, 9 in metals, and 4 in textiles. The research department of Sumitomo Electric Industries leads the fiscal year 1942 ranking of annual research expenses (see Table 9.7) with outlays of 915,000 yen, followed in order by Nippon Synthetic Chemistry Company (896,000 yen), the Steel Works of Sumitomo Metal Industries (762,000 yen), the Rolled Copper Works of Sumitomo Metal Industries (693,000 yen), the Takeda ChobeiPharmaceutical Company (624, 000 yen), and the Yuasa Battery Company(514,000 yen). The top-ranking research department of Sumitomo Electric Industries (which was originally founded as Sumitomo Electric Wire Works in 1911) also ranked second in the number of staff and had a long and distinguished history after the establishment of the original testing section in the year of the company’s founding.91 As part of a 1917 reorganisation, Sumitomo Electric Wire Works was divided into two departments of accounting and manufacturing, the latter being composed of the four sections of manufacturing, maintenance, technology and testing. In another large-scale reorganisation in 1921, the company came to be composed of a maintenance section and four departments of technology, manufacturing, accounting and marketing, with three sections of design, research and testing set up under the auspices of the technology department. The tasks of the research section were defined as academic research and the analysis of products and materials; the testing of materials; and maintenance and improvement of machinery. A two-storey reinforced concrete laboratory was built in 1923, initially focusing on physical and chemical research and testing of materials; research targets were then gradually expanded to include electric and metal topics. The research section of the technology department was upgraded to department status in 1930, and Sadatoshi Bekku was named the first director of the department. (Bekku was a renowned engineer in the Electrotechnical Laboratory of the Ministry of Transport and Communications, who had achieved remarkable success in research on highvoltage electric current.) The research department employed excellent staff in the fields of chemicals, metals, and electricity, showing impressive results in the development of cemented carbide tools, cables, condensers and other products. The research department gradually expanded, and in May 1938 following the outbreak of war with China, the four sections of electricity, metals, chemicals and patents were set up within the department. The establishment of the patent section reflected active work on patents; at the time, the number of patents and utility models based on inventions by Sumitomo Electric Industries had reached 91 and

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186, respectively. Moreover, the 33 patents and 58 utility models were under application, while Sumitomo had been granted rights from 10 foreign companies for about 50 patents and 70 utility models. Research activities during the Pacific War can be divided into two groups: research on substitute goods, and on weapons and specialised electric wires for military use. In military-related development, the research department of Sumitomo Electric Industries became connected with military research institutes, being appointed a branch of the Naval Research Department, and Sumitomo researchers oversaw military research as adjunct military researchers. Between 1953 and 1955, on the eve of the high-growth era, 88 private industrial research organisations in Osaka can be identified (see Table 9.8). The years of establishment can be confirmed for 77 organisations, of which 34 were founded after 1945. By industry, an overwhelming 42 organisations were located in chemicals, 15 in machinery, 11 in metals, 10 in electrical engineering, 7 in textiles and 3 in ceramics. In terms of the number of laboratory researchers, Takeda Chemical Industries Company and the Osaka Works of the Sumitomo Chemical Company were extremely prominent, followed by the Dainippon Pharmaceutical Company, the Hayakawa Electric Works Company (now Sharp Corporation), the Hitachi Zosen Company and the Toyobo Company. However, most research organisations were small, with only a few researchers. Through the enlargement of established organisations (Table 9.8) and the establishment of new research organisations during the high-growth era, there were at least 58 Osaka-based private industrial research organisations with 16 or more full-time researchers as of 1966. Among them were eight organisations with 100 researchers or more: Takeda Chemical Industries (503 persons), Shionogi & Company (270), Matsushita Electric Industrial Company (200), Wireless Division of Matsushita Electric Industrial Company (182), Osaka Works of Sumitomo Chemical Company (140), Matsushita Electric Works (135), Sumitomo Electric Industries (122) and Dainippon Pharmaceutical Company (118).92 Now let us examine the postwar histories of the industrial research organisations of Kawasaki Heavy Industries and Mitsubishi Electric Corporation, both of which are located in Hyogo Prefecture, next to Osaka. The Technical Research Laboratory of Kawasaki Heavy Industries (TRL) was originally established as a laboratory in the Warships Factory of the Kobe Shipyard in September 1948.93 The laboratory was given TRL status in 1957, and four laboratories were positioned under its administration in 1957 and 1959. These became known individually as the machinery, ships, materials and electricity laboratories from 1961. Through the April 1969 amalgamation of Kawasaki Heavy Industries, Kawasaki Sharyo [rolling stock] Company, and Kawasaki Aircraft Company, the TRL was enlarged to include nine laboratories: hydraulic structure, first machinery, second machinery, controls, metals, chemical physics, manufacturing, technology and welding engineering. Meanwhile, the number of TRL staff increased from about 14 around 1950 to 18 in the years from 1953 to 1955, 110 in 1966,94 between 160 and 170 just

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prior to the amalgamation in 1969, and then to about 270 immediately after the amalgamation. The most significant task for the laboratory/TRL in its early stages was to have the large non-clerical divisions recognise the importance of the TRL as an indirect section. The manufacturing divisions, represented by shipbuilding, had promoted various kinds of research such as welding engineering, investing large amounts from their own budgets,95 and it was an urgent task for the TRL to consolidate its power to the extent that the manufacturing divisions would perceive its necessity. For example, at the beginning of the 1950s when automatic welding machines based on the Union Melt method were introduced into the shipbuilding division, the laboratory co-operated with the division in implementing the proper handling of the machines, studying operation manuals and technical sources written in English. Management of the laboratory was significantly changed with its promotion to TRL status in 1957. Although research covered by divisional budgets was still managed by individual manufacturing divisions, the TRL was allowed to control expenses for other research in a single lump sum, and it could independently propose research projects. Furthermore, the traditional training system of researchers by product was switched to a system based on academic fields. This reform was based on the judgement that the TRL could not compete with the researchers of manufacturing divisions, who could easily obtain needed information from the shopfloors, as long as training of researchers by product continued. Training of specialists by academic field was therefore needed in order to consolidate the advantages of the TRL as an indirect section. The research department of Mitsubishi Electric Corporation also has a long history, starting with the establishment of the industrial research group in the manufacturing section of the Kobe Works in 1924.96 Thereafter, the industrial research group proceeded with research activities for which topics were generally proposed by each manufacturing works, under the control of the chief of the technology section of the head office. A system of research reporting was set up in 1932, and the head office research section was established in September 1935. Aishichi Ouchi, a managing director, noted the policy of industry—university cooperation in a document entitled, ‘The Research Institute’, writing that: The main emphasis of the laboratories of manufacturing companies is placed on the development of products, not on the secondary goal of fundamental, academic research. It is impossible, however, to promote true development without knowledge concerning the progress of fundamental, academic research. This is why we need the connection between schools and companies. Research staff should maintain communication with schools, and there is also a need to appoint school teachers as adjunct researchers in order to encourage better communication.97 The research section was promoted to department status in a 1940 reorganisation, and in 1942 the new research department consisted of seven sections. It was then

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transferred to the Osaka Works of Mitsubishi Electric Corporation during the Pacific War. The most important themes of wartime research, which were controlled by the military, were wireless communication apparatus and electric wave-based weapons such as radar. In 1944, the research department was upgraded to the status of independent research institute, separate from the head office organisation and standing shoulder to shoulder with the individual manufacturing works. The number of research department staff reached 140 in 1943, an impressive number in terms of contemporary private industrial research.98 In 1951 the laboratories of the research institute were reorganised by technological field, and a system featuring researchers under laboratory heads was introduced. This system was again reorganised into a system of chief researchers and researchers in 1961, with the institute becoming the company’s central research institute in 1963. The traditional laboratory system was abolished, and a new system based on the three pillars of research, development and technical co-operation was then introduced. In the meantime, the expansion of the institute was remarkable, with the number of staff rising from 390 in 1951, to 400 in 1954, to about 1,000 in 1961 and to 1,100 in 1963. Mitsubishi Electric Corporation adopted a multidivisional system by 1958, with each division independently proceeding with various kinds of business. In spite of research institute policy proposed in 1962, which prescribed the separation of the head office research institute from the research sections of each division, defining clear duties for each research organisation, the central research institute had to undertake not only basic and applied research but also the development of new products and trial manufacturing. This was because there was only one other research institute within the company, founded in 1959 and attached to the product division, at the time when the research institute was upgraded to become the central research institute. The establishment of research institutes attached to each manufacturing division started in the 1970s; only two research institutes, together with the research sections of the individual works or manufacturing divisions, were overseeing R&D activities until that time. Concerning the management of research activities within the research institute, rules of management were established in 1952. The target was to manage systematically the process of research. This was accomplished by drawing up research plans dividing research topics into the three categories of ‘basic/ fundamental research’, ‘applied research’, and ‘research for development’, allocating budgets, and assigning completion dates for each project. Based on these experiences, a book entitled Kenkyu Kanri [Research Management] written by Masamoto Tokuhisa, the ex-director of the department of general affairs of the research institute of Mitsubishi Electric Corporation, was published in 1961. This was the first book which fully discussed research management in Japan, and Tokuhisa became well known as a consultant on research management and as an organiser of a committee of private industrial research organisations in the Kansai region.99 Subsequently, from 1965, Mitsubishi Electric introduced a system whereby major research themes were selected and separated from other ordinary

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research topics, and were managed as special themes. Important research themes which required co-operative research activities among research departments were selected and managed as project research within the central research institute. Conclusion A comparison of the development of industrial research in Osaka with the northwest of England reveals some important differences in approach. Both regions adopted a mixed strategy to R&D, blending public sponsorship with private initiative. Osaka University, OIRI, OPIRI and OMTRI made major contributions to the Osaka region’s industrial development. Osaka University contributed to the technological upgrading of Osaka enterprises not only by training future engineers, but also through the development of basic and applied research, and, during the interwar and wartime periods, a portion of the expenses for research in the Faculties of Science and Engineering and research institutes was donated by Osaka business. The coexistence of the three public research institutions promoted both cooperation and healthy competition. The activities of OMTRI, which focused mainly on the chemical industry, were partly promoted by the rivalry with the nationally-administrated OIRI, which had a much larger budget than OMTRI, and which also became deeply involved in chemical R&D activities. Conversely, OMTRI’s success spurred OIRI into various initiatives, such as the establishment of an open laboratory system. The research activities of OIRI were generally big projects, but OMTRI and OPIRI greatly contributed to the technological development of small business in Osaka. The two institutions forged a balanced division of labour, with the former working primarily with chemical industries and the latter for the promotion of metals, machinery, textiles and craft industries. On the other hand, private industrial research organisations gradually developed from the interwar period, especially in the chemical industry, closely related to the activities of public research institutes. These private organisations continued to expand to further Japan’s goal of technological independence from advanced industrialised countries during the war, when imports of technology slowed and finally ceased. Although the business climate changed drastically after defeat in the war, and even as private companies had to shift from military to civilian business (thereby decreasing the volume of business), ‘maintenance of technology’ was still advocated. As far as possible, the employment of engineers and researchers, which had significantly risen during the war, was maintained, and research organisations were retained albeit in slimmer form.100 In the 1950s, private industrial research organisations again became prominent, with the expansion and establishment of new research organisations continuing during the high-growth era. Through this process the centre of R&D activities in Japan shifted from universities and public research institutes to private companies. In fiscal year 1952 the composition of R&D expenditures by sector was 40 per cent by universities, 27 per cent by public research institutes and 33 per cent by private

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companies. However, by fiscal year 1958, these shares had changed to 26 per cent by universities, 33 per cent by public research institutes, and 41 per cent by private companies, and the share of private companies continued to increase thereafter.101 Privately-sponsored research activities were quite diverse, reflecting the differences in business climate that companies had to face, as well as the degree of accumulated expertise within research departments in each company. For example, at Mitsubishi Electric Corporation the central research institute had to undertake new product development in addition to basic and applied research, while at Kawasaki Heavy Industries the most urgent task for the technical research laboratory was to gain recognition from the well-staffed manufacturing divisions. This chapter has shown that, whereas Osaka has placed a great emphasis on public support for industrial research, in the north-west of England R&D has been largely an in-house activity, conducted by the firms themselves (or through their research associations). This research effort began in the late nineteenth century, expanded considerably in the first half of the twentieth century (spurred greatly by military needs), and seems to have reached its peak by the 1960s. Public research institutes never developed to the same extent as in Japan and it was left largely to the universities in the North-west—Manchester, UMISTand Liverpool —to provide a measure of public support for research (though even here industry provided some of the key funding). Superficially,'public’ support for industrial research and training in the UK looks impressive; on the other hand, its ad hoc nature may have led to some important weaknesses. The British system of making local authorities responsible for some of the funding for local higher education may have been one failing. It made education dependent on local taxpayers, who (like some of the business community) were reluctant to contribute and lacked a national viewpoint. It has been suggested that such factors hindered the development of the University of Manchester Institute of Science & Technology.102 The network of public research institutes and a university, which contributed greatly to the development of industrial research in Osaka-based private companies, were either absent or not as influential in the UK. The burden for industrial research fell on companies themselves. This remains as true in the 1990s, as it did in the 1920s. In 1995, businesses in the North-west UK spent £1.1 billion on R&D (the UK total was £9.3 billion), while higher education spent £162 million in the region, and government £82 million.103 Naturally, R&D in the North-west has mirrored the decline of industry in the region; whereas Osaka has been able to maintain a more enduring research presence. Does this signify that Osaka’s policy of more publicly-minded research has been more successful; or would the north-west’s research effort have declined anyway as the country switched from a manufacturing to service economy? What is certain is this chapter has demonstrated that Japan’s R&D has been greater than has usually been recognised. The Osaka experience shows that intense efforts at meaningful industrial research were being promoted in Japan during a period usually labelled as merely ‘backward’. In addition to large companies, linked with universities, and national industrial research institutes, which systematically

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Table 9.9 Innovations in north-west England

built up R&D, prefectural and municipal research institutes eagerly developed and refined techniques for the technological upgrading of private companies. This is particularly evident in the case of small business in Osaka. Thus, it is difficult to understand completely the history of late-industrialising countries like Japan by means of the traditional dichotomy of ‘imitation/introduction’ versus ‘independent development’ of technology. ‘Imitation’ was underpinned by the elements of ‘independent development’; conversely the latter needed a lengthy accumulation— at both management and shop-floor level—of fundamental experience with imported technologies. Thus the two were not contradictory but complementary. If this study has demonstrated a more long-established R&D tradition in Japan than most would suppose; it has also confirmed the North-west UK’s contribution to both national and international technology. It is a feature—some might say conceit—of British industrial and scientific research that its innovative record remains high, despite slender resources and an apparent inability to transform ideas into commercial success. Although Osaka may have outranked the North-west in terms of the number of research laboratories, British creativity is still much in evidence. Fundamental technological breakthroughs have been made in the Northwest, in electronics, computing, textiles and pharmaceuticals (see Table 9.9). A laissez-faire approach to R&D, it seems, does have its merits. Acknowledgements The UK section has benefited from references provided by Colin Divall, Paul Tweedale and especially Douglas Farnie. Penny Feltham kindly provided access to the Metrovic papers. Notes 1 D.E.H.Edgerton (ed.), Industrial Research and Innovation (Cheltenham, 1996). 2 A.D.Chandler Jr., Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge, Mass., 1990); C.Barnett, The Audit of War: The Illusion and Reality of Britain as a Great Industrial Nation (London, 1986). 3 ‘UK Bottom in R&D Spending’, Guardian, 26 June 1997.

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4 On the social capability of industrialisation, see Tetsuro Nakaoka (ed.), Gijutsu Keisei no Kokusai Hikaku: Kogyoka no Shakaiteki Noryoku [International Comparison of Skill Formation: The Social Capability of Industrialisation], (Tokyo, 1990); and for a systematic discussion of the technological development of modern Japan from the viewpoint of the ‘social network of innovation’, see Tessa Morris-Suzuki, Technological Transformation of Japan: From the Seventeenth to the Twenty-First Century (Cambridge, 1994). 5 C.Field and J.V.Pickstone (eds.), A Centre of Intelligence: The Development of Science, Technology and Medicine in Manchester and Its University (Manchester, 1992). 6 M.Sanderson, The Universities and British Industry 1850–1970 (London, 1972), p. 83. 7 G.Tweedale, ‘The Beginning of Electro-metallurgy in Britain: A Note on the Career of Robert S. Hutton (1876–1970)’, Journal of Historical Metallurgy Society 25 (1991), pp. 71–77. 8 J.Morrell, ‘W.H.Perkin Jr. at Manchester and Oxford: From Irwell to Isis,’ Osiris 8 (1993), pp. 104–26. 9 G.Tweedale, ‘Geology and Industrial Consultancy: Sir William Boyd Dawkins (1837– 1929) and the Kent Coalfield,’ British Journal for the History of Science 24 (1991), pp. 435–51. 10 D.S.L.Cardwell (ed.), Artisan to Graduate: Essays to Commemorate the Foundation in 1824 of the Manchester Mechanics’ Institution, now in 1974 the University of Manchester Institute of Science and Technology (Manchester, 1974). 11 Manchester Association of Engineers, Report on Experiments with Rapid Cutting Tool Steels. Prepared by J.T.Nicolson (1903). See also Engineering 76 (1903), pp. 590–95, 639–44, 654–58. 12 T.Kelly, For Advancement of Learning: The University of Liverpool 1881–1981 (Liverpool, 1981), p. 138. 13 J.Liebenau, ‘Corporate Structure and Research and Development,’ in J.Liebenau (ed.), The Challenge of New Technology: Innovation in British Business Since 1850 (Aldershot, 1988), pp. 30–42. 14 J.J.Walsh, ‘Higher Technological Education in Britain: The Case of the Manchester Municipal College of Technology,’ Minerva 34 (1966), pp. 102–57. 15 Cardwell, Artisans, pp. 239–40. 16 Kelly, Advancement, pp. 390–91. In chemistry and engineering, industrial linkages continued at Liverpool. In 1958, the Harrison Chair of mechanical engineering was occupied by J.H.Horlock, a design and development engineer with Rolls-Royce, who continued his work for the company. In 1962, C.H.Bamford, formerly head of Courtauld’s Fundamental Research Laboratory, was appointed to the chair of industrial chemistry. 17 On the details of this process, see M.Sawai, ‘Policies for the Promotion of Science and Technology in Wartime Japan’, The Journal of Business Studies, Ryukoku University 35, No. 1 (June 1995), pp. 55–60. 18 Sawai, ‘Promotion of Science’, p. 57. 19 The Agency of Industrial Technology (ed.), Kenkyu Hakusho [White Paper on Research] (Tokyo, 1951), pp. 4–5. 20 These were the Osaka Industrial Research Institute of the Ministry of Commerce and Industry (MCI), the Kansai Branch of MCI’s Center for Craft Industries, the Osaka Branch of the Electrotechnical Laboratory of the Ministry of Transport and Communications, the Osaka Institute of Hygienic Sciences of the Ministry of Health

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21 22

23

24

25 26

27 28

29 30 31 32 33

34

and Welfare, the Osaka Prefectural Agricultural Experiment Station, the Osaka Prefectural Industrial Research Institute, the Osaka Prefectural Animal Breeding Farm, the Osaka Municipal Life Science Institute and the Osaka Municipal Technical Research Institute. See The First Department of the Agency of Technology (ed.), Shiken Kenkyu Ichiran (Kankoritsu no Bu) [List of lndustrial Research Organisations (in the Public Sector)] (Tokyo, April 1943). This succeeded the original Osaka Prefectural Industrial Research Institute which had been first established in 1903. Osaka Imperial University itself changed its name to Osaka University in 1949 as part of the changes that took place during postwar educational reform. See Osaka University (ed.), Osaka Daigaku 50-nen Shi [A Fifty Year History of Osaka University] (Osaka, 1985), pp. 30–44, 155–58, 258–65. Originally attached to the Bureau of Industries of the Ministry of Commerce and Industry, after many changes OIRI was moved to the Agency of Industrial Science & Technology of MITI in 1952, when the Agency of Industrial Technology was reorganised into the Agency of Industrial Science and Technology. The following discussion is based on OIRI (ed.), Osaka Kogyu Gijutsu Shikensho 50-nen Shi [A 50Year History of Osaka Industrial Research Institute] (Osaka, 1986), pp. 1–21. OIRI (ed), 50-nen Shi, pp. 168–77, and the Ministry of International Trade and Industry (ed.), Tsusho Sangyo Sho Kogyo Gijutsuin Shozoku Shiken Kenkyu Kikan no Enkaku to Gyoseki [The History and Performance of Research Institutes Attached to the Agency of Industrial Science and Technology of MITI] (Tokyo, 1957), pp. 24– 25. On the themes of research, see OIRI (ed.), 50-nen Shi, pp. 395–414. The following discussion is based on OMTRI, ‘Osaka Shiritsu Kogyo Kenkyusho Soritsu 20-nen Shi’ [‘A 20-Year History of OMTRI’], in Kagaku to Kogyo [Science and Industry] 11, No. 5 (May 1936), pp. 4–92; and OMTRI (ed.), Soritsu 50 Shunen Kinenshi [A 50-Year History] (Osaka, 1956), pp. 28–31. Kiyoshi Kishida, ‘Takaoka Shocho no Kadode ni Saishite’ [‘On the Departure of Takaoka, Former Director’], Kagaku to Kogyo 9, No. 2 (February 1934), p. 28. Sagoro Horii, ‘Osaka Shiritsu Kogyo Kenkyusho Soritsu Zengo no Koto’ [On the Establishment of Osaka Municipal Technical Research Institute], Kagaku to Kogyo 11, No. 5 (May 1936), p. 107. On the establishment of Mellon Institute of Industrial Research, see David F.Noble, America by Design: Science, Technology, and the Rise of Corporate Capitalism (New York, 1977), pp. 122–23. OMTRI (ed.), Soritsu, p. 80. OMTRI (ed.), Soritsu, pp. 126–44. OMTRI, ‘Osaka Shiritsu Kogyo Kenkyusho Soritsu 20-nen Shi’, p. 24. Tadahiro Shono, ‘Gakusha ha Kakuatte Hoshii’ [Scholars Should be Like This], Kagaku to Kogyo 9, No. 2 (February 1944), p. 11. OMTRI, ‘Osaka Koken Kyokai Kio 10-nen no Jigyo Gaikyo’ [The Activities of Osaka Industrial Research Association in the Past Ten Years], in Kagaku to Kogyo 11, No. 5 (May 1936), pp. 98–104. OPIRI was amalgamated with the Osaka Prefectural Textiles Research Institute in 1988. On its history, see OPIRI (ed.), Nobiyuku Kogyo Shoreikan: Soritsu 30 Shunen Kinen [Developing Industrial Research Institute: The 30th Anniversary] (Osaka, 1960), pp. 98–132; and OPIRI (ed.), Osaka Furitsu Kogyo Gijutsu Kenkyusho Soritsu 50-Shunen Kinenshi [A 50-Year History of OPIRI] (Osaka, 1980), pp. 10–40.

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35 Dept. of Economic Affairs of Osaka Prefectural Government (ed.), Osaka Fu Kogyo Nempo [Industrial Handbook of Osaka Prefecture] (Osaka, 1937), p. 138; OPIRI, Osaka Fu Kogyo Shoreikan Gaiyo [Overview of OPIRI] (November 1944), Osaka Prefectural Archives. 36 Kanto is the name of a region, which includes the Tokyo metropolitan area and other prefectures of Kanagawa, Chiba and so on. 37 Susumu Hondai, Daikigyo to Chusho Kigyo no Dojiseicho: Kigyokan Bungyo no Bunseki [Simultaneous Growth of Big and Small Business: An Analysis on Division of Labour Between Firms] (Tokyo, 1992), chap. 7. 38 Chikara Demizu, ‘Jitensha Buhin Kogyo Gijutsu no Kakuritsu Katei: Shimano Kogyo to Tange Tekkosho o Jireini’ [The Establishment of Industrial Technology of Parts of Bicycles: Cases of Shimano Industrial Co. and Tange Ironworks], in T. Nakaoka (ed.), Gijutsu Keisei, pp. 291–97. 39 Yagi was appointed dean of the Faculty of Science in 1939, and president of Tokyo Technical University in 1942. He then served as the second president of the Agency of Technology from December 1944 to May 1945, just before Japan’s defeat in the Second World War. Although he was named the fourth president of Osaka University in February 1946, he was forced to resign his post by the Allied Powers, having been disqualified as an educator due to his former position as president of the Agency of Technology. On the life of Yagi, see Hiroshi Matsuo, Denshi Rikkoku Nippon o Sodateta Otoko: Yagi Hidetsugu to Dokusoshatachi [A Man Who Fostered Japan, Nation of Electronics: Hidetsugu Yagi and Creators] (Tokyo, 1992). 40 Osaka University (ed), Osaka Daigaku 25-nen Shi [A 25-Year History of Osaka University] (Osaka, 1956), pp. 160–61. 41 The Council for Research Mobilisation, the president of which was the prime minister, was organised in October 1943. Research with military applications was designated ‘wartime research’ by the Council, and ‘wartime researchers’ were appointed. By the end of the war, there were about 5,500 of the latter (including assistants). See Minoru Sawai, ‘Taiheiyo Sensoki Kagaku Gijutsu Seisaku no Hitokoma: Kagaku Gijutsu Shingikai no Secchi to Sono Katsudo’ [Policies for the Promotion of Science and Technology during the Pacific War: The Case of the Council for Science and Technology], Osaka Daigaku Keizaigaku [Osaka Economic Papers], 44, No. 2 (October 1994), pp. 19–20. 42 Reporting Group of the Japanese Broadcasting Corporation (ed.), Erekutoronikusu ga Tatakai o Seisu [Electronics Dominates Wars] (Tokyo, 1994), pp. 188–94. 43 The Taniguchi Foundation for Industrial Research was established in 1929 as the dying wish of FusazoTaniguchi, the president of Osaka Godobo Co., with a fund of 1 million yen. The Foundation granted research subsidies of about 700,000 yen for 114 projects from 1930 to 1945, of which Osaka Imperial University received about 390, 000 yen for 64 research projects, the largest share in the total. See Chikayoshi Kamatani, ‘Osaka Teikoku Daigaku no Keisei: Rigakubu to Sangyo Kaguku Kenkyusho’ [The Establishment of Osaka Imperial University: The Faculty of Science and Institute of Scientific and Industrial Research], Osaka Daigakushi Kiyo [Journal of the History of Osaka University], No. 4 (January 1987), pp. 42–45. 44 Osaka University (ed), Osaka Daigaku 50-nen Shi [A 50-Year History of Osaka University], Vol. of History of Faculties (Osaka, 1983), pp. 394, 408, 584–89. 45 Osaka University (ed), Osaka Daigaku (1956), p. 467.

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46 Kansai is the name of the region which includes prefectures of Osaka, Kyoto, Hyogo and so on. 47 The Editorial Committee (ed.), Sosetsu 30-nen Shi [A 30-Year History] (Osaka University: Dept. of Welding Engineering of Faculty of Engineering, Osaka, 1975), p. 145. 48 The Editorial Committee (ed.), Sosetsu 30-nen Shi, pp. 141–43. 49 See Tomohei Chida and Peter N. Davies, The Japanese Shipping and Shipbuilding Industries: A History of Their Modern Growth (London, 1990), chaps 3 and 4; and Minoru Sawai, ‘Zosengyo: 1950 Nendai no Kyoso to Kyocho’ [The Shipbuilding Industry: Competition and Co-operation in the 1950s], in Haruhito Takeda (ed.), Nippon Sangyo Hatten no Dainamizumu [Historical Studies on the Competitive Advantage of Japanese Industries During the 20th Century] (Tokyo, 1995), pp. 121– 55. 50 See ISIR (ed.), Osaka Daigaku Sangyo Kagaku Kenkyusho 50-nen Shi [A 50-Year History of the ISIR] (Osaka, 1989), pp. 1–43. Kamatani, ‘Osaka’, p. 52. 52 Kamatani, ‘Osaka’, p. 62; and Osaka University (ed.), Osaka Daigaku (1956), p. 568. 53 M. Sanderson, ‘Research and the Firm in British Industry, 1919–39,’ Science Studies 2 (1972), pp. 107–51. 54 D.E.H.Edgerton and S.M.Horrocks, ‘British Industrial Research and Development before 1945’, Economic History Review 47 (1994), pp. 213–38. 55 Kellogg, for example, benefited from research at its Battle Creek headquarters in Michigan, and only conducted routine work at its Stretford factory. 56 J.H.Lester, ‘Textile Research,’ Journal of the Textile Institute 7 (November 1916), pp. 202–16. 57 E.Homburg, ‘The Emergence of Research Laboratories in the Dyestuffs Industry,’ British Journal for the History of Science 25 (1992), pp. 91–111. Homburg mentions the Lancashire firm of Roberts, Dale & Co as being possibly the only north-west firm with a research laboratory in the 1860s. 58 D.W.F.Hardie, A History of the Chemical Industry in Widnes (1950), pp. 175, 211–14. 59 Maurice Fox, Dye-Makers of Great Britain 1856–1976 (Manchester, 1987), p. 49. 60 W.J.Reader, Imperial Chemical Industries: A History (2 vols., Oxford, 1970/5), II, pp. 81–94. 61 Charles Wilson, The History of Unilever (3 vols, London, 1954/68), III, pp. 64–65. 62 A.E.Musson, Enterprise in Soap and Chemicals: Joseph Crosfield & Sons Ltd, 1815–1965 (Manchester, 1965), pp. 157–58. 63 T.C.Barker, The Glassmakers: Pilkington. The Rise of an International Company 1826– 1926 (London, 1977), p. 339. 64 Manchester Museum of Science & Technology Archives. Peter Dawson Collection of Metrovic Research Dept. Reports, 1931, p. 2. Ms. Papers 0532. 65 A.P.M.Fleming and J.G.Pearce, Research in Industry: The Basis of Economic Progress (London, 1922). On Fleming, see also E.T.Williams and H.M.Palmer (eds.), Dictionary of National Biography 1951–60 (Oxford, 1971), pp. 364–65. 66 J.Dummelow, Metropolitan-Vickers Electrical Co Ltd 1899–1949 (Manchester, 1949), p. 98. 67 Willis Jackson (1904–70) became professor of the Electrotechnics Department at Manchester University in 1938; held a chair at Imperial College between 1946 and 1953; and succeeded to Fleming’s position as director of research in 1954. See

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68 69 70 71 72 73 74

75 76 77 78 79 80

81 82

83 84

E.T.Williams and C.S.Nicholls (eds.), Dictionary of National Biography 1961–70 (Oxford, 1981), pp. 574–76. J.Wilson, Ferranti: A History (Lancaster, forthcoming). J.D.Scott, Siemens Brothers 1858–1958 (London, 1958), pp. 152–60. A.Simon, The Simon Engineering Group (Cheadle Heath, 1953), pp. 109–19. A.Simon, Simon Engineering, p. xxviii. B.H.Tripp, Renold Chains: A History of the Company and the Rise of the Precision Chain Company 1879–1955 (London, 1956), pp. 131, 141. F.Robinson, Contribution to Victory (1947), pp. 21–44. Industry and Science: A Study of Their Relationship Based on a Survey of Firms in the Greater Manchester Area Carried out by the Manchester Joint Research Council (Manchester, 1954). See also, Manchester Joint Research Council, Report on the Conference on Industry and Science, 9 July 1954 (Manchester, 1954). Industry and Science, pp. 58, 71. About a third of the 151 Greater Manchester firms were members of the British Cotton Industry Research Association (Shirley Institute). D.J.Jeremy, ‘Survival Strategies in Lancashire Textiles: Bleachers’ Association Ltd to Whitecroft plc, 1900–1980s,’ Textile History 24 (1993), pp. 163–209. D.A.Farnie, ‘The Marketing Strategies of Platt Bros & Co Ltd of Oldham, 1906– 1940,’ Textile History 24 (1993), pp. 147–61. The research laboratory of the TMM was founded after 1945 at Helmshore in Lancashire. By 1950, it was spending £150,000 a year on research. Shirley Institute 1919–1969 (1969); M. Sawbridge (ed), The Story of Shirley: A History of Shirley Institute, Manchester, 1919–1988 (Manchester, 1988). Tootal Broadhurst & Lee told the FBI: ‘lt will be seen therefore that certain spectacular developments have occurred, but although science came somewhat later to the textile industries than to other industries…solid foundations have been laid by British chemists, physicists and engineers…’. Letter 27 July 1943. Warwick Modern Records Centre: MSS 200/F/3/T2/7/1. This work earned Black a knighthood, fellowship of the Royal Society and a Nobel Prize. See From ICI to Zeneca (1994). S.Lavington, Early British Computers (Manchester, 1980); G.Tweedale, ‘Marketing in the Second Industrial Revolution: A Case Study of the Ferranti Computer Group,’ Business History 34 (January 1992), pp. 96–128. By 1969, the laboratories were united at Risley, with the creation of a Reactor Engineering & Materials Laboratory. R.J.Buswell and E.W.Lewis, ‘The Geographical Distribution of the Industrial Activity in the United Kingdom,’ Regional Studies 4 (1970), pp. 297–306. Industrial Research in the United Kingdom (London, 13th edn, 1989). Society for the History of Science (ed.), Nippon Kagaku Gijutsushi Taikei [History of Science and Technology in Japan] (Tokyo, 1967), pp. 179–80.

85 86 Japa n 87 The Agency of Industrial Technology (ed.), Kenkyu, p. 43. 88 The Agency of Industrial Technology (ed.), Kenkyu, p. 46, and Chikayoshi Kamatani, ‘Kigyo o Chushin Toshita Kenkyu Taisei no Suii: Sono Rekishiteki Hatten no Tokucho’ [The Changing Pattern of Company-Based Research: Characteristics of Historical Development], in Tetsu Hiroshige (ed.), Nippon Shihonshugi to Kaguku Gijutsu [Japanese Capitalism and Science and Technology] (Tokyo, 1962), p. 119.

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89 The Science Council of Japan (ed.), Zenkoku Kenkyukikan Soran [Directory of the Research Institutes and Laboratories in Japan] (Tokyo, 1967). 90 Takeda Chemical Industries Ltd (ed.), Takeda 200-nen Shi (Hompen) [A 200-Year History of Takeda (Text)] (Osaka, 1983), pp. 210, 237–40, 253, 287. 91 See Sumitomo Electric Industries Ltd (ed.), Shashi: Sumitomo Denki Kogyo Kabushikigaisha [The Company History: The Sumitomo Electric Industries Ltd] (Osaka, 1961), pp. 141, 274–75, 391–94, 556–57, 574–79, 732–34, 886–91. 92 Science Council of Japan (ed.) Zenkoku Kenkyukikan Soran. 93 Kawasaki Heavy Industries Ltd, (ed.), Gijutsu Kenkyusho no Ayumi [The History of Technical Research Laboratory] (Akashi, 1985), pp. 3–12. 94 Science Council of Japan (ed.), Zenkoku Kenkyukikan Soran [Directory of the Research Institutes and Laboratories in Japan] (Tokyo, 1956); and Science Council of Japan, 1967. 95 As early as 1943, the research department of the warship factory of Kawasaki Heavy Industries Ltd had thirty-seven staff, who promoted research closely related to the workshops. See The First Department of the Agency of Technology (ed.), Bumonbetsu Zenkoku Shiritsu Kenkyu Kikan Ichiran-An [List of Private Industrial Research Organisations by Industry (draft)], 28 February 1943, and idem, (ed.), Shiken Kenkyu Kikan Ichiran (Minkan no Bu) [List of Industrial Research Organisations (in the Private Sectors)], 1 April 1943. 96 The following discussion is based on Mitsubishi Electric Corp, (ed.), Mitsubishi Denki Kenkyusho 50-nen Shi [A 50-Year History of the Laboratory of Mitsubishi Electric Corp.] (Tokyo, 1986), pp. 1–9, 21–27, 61–63, 261–63. 97 Mitsubishi Electric Corp. (ed), 50-nen Shi, p. 3. 98 The First Department of the Agency of Technology (ed.), op. cit., 28 Feb. 1943, and 1 April 1943. 99 Kazuo Noda (ed.), Nippon Keieishi: Gendai Keieishi [The Japanese Business History: The Contemporary Business History (Tokyo, 1969), p. 596. 100 See Hoshimi Uchida, ‘Gijutsu Kaihatsu’, [The Development of Technology], in Keiichiro Nakagawa (ed.), Nipponteki Keiei [The Japanese Style Management] (Tokyo, 1977), p. 150. 101 Shigeru Nakayama, ‘Kigyonai Kenkyu Katsudo no Koryu: Chuo Kenkyusho Bumu’, [The Rise of Corporate R & D Activities: The Central Laboratory Boom], in Shigeru Nakayama et al., eds., Tsushi: Nippon no Kagaku Gijutsu [The Social History of Science and Technology in Contemporary Japan] (Tokyo, 1995), iii, p. 46. 102 Walsh, ‘Higher Technological Education’ 103 Office for National Statistics.

10 Region and strategy Douglas A.Farnie, Tetsuro Nakaoka, David J.Jeremy, John F.Wilson and Takeshi Abe

Significant issues arising from the comparison of the Lancashire and Kansai regions Among the questions that have arisen in the course of our collaboration some have seemed important enough to merit further examination at the international level. Those questions are enumerated below in a list which cannot however claim to be exhaustive. 1. Should there be a radical improvement in the range and quality of regional economic data? 2. Does the concept of the region retain validity for modern business development? 3. Have regional cultures exerted a major influence upon the pattern of recent business development? 4. Has regional dualism within states declined or increased since Jeffrey G. Williamson’s incisive global analysis of 1965?1 5. Which of the two regions surveyed has been the more innovative? Which has been the more successful in achieving self-sustained growth? 6. Which region has made the transition more effectively from mass-production to flexible specialisation? 7. If a counter-factual assumption be made, distributing economic resources evenly throughout each state, would either region still have made a distinctive impact upon their respective national economy? 8. How do immigrant communities influence the commercial development of their host-regions? 9. Does the pattern of business start-ups, whether by small and medium-sized enterprises or by management buy-outs, differ fundamentally between the two regions? 10. What benefits have accrued, and what costs have been incurred, from the presence of big business within each of the two regions? 11. Do the means whereby leading firms emerge as regional champions differ between the two regions?

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12. Which region has made the transition from manufacturing to services most effectively? 13. Which region has proved most successful in mobilising national resources, both public and private, for regional restructuring? 14. In which ways has regional policy improved the performance and the prospects of the two regions? The inherent limitations of a national perspective Such scholars as Colin Clark in the 1930s and Walt Rostow in the 1950s gave a great impetus to the study of the process of economic development. Their research was however conducted within a national framework, so extending their horizons from the regional perspective favoured by their predecessors. That aggregative bias was confirmed by the new economic historians. The national paradigm suffers however from severe limitations. It may raise questions which cannot be answered at a national level but which may be explicable at another level, either regional or international. It may obscure more than it reveals. In particular it may conceal the contribution made by particular regions to the wealth or to what Ruskin called the ‘illth’ of a country. Serious blunders may be made, from sheer ignorance of the regional realities underlying a national pattern. Aggregation may even foster undue arrogance amongst ‘the national classes’ and encourage the denigration of particular regions and their legitimate interests. In contrast the de-aggregation of national statistics upon a regional basis can generate insights otherwise unobtainable. Statistics may well inspire confidence and may even be, as Florence Nightingale believed, the measure of the divine purpose. They remain however susceptible to error, human or mechanical, and subject to manipulation, especially in relation to sensitive issues. Thus the government of Hong Kong discontinued in September 1925 the collection and publication of trade statistics because of the impact of the Chinese boycott, following upon the Shanghai Incident of 30 May 1925. In China the State Statistical Bureau ceased to publish the statistics of the exports of cotton cloth between 1957 and 1973, following upon the launch of the disastrous ‘Great Leap Forward’. In 1981 the USSR stopped publishing the statistics of Japan’s GNP because it was rising so rapidly. In Britain the government has never, regrettably, made the free diffusion of information a high priority. The official publication, Regional Trends, ended the printing of data relating to the number of retail shops after 1971, to employment in textiles and clothing after 1973, to the establishment of new manufacturing units after 1980 and to the payment of income-support after 1991. The government also changed the criteria for the calculation of such items as supplementary benefits from 1975– 76, output per employee from 1980 and unemployment from 1982. Above all, the statistics of industrial employment were withheld during the era of de-industrialisation for seven separate years (1977, 1979, 1983–84, 1987–88 and 1994). The number of tables printed in Regional Trends certainly quintupled from 43 in 1965 to 216 in 1998. Those annual volumes continued, however, to omit basic information relating to income, output, exports,

DOUGLAS FARNIE, TETSURO NAKAOKA, DAVID JEREMY, JOHN WILSON AND TAKESHI ABE 305

local government services, transfer-payments and government revenues and expenditure. In contrast Japanese statistics remained far superior to British in their chronological coverage and in the number of originating agencies, both public and private, because prefectures dated back to the year 1871. Region and nation during the era of expansion Both Lancashire and Kansai have fulfilled at least five distinct functions, serving as: 1. an economic powerhouse during an era of expansion; 2. an economic buffer during an age of recession, bearing on behalf of the nation the full impact of structural change; 3. a post-depression regenerator of industry, under the influence of either big business or small and medium-sized enterprises; 4. a manufacturing base for the defence industries of the nation, in peace and in war; 5. a domicile of a cluster of knowledge-based industries, offering external economies to knowledge-using firms. Regional business history undoubtedly illustrates and illuminates the national experience. In both regions the export trade became the key to economic growth. In both regions the transition took place from traditional manufacturing to new industries and thereafter to hi-tech manufacturing and finally to the service industries. The transition seems to have proved more effective in Kansai than in Lancashire, perhaps because of its greater reserves of human capital, manufacturing skills and business expertise and its higher educational standards. During the period 1890 to 1990 the regional experience relates most closely to the national experience in the case of Japan rather than in that of Britain, where the century witnessed the long decline of the staple trade of Lancashire. In both regions a quasi-independent economy developed, with extensive factor-markets, numerous dependent trades and a strong sense of regional identity. Kansai had however been the industrial and commercial heartland of Japan during the Tokugawa era, an economic pre-history for which no real parallel exists in Britain. Within both states other regions eventually caught up with the pioneering region, aided in Britain by the spread of private trading estates and in Japan by deliberate public policy. Capital remained, as always, far more mobile than labour. Linkages between nation and region developed at the level of the firm in the supply of metropolitan demand, in external sources of investment, in the recruitment of managers from outside the region, and in the location of the head office. From the 1960s a sharp contrast developed between the emerging branch-plant economy of North-west England and the largely independent economy of Kansai, with its own capital, entrepreneurs and managers. The choice of particular case-studies may have made the conclusions drawn by the editors less robust than they would otherwise have been. The selection of certain threads from the seamless web of history, woven in ‘the roaring loom of Time’, to the exclusion of other threads, must always remain a dangerous procedure. From the

306 REGION AND STRATEGY

viewpoint of the staple trade in textiles it would have been most appropriate to compare Lancashire between 1780 and 1860 with Kansai between 1890 and 1960, when both regions served as the powerhouses of their respective national economies. Such a comparison would however have doubled the time-span of this study from one to two centuries and would have precluded the drawing of significant contrasts during the period when their fortunes were most closely related. National and regional policy during the era of re-adjustment Kansai may have proved slow to develop a regional policy but did so much earlier than North-west England. In both states the central government did expand investment in the economic infra-structure, in motorways and in airports. A littoral industrial zone was created in Osaka Bay but remained an unimplemented idea in the Lancashire region, where Whitehall established a Government Office only in 1992. In both regions the business sector played a large role in the process of regeneration. In North-west England big business filled the void left by governmental inaction. In Kansai small and medium-sized enterprises may well have fulfilled that therapeutic role while larger firms proved more conservative and in need of the guidance proffered by the general trading companies. The decline of the staple trade undoubtedly afflicted Lancashire earlier and much more severely than Kansai. The core-identity of the region began to suffer erosion as national changes accelerated during the 1960s and as Cheshire became a magnet for hi-tech industry. That trend may be contrasted with the experience of Northumberland and Durham, which had been the heartland of British heavy industry: it became the most depressed region in the whole of England but it still retained most of the elements of a robust way of life. During the era of decline new and creative cultural vortices emerged in the Lancashire region. First, Liverpool in the 1960s and then Manchester in the 1980s imposed their style of music and of fashion upon the nation, especially amongst the younger generation, and so offered an alternative lifestyle to that of the metropolis. The cultural life of Osaka successfully blended tradition with novelty while that of Manchester suffered a complete sea-change. The divergence in business culture between Lancashire and Kansai The broad differences in national cultures were especially manifest in the mental structures of the business elite. The identification of such structures remains however an enterprise fraught with enormous difficulty, in the light of the judgement passed by Hugo von Hofmannsthal ‘lt is just possible to imagine what past epochs included in their thinking but not what they excluded.’ It is however just such exclusions which must form the major part of any society’s system of values. Taking such a fundamental constraint into account it may be possible tentatively to suggest that the business-culture of Japan differed from that of Britain in certain key respects, such as:

DOUGLAS FARNIE, TETSURO NAKAOKA, DAVID JEREMY, JOHN WILSON AND TAKESHI ABE 307

• The basic aims of business, which were understood to centre around the service of society. • The central role of the corporation, of its founding household and of its ancestral tradition. That tradition extended the time-horizons of the firm far into the future as well as into the past, subordinating short-term to long-term goals. It also created an intense spirit of corporate solidarity, merging individuals into the larger unity of the group and inspiring total dedication to the service of the enterprise. • The pivotal function of management, especially in respect of organisational capabilities and of industrial relations, eliminating visible status-symbols and transforming ‘hands’ into participant stakeholders. • The close links between industry and commerce, mediated especially by the general trading companies and providing access to finance and to the highest range of marketing skills. • The attitudes towards technology which in Japan became closely related, after 1854 and 1945, to the question of national independence and as such passed outside the realm of the strict economic calculus. Fortified by such a culture, the firms of Kansai survived while those of Lancashire disappeared and were replaced after the 1960s by a branch-plant economy. As a result the relations between business and government seem to have been more productive in Kansai than in Lancashire. Attitudes towards regional policy and planning also proved to be more positive in Kansai. Whether the experience of the two regions offers any help in the definition of business strategy remains a thorny question. Regional strategies have undoubtedly changed radically over time. The range of possible strategies may well exceed the trio of horizontal integration, vertical integration and diversification. From the 1960s regional business strategies came to concentrate upon the need to attract external investment. Hence the launch in the 1960s of grand designs to restructure the whole textile industry of Lancashire, followed by a whole series of marketing initiatives. Hence the ambitious plan conceived in the 1980s to make Kansai a centre of global technological research. Kansai developed a coherent strategy for the renewal of its economic life whereas Lancashire did not. It seems to have been better endowed with that most scarce but most precious of all resources, genuine entrepreneurial talent. Lancashire undoubtedly gave birth to a number of true entrepreneurs. Whether this number was proportionate to its large population must remain a debatable question. The comparative shortage of entrepreneurial talent in the region was rendered more acute by the rise of an anti-entrepreneurial culture. That trend may well be reflected in the history of the paper industry which had become an important subsidiary trade within the region. It was not a Lancashire firm but a pulp and paper manufacturer, founded in Finland in 1865 as Nokia, which became in the 1980s the world pioneer of the mobile phone.

308 REGION AND STRATEGY

The inherited image and the statistical reality The transformation of society by ‘the white heat’ of modern technology was foretold in Britain in 1963 but actually occurred in distant Japan. That state revealed a capacity not merely to improve upon its exemplars but also to do so at an unprecedented speed. It even broke its own records, more than doubling the rate of its economic growth between 1889–1938 and 1955–90. The outcome amazed a world grown accustomed to new marvels. Britain in 1890 had been the home of the most dynamic society in the world and the heart of the greatest empire ever known. Japan in 1990 surpassed the USA in per capita GDP and in per capita private consumption, ranking in total GNP as the world’s second nation. For its part Britain had since the 1960s joined ‘the tribes of the setting sun’ and had become by 1990 the tenth ranking state in the world in terms of GDP. During the century both Lancashire and Kansai have suffered a relative decline in status as their staple trades have become sunset industries. Both regions labour under the burden of an ‘image-problem’. Both have however maintained a varied pattern of business activity. Both have suffered more in their pride than in their material welfare. What must surely remain indisputable is the enjoyment by Osaka of two successive golden ages, during the Tokugawa era and the period 1885–1935. Merchant princes reigned in Osaka some three centuries before Lancashire generated comparable fortunes. Such loss as Osaka experienced after 1955 pales however into insignificance when it is compared with the losses suffered by the Lancashire region. The contrast in material welfare remains glaring. Per capita GDP increased in the Osaka Prefecture at twice the rate (1973–93) which it did in Northwest England. The pattern of income-distribution undoubtedly became more equal in Japan than in Britain. In 1990 per capita GDP in the Osaka Prefecture remained however 23 per cent above the national average while that in North-west England remained 10 per cent below the national average and 35 per cent below the average for Greater London. Such a disparity suggests that convergence between the regions has not occurred in Britain. Such statistics can never measure however the incommensurable. They make no allowance for income derived from unreported and non-official sources, such as the grey economy, the black market, drugs, crime, fraud and corruption. Comparative indices for the non-material aspects of the quality of life might well provide a corrective supplement to the basic statistics of GDP. Kansai has not suffered the drastic remoulding of its life experienced by Lancashire. The business culture of Manchester has undergone an almost total eclipse. The city has been downgraded by such external agencies as Whitehall, British Telecom, Eurostar and Fortune magazine. As for Liverpool the image of ‘Merseyside’ has proved so repugnant that the name has had to be abandoned by canny seekers of venture capital. Kansai on the other hand has preserved a rich and diverse mercantile culture. It remains endowed with more commercial resources and capacity than Lancashire. Its elite remains thoroughly professional in their approach to business. Its economy is strongly supported by the stable tourist traffic to the

DOUGLAS FARNIE, TETSURO NAKAOKA, DAVID JEREMY, JOHN WILSON AND TAKESHI ABE 309

cultural heartland of Japan, by the associated high-class retail trade of Kyoto, by the booming traffic of the port of Kobe and by the extensive investment undertaken in the reconstruction of Kobe after the earthquake of 1995. New frontiers undoubtedly remain to be crossed in the future as the gaps in our knowledge of the past become ever more clear. ‘The more we learn about the world and the deeper our learning, the more conscious, specific and articulate will be our knowledge of what we do not know, our knowledge of our ignorance’2 Notes 1. Jeffrey G.Williamson, ‘Regional Inequality and the Process of National Development: A Description of the Patterns’, Economic Development and Cultural Change, 13:4:2, July 1965, 3–45, reprinted in John Friedmann and William Alonso (eds.), Regional Policy. Readings in Theory and Applications (Cambridge, Mass, 1975), 158–200. Idem, ‘Real Wages and Relative Factor Prices in the Third World 1820– 1940: Asia’ (Harvard Institute of Economic Research, Discussion Paper No. 1844, August 1998, 68 pp.). 2. Karl R.Popper, ‘On the Sources of Knowledge and of Ignorance’, Encounter, 19:3, Sept. 1963, 56, reprinted in Conjectures and Refutations. The Growth of Scientific Knowledge (London, 1963), 28–29.

Index

Abe, F. 155 Abe Paper 108 accountancy 16, 118, 234–5, 243, 246 acoustics 268, 271 Adamson, D. 279 Adelmann, G. 151 aerospace industry 32–3, 39, 195 agriculture 11, 15, 19, 22, 35, 64, 83–6, 125, 148, 230 Aichi Prefecture 33, 39, 42, 66, 124 Air Tours 62 Alcock, R. 69 Allen, G.C. 225–6, 230, 232, 244 Alun-Jones, D. 196 Amagasaki Spinning 28 Amalgamated Association of Operative Cotton Spinners 163 Amalgamated Cotton Mills Trust 101, 274 Amalgamated Weavers Association 157 amateur, cult of the 232–3, 244 Amatsuji Bearing Works 281 Anchor Chemical 274 Andrew, S. 154 Anti-Trust Act (1947) 93 Argyll Group 106 Ariake 39, 211, 217–18 armaments 22, 32–3, 45, 94, 183, 187, 195, 209 Armitage & Rigby 100 Armstrong, Whitworth 93, 100, 187, 254, 269 Asada, J. 265 Asahi Battery 185 Asahi Glass 261 Asahi Steel 284 ASDA 105

Ashley, W.J. 233 Ashton Bros. 100, 102, 164, 279 Associated Electrical Industries (AEI) 94, 101, 103: see also Metro-Vickers AEI Power Group 279 Atherton Bros. 100 Australia 94 Automatic Electric 102 AutomaticTelephone & Electric 94, 103 automation 40, 218 automobile industry 33, 35, 39, 42, 45, 50 65, 70, 94 avionics 187, 195 Baddiley, J. 269 balance of payments 10, 11, 27, 29 Baldwin, S. 148 Bamford, C.H. 294 bank clearings 25, 61, 150 Bank of England 116, 147, 268 Bank of Ikeda 114 Bank of Japan 10, 73 Bank of Kansai 114 Bank of Kinki 113 Bank of Osaka 113 banking 16, 23–4, 32, 34, 40, 53, 59, 61–2, 64–6, 127, 151, 199–200 Barclays Bank 106 Barlow & Jones 100 Barrow in Furness 101, 105, 212, 213 Bass 106 Beck Koller 279 Bekku, S. 287 Belfast 212

INDEX

Belgium 4, 59, 94, 141 Beyer, Peacock 100 Bibby, J. 104, 254, 271, 274, 279 Bickershaw Collieries 101 Big Bang (1986) 59 Birkenhead 102, 207, 275 Birmingham 24, 62, 233 Black, J. 278 Blackburn 49, 63, 128, 130, 154, 164, 166 Blackpool 52, 62, 68 Bleachers’Association 90, 99, 101, 269 273 Boddington Group 106 Bolton 63, 76, 99–100, 140 Bolton, J. 240 Bolton, T. 274 Bombay (Mumbai) 30, 118–19, 121, 129, 132, 136, 138, 144 Bombay–Japan Shipping Conference 127 Boothman, H. 163 Boots Pure Drug 104, 105 Bourne, F.S.A. 154 Bowden, V. 255 Bowker, B. 73, 98, 142, 156 Bowmans Chemicals 279 branch-plant economy 42, 50, 96, 304 Braverman, H. 158 Bridgewater Canal 50 Bright, John 100, 274 British Aerospace 45, 105 British Celanese 104 British Cotton & Wool Dyers Association 274 British Cotton Industry Research Association 277 British Dyestuffs Corporation 269 British Electric Traction 92, 103 British Electricity Authority 103 British Empire 23, 34, 148 British Ensign 217 British Gas 105 British Institute of Management 240 British Insulated Cables 94, 102, British Insulated Callender Cables 103 British Nuclear Fuels 105 British Petroleum (BP) 217 British Railways Board 105

311

British Rayon Research Association 277 British Shipbuilders 213, 220, 224 British Silk Association 277 British Transport Commission 103 British Vita 106 British Westinghouse 99, 271 Brooklands Agreement (1893) 117, 134 Brooks & Doxey 100 Brown & Polson 279 Brunner, Mond 100, 254, 269–70 BTR 106, 279 bubble economy (1987–90) 63–7 building societies 61–2, 125 Burmah Oil 196 Burnley 102, 166, 272, 279 Burton, Montague 101 Bury & Masco 279 business: activity 43, 82, 88; big 42–3, 78–114, 303; chairmen 94; culture 20, 32, 177, 303–4; cycle 9, 24, 27, 30, 33, 35, 55, 66, 127, 139; elite 16, 20, 36, 53, 55, 74; head office 42, 50, 53, 61, 68, 88–9; intelligence 23, 128, 229; investment 25, 43, 47, 50, 117, 138, 150; profits 24, 30, 64, 124, 181, 271; secrecy 122, 130, 252; services 53, 59; see also entrepreneurship; firm; management; trade associations business strategy: cartels 124–5, 134, 138, 192; constraints upon 42–7; consultancy 92; diversification 32, 35, 59, 92, 142, 207, 214–15; holding company 92–3; integration 90–2, 133, 207; joint ventures 32, 94; long-term planning 16, 180; mergers 78, 90, 118, 123, 147; rationalisation 39, 57, 140, 207, 304;

312 INDEX

see also research and development Calico Printers’Association 90–1, 94, 99, 101, 104, 144, 273, 274, 293 Cambridge 6, 7, 57, 253 Cammell, C. 209 Cammell Laird 99, 102–3, 207–25 canals, 13, 50 Carborundum 274, 279 Castner-Kellner 269–70 ceramics 11, 257, 282 Ceylon 94, 143 Chandler, A.D. 90, 115 Channel Tunnel 47, 74 Chapman, S.J. 233 Checkland, Olive 71 chemicals 19, 21, 38, 45–6, 50, 88, 150. 216, 254, 268–70, 278 chemistry 253–5, 257 266 Cheshire 15, 44, 50 68, 256, 269, 303 Chester 61–2, 68–9, 102 Chester, T.E. 241 Chiba Prefecture 39 Chida, T.296 child labour see employment China: exports, 150, 218; market 15-16, 30, 34, 120, 136–9, 140, 142, 158, 194; market boycotts 136–7, 138, 144, 301; mills 126, 129,137–8; treaty ports 138 Chinese merchants 14, 20, 25, 29, 127 Chiyoda Optical (later Minolta) 112, 257 Choyosha 108 Christaller, W. 4 Chuobo 112 circuits, integrated 201 city banks 64 city regions 12 Clark, C. 43, 58, 63, 301 Clark, W.A.G. 154 Claus & Co. 269 cliometrics see economic history clothing industry 40, 48, 148–9 Clyde 214

coal and coke industry 12, 15, 22, 24, 26, 71, 78, 139 Coats, J. & P. 134 Coats Viyella 96, 105 Cockcroft, J. 272 Colgate Palmolive 279 collective bargaining 134, 167 Combined Egyptian Mills 101 Combined English Mills (Spinners) 103 companies, joint-stock 27–8, 116 computers 39, 58, 61, 65, 195, 255, 266, 278, 293 Confederation of British Industry (CBI) 44 construction industry 66 container freight 46 Cooper, C. 77 Co-operative Bank 62 Co-operative Insurance Society (CIS) 62 co-operative societies, retail 52, 59, 91, 125 Co-operative Wholesale Society (CWS) 24, 91, 93, 94, 96, 99, 101, 103, 105 copper trade 16, 20, 32 Corley, T.A.B. 204 Corn Laws 22 costs: distribution 128, 130, 146; labour 40, 120, 141, 144; production 34, 40, 121, 124, 131–3, 134, 141, 218; transaction 130, 133; see also shipping freights cotton blending 125, 132, 139, 142 cotton corners 118 cotton cultivation 125 Cotton Factory Times 134, 155 Cotton Famine 22, 126 cotton industry: British 4, 24–5; historiography 115–16; Japanese 19, 34 55, 121–7, 146 Cotton Industry Re-organisation Act (1939) 147 Cotton Industry Stabilisation Law (1978) 171 cotton mill construction 124 cotton piece goods 30, 32, 34, 119, 136–7, 140–1, 147, 301 cotton prices 129

INDEX

cotton yarn 12, 26, 27, 119–20, 136 Cotton, Silk & Man-Made Fibres Research Association 277 CottonTrade Organisations, Joint Committee of 117 Courtaulds Textiles 106 Coventry 272 Cripps, S. 141 Crosfield, Joseph 100, 254, 255, 269–70 Crosses & Heatons 104 Crosses & Winkworth 100 Crosses & Winkworth Consolidated Mills 102 Crossley Bros. 274, 279 Cryosystems 279 Cunard Steamship Co. 99, 101, 104, 218 cycle industry 31–2, 35–6, 39, 72, 180, 184, 264–5, 295 Daido Electric Power (later Kansai Electric Power) 109 Daihatsu 31, 25, 111, 113 Daihatsu Motor 284 Daihen (formerly Osaka Transformer) 114 Daikin 35, 111, 113 Daimaru 113 Dai Nippon Beer (later Asahi Breweries) 110 Dai Nippon Celluloid 282 Dai Nippon Hormone Manufacturing 285 Dai Nippon Ink & Chemicals 114 Dai Nippon Pharmaceuticals 112, 280, 282, 285, 288 Dai Nipponbo (later Unitika) 90, 94, 109, 111, 160, 165, 280 Daiwa Spinning 284 Dawkins, B. 253, 293 Day, G. 223–4 De Havilland Aircraft 104 de-industrialisation 40, 47 DEMAG 214 Deming, W.E. 34, 237–8, 250 Denmark 93 devaluation: of sterling (1919, 1949) 140, 151; of the yen (1931) 140, 143 Devonshire, HMS 215 Dick, Kerr 100

313

Dickens, C. 44 Disraeli, B. 44, 63 Dobson & Barlow 99 Dore, R.P. 173, 226, 245 Doseiryukan 107 Dreyfus, C. 269 drug trade 48, 51, 305 Dunlop Rubber 21, 92, 94, 102, 103 Dutch East Indies see Indonesia dyestuffs 256 earthquakes 53, 124 East Anglia 52, 58 economic history, the new 6–7, 8, 151 economics: development 11; Marxist 231, 236 Edinburgh 52, 187, 195 education 50, 51, 65, 302; business 16, 21, 237; commercial 229–30; female 49; higher, 45, 49; Imperial Rescript, 288; industrial 229, 237; limitations of 45, 233; literacy, 228; management 226–44; primary, 236; professional 49, 230; religious 180, 228; technical 161, 230, 240 EEC (later EC, EU) 4, 40 45, 51–2, 68, 201, 220 Egypt 132, 146 electric light and power 50, 125, 133, 186, 272 electrical and electronic engineering see engineering electrical appliances 190–4 Ellinger, B. 142 employment: child 134; female 21, 40, 49, 125, 132, 134, 161; juvenile 48, 151; male, 41; manufacturing 21, 25, 40–1, 52, 150;

314 INDEX

part-time 40; self 43, 232; statistics 48; unemployment 40, 47, 51, 66, 140, 156 189; see also labour engineering: automotive 25; aircraft 32; biophysical 266; chemical 266; civil 221; control 266; electrical and electronic 23, 32, 33, 35, 40 50, 68, 176–202, 271–2; flour milling 272; graduates 240–257; heavy 28, 30; light 184; marine 28, 209, 254; materials 266; mechanical 23, 32, 73, 266; mill 131, 139; precision 40, 68; welding 215, 264, 266, 279, 288; see also machine tools; textile machinery English Electric 103 English Sewing Cotton 164, 279 English Steel 210, 214 entrepreneurship 32, 35, 47, 139, 181 environmental: degradation 13, 68; rehabilitation 255–6 Erskine Heap 279 Etsuji Nakayama Foundry (later Nippon Steel Works) 109 Evans & Co. 102 Evans Medical 254, 269, 274 Evans, N. 279 exhibitions 23, 37 factory legislation 125, 133–4, 160 Fawcett, C.B. 3, 7 Federation of British Industries (FBI) 272–3 Federation of Master Cotton Spinners’ Associations (FMCSA) 166–7

female labour see labour Ferranti, Dr Sebastian de 177–9, 182 Ferranti, Sebastian de 195 Ferranti, Vincent de 182, 194, 199 Ferranti International 197 Ferranti Ltd. 94, 102, 103, 176–202, 255, 269 273, 274, 278, 279, 293 ‘Ferranti Spirit’ 182, 187, 202 Fine Cotton Spinners & Doublers 90, 93–4, 99, 101, 164, 274 Fine Spinners & Doublers 103 finishing industries 125, 130, 143 firm: family 16, 116, 123, 151, 161; multi-divisional 92–3, 177, 196, 290; multi-national (trans-national) 40, 53, 93, 97, 192–4, 268; multi-plant 89–92; size of 28, 31, 78–82; see also branch-plant economy firms: founders of 94, 177; largest fifty 78–88; number of 30, 116, 122, 147; small and medium-sized (SME or ‘MSE’ in Japanese style) 37, 43, 66, 68, 116, 123, 261, 291, 302–3; survivors, 96 Fisher, A.G.B. 58 Fleming, A. 271 Fodens 274 Forster’s Glass 274 Foster Yates & Thom 274 food processing 50 football 51, 62–3 football pools 51, 59, 63 Ford, H. 185 Ford Motor 94, 105 France 2, 4, 21, 47, 94, 146, 246 Franks, Baron Oliver S. 240–1 free trade 18–19, 140 French, T. 274, 279 Friedmann, J. 54, 306 friendly societies 30, 47, 52, 125 Fuji Bank 114 Fuji Photo Film 267 Fujii, Y. 219

INDEX

Fujinagata Shipyard (merged in Mitsui Zosen in 1967) 91, 108, 109, 111, 267, 281, 284 Fujita 229 Fujita, K. 231 Fujitec 114 Fujisawa Pharmaceutical 280, 282, 286 Fujitsu 278 Fukui, K. 231 Fukumoto, G. 155 Fukushima Co.’s Leather Factory 108 Fukushimabo (later Shikibo) 94, 107, 110 Fukusuke Tabi 96, 107, 109, 111, 113, 208 Fukutoku Bank 113 Fushimi, K. 266 futures 16, 20, 53, 59, 66, 127, 141 Gamble, D. & J.C. 254 gambling 51, 63 Gandhi, M.K. 146 Gardner, H.T. 69 Gas Council 103 Gaskell, E. 44 Gatterer, J.C. 3 Geddes, P. 3 Geddes Report 220 GEC (UK) 94, 103, 105, 214, 275 GEC (USA) 181, 201 General Motors 94 General Post Office (GPO, later Post Office) 96, 99, 101, 103, 105 General Strike (1926) 117 general trading company (GTC) 93, 119, 127–30, 140, 149, 152–3 Germany 2, 4, 5, 41, 47, 54, 73, 94, 129, 146, 158, 231, 239, 242, 253, 282 Giffen, R. 59 Gifu Prefecture 1, 33 Glasgow 214, 256 Glico (later Ezaki Glico) 112 globalisation 53–5, 75 Glover, W.T. 274 Godai, T. 16–18, 70, 229 Goryo Asbestos 285 Gosho 128 Gossage, W. 254 Graesser Salicylates 274

315

Granada TV 44, 102 Great Universal Stores (GUS) 61, 92, 102, 103,105 Greater Manchester Buses 106 Green, A.G. 269 Greenalls Group 105 Greengate & Irwell 102 Guerin, J. 197, 204 Hague, D.C. 241 Hajime, S. 230 Halifax Building Society 106 Hamburg 51 Hanshin Department Store 113 Hanshin Industrial Zone 25–33, 207, 219 Hanshin ports 36, 38 Hanshin Tigers 19 Hargreaves Collieries 102 Harisu 286 Harrison, T. & J. 254 Hartree, D. 255 Hatsudoki Seizo (later Daihatsu) 31 Hawker Siddeley Group 104, 279 Haworth, Richard 100, 274 Hayakawa Electric Works see Sharp Hayami, A. 67 Hetherington, John 99 Hilditch,T.P. 255 Hirose, S. 27 Hiroshi, I. 231 Hirota,Y. 225 Hitachi Electronics 91 Hitachi Sewing Machine 285 Hitachi Zosen 27–8, 39, 91, 107, 109, 111, 207–25, 267, 285, 288 Hitotsubashi University 6, 231 Hokusenbo 110 Holden, R.W. 274 Home & Colonial Stores 92, 104 Hong Kong 54, 128, 149, 194, 301 Horlock, J.H. 294 Horrrockses, Crewdson 99, 101, 274 Horrockses Crewdson Spinning & Manufacturing 104 Hosoitobo 107 Howard & Bullough 99 Hoyle, Joshua 101, 104

316 INDEX

Hudson Rubber Chemicals 274 Hunter, E.H. 27–8, 210 Hunter, Janet 71, 154, 173 Hutton, R.S. 254 Hyogo Iron Works 21 Hyogo Prefecture 21, 31, 38, 66, 124, 288 Hyogo Shipyard see Kawasaki Zosen illegitimacy 49, 51 Imperial Brush 107 Imperial Chemical Industries (ICI) 92, 94, 101, 103, 105, 255, 268, 269–70, 274, 279, 293 ICI Dyestuffs Group 270 ICI Pharmaceuticals 256, 277–8 India: export market 15, 129, 139–-40, 144–6; export of piece-goods 146; export of raw cotton 115, 132; export of yarn 119–20; see also Bombay Indonesia 140, 143–4, 146 Industrial Reorganisation Corporation 220 Industrial Revolution 4, 115, 118, 151, 176, 227 ‘industrious revolution’ 36, 67 Inland Sea 26–7, 32, 211, 214, 217 Innoshima 212, 219 Inoue Leather Belt 281 Institute for the Promotion of Industries 261 Institute of Economic Research 231 insurance 62, 64, 100, 102 Intel 201 Interarms 45 International Computers (ICL, formerly ICT) 94, 106, 195 International Federation of Master Cotton Spinners’ and Manufacturers’ Associations (later ITMF) 118, 142, 148, 151 International Labour Organisation 174 International Signals & Controls (ISC) 196, 201, 204 International Telephone & Telegraph (ITT) 181 International Textile Workers’ Association 117

iron and steel industry 11, 22, 31, 38, 122, 151, 214 Ishii, O. 157 Ishikawajima-Harima Heavy Industries 267 Ishiyama, S. 14 Isle of Man 62 Isonishi Weaving 108 Italy 2, 4, 12, 51, 94 Ito Enamel 110 Itoh, C. 267 Iwakura, T. 10 Izumi, T. 151 Izumi Weaving 110 Izumibo 109 Izumisano 67 Jacob, W. & R. 154, 275 Jackson, W. 255, 272, 297 Japan: Companies Law 123; Constitution 11; currency 10, 34; economic planning 10–12, 33–4, 37; economic statistics 6; education 235; employment system 125, 238; feudal domains 10, 27; historiography 5–6; management 238; national budget 10, 55; National Post Office 96; national spirit 16, 142; phases of economic development 9–12, 30, 33, 67, 191; Public Order Act 236; relations with China 14, 136–9; relations with India 19–21, 126, 129, 132, 139, 144–6; relations with USA 34, 82, 185, 283; samurai 10, 11, 16; world outlook 14 Japan Agricultural Chemicals 286 Japan Aluminium 281 Japan Chamber of Commerce 237 Japan CottonTrading (Nippon Menka) 128 Japan Federation of Employers’ Associations 175

INDEX

Japan Federation of Management Associations 236 Japan National Mint 10, 111 Japan Productivity Centre (JPC) 237 Japan Society for Industrial Training 250–1 Japan Society for Welding Technology 266 Japan Sugar 108 JapanWeaving & Dye Associations, League of 280 Japanese cloth 136 Japanese Cotton Spinners’ Association 19, 30, 118, 120, 139, 163, 167 Jenkins, R. 279 JJB Sports 61 John Brown 218 Johnson, R. 223 Johnson & Nephew 275 Jones, A. 254 Joseph, K. 240 Jujo Paper 112 Kadoma 113 Kagoshima 16, 119 Kaizuka Boshoku 110 Kakuichi Rubber 280, 285 Kamaishi 28 Kanagawa 65, 67, 126 Kanabin Weaving 107 Kanebo 34, 90–4, 107–11, 136, 149, 160– 5, 280, 284 Kanegafuchi Chemical Industry 93 Kansai 33–4, 36, 55–7, 65, 67–9; climacteric 37, 38; elite 16, 33, 55; exports 45; financial sector 64; GDP 1, 57; heritage 5, 15; prefectures 1, 13; population 1, 57 Kansai Brush 107 Kansai Economic Federation 37 Kansai Electric Power 111, 113, 285 Kansai International Airport 65–7 Kansai Paint 281 Kansai Power Supply 281 Kansai Research Institute 65

317

Kansai Science City 65 Kansai Steel 280 Kansai Trading 14, 70 Kanto 28, 33, 38, 39, 53–7, 67, 264 Kataoka, Y. 267 Katoh, K. 153 Kawada, S. 231 Kawano Foundry 281 Kawasaki Aircraft 288 Kawasaki Heavy Industries 267, 288, 291, 298 Kawasaki Sharyo 288 Kawasaki Steel 30 Kawasaki Zosen 20–1, 27, 30, 91, 211 Keihin ports 36 Keio Graduate Business School 237 Kellogg 94, 106, 268, 297 Keynes, J.M. 116, 152 Kikuchi, S. 266 Kilburn, T. 255 Kimble, G.H.T. 4, 8 Kimitsu Iron Works 39 Kingfisher 105 Kinkabo 110 Kinki Region Development Act (1963) 37 Kinki Sharyo 31, 114, 284 Kisha Seizo (merged into Kawasaki Heavy Industries in 1972) 29, 107, 111, 267, 280–1, 284 Kishiwadabo 107, 109 Kita, M. 231 Kiyokawa, Y. 157 knitwear 27 Kobayashi, I. 92 Kobe 18–21, 26, 29, 36, 57, 68–9, 229, 264, 306; see also Mitsubishi Kobe Kobe Electric 285 Kobe Steel 20, 30, 266 Kobusho Iron Manufacturing Works 28 Koda. S. 5 Kodanshah 57 Koei Chemical Industries 285 Kokko Steel 284 Kokusai Celluloid 280 Komatsu 35, 111, 113 Konishiroku Photo Industry 257 Korea 14, 30, 54, 129, 136, 149, 192, 193;

318 INDEX

see also wars, Korean Kotobukiya 285 Koyo Seiko 35, 111, 113, 284 Kubota Iron Works 31, 35, 111, 113, 267, 280 Kurashiki Rayon (later Kuraray) 112 Kurashiki Spinning 284 Kureha Spinning 284 Kurimoto Iron Works 31, 111, 113, 280 Kuwahara, T. 139, 155 Kwantung 140 Kyoto 5, 15–16, 29, 53, 57, 68, 236, 306 Kyoto Prefecture 66 Kyowa Hakko Kogyo 285 Kyowa Rubber 285 Kyushu 26, 39, 217, 264 labour: aristocracy 47; costs 21; history 44; hours of 134, 140, 166; incentives 118, 165; intensity of 121; management 125, 158–73, 189; migration 14, 25, 49, 53; movement 30–1; overlookers 161; productivity 40–1, 118, 132–3, 144, 222–3; recruitment 49, 125, 139, 159–60, 161, 169; shift working 124, 132–3, 138, 151, 170; short-time working 118, 136, 140; surplus 49; turnover 125, 131–2, 160; wages of 36, 125, 133, 141, 170, 228; wage lists 135–6, 166, 171; see also collective bargaining; employment; factory legislation; friendly societies; work ethic; work study; works committees Labour Party 24, 117, 134, 168 Ladbroke Group 105

Laird Group 214 Lancashire 15, 23–4, 47–52, 68; golden age 1, 19; ethnic minorities 49, 151; image 24, 36, 43–4, 305; individualism 116–17, 125, 234; migration from 49; new towns 49; specialisation 133; reactions to competition 139–40, 146– 8, 149–51 Lancashire Cotton Corporation 101, 103, 162, 275, 277, 279 Lancashire Steel Corporation 101, 104 Lancaster 100, 256, 275, 276 Lancaster, Pa. 196 Langton, J. 4, 8 Lankro Chemicals 279 Latin America 45, 146, 194 Lazonick, W. 115, 152, 175 Le Play, F. 3 Lee, C.H. 4, 8, 48, 69, 71, 76 Leeds 62, 101, 269 Lees, Asa 100 Lever Bros. 94, 99, 255, 269–70, 275; see also Unilever Lever, W.H. 50, 75, 91, 254 Levinstein, I. 269 Lewis, C. 61 Lewis’s 100 Lewis’s Investment Trust 102, 103 Leyland DAF 94, 106 Leyland Motors 102, 104 Littlewood’s 59, 89, 92, 97, 102, 104 Littlewood’s Organisation 105 littoral industrial zones 37, 39, 65, 219–20, 303 Liverpool 16, 18, 19–21, 24–5, 45, 49, 50, 59, 61, 63, 69, 88, 130, 151, 233, 254, 303, 305 Liverpool Borax 275 Liverpool Cables 275 Liverpool Corporation Passenger Transport Department 104 Liverpool Corporation Tramways 100 Liverpool United Gas 100 Lloyds Packing Warehouses 151 Lösch, A. 4

INDEX

London 21–5, 54, 58, 88, 128, 151, 182; image 22, 23 London Business School 241, 247 London Chamber of Commerce 233 London, City of 23, 58–9, 62 London School of Economics (LSE) 233, 249 lone-parent households 49, 51 Lorenz, E.H. 223 Lovell, B. 255 Lucas Industries 106, 279 Lurgie Chemie 214 Macclesfield 50, 277 machine tools 25, 30, 39, 187 Mackinder, H.J. 7, 71 Maizuru 218 Makino, Baron 136 Malaysia 63, 136, 143, 146, 194 management 16, 34, 96, 123, 134–6, 139, 161–2, 222–5, 230–42 Management, Association of Teachers of 240 Management, British Institute of 240 Management Education, Foundation of 240 Management Research Group 250 Management School, Sanno 237 Manchester: commerce 18; education 63, 233; foreign consulates 20, 23, 47; foreign merchants 14, 42, 68, 119, 122; function 14, 52, 121; image 8, 13, 14, 21, 24, 43; industry 21; leisure pursuits 59, 62–3; municipal budget 24; population 15, 18, 29; youth culture 48, 63, 303 Manchester Business School 44, 74, 241, 246 MCB 279 Manchester Chamber of Commerce 24, 43, 129, 134, 148, 151, 233, 273 Manchester College of Technology (formerly Manchester Mechanics’ Institute, Manchester Technical School, Manchester Municipal Technical School,

319

later Manchester College of Science and Technology and then UMIST) 234, 254, 292, 294 Manchester Collieries 101 Manchester Corporation Gas Department 100 Manchester Guardian 14, 22, 61 Manchester International Airport 46, 62, 74 Manchester Royal Exchange 14, 24, 121, 151 Manchester School 18, 22, 24 Manchester Ship Canal 23, 46, 61, 99, 101, 104, 130 Manchester Trust 61 Manchester United 19, 63 Manchester, University of (formerly Owens College) 227, 233, 241, 253, 278 Manchuria 129, 136–7, 140, 192 man-made fibres 25, 34, 38, 93, 125, 142, 148 manufacturing industry: heavy 10, 38, 219, 267; light 12, 23, 25, 39, 58; new 41, 65, 68, 79; old 21–2, 38, 40, 48, 52, 55, 58; sub-contracting 31, 35, 41, 45; subsidiary 207, 222; see also Industrial Revolution MANWEB 106 maritime industrial areas see littoral industrial zones Marks & Spencer 105 Marshall, A.7, 98, 116 Martin, R. 4, 8, 71, 76 Maruyama Institute 282 Massachusetts 30, 132, 231 mass market 180, 195, 201 mass media 44, 61 match manufacture 21, 27, 28, 32, 257 Mather & Platt 100, 102, 104, 269, 275, 279 Masuda, T. 128 Matsushita Battery 281 Matsushita Electric 112, 113, 178, 191, 281, 285–6, 288 Matsushita, K. 32, 35, 91, 93, 111, 113, 177–202 Matsushita, M. 181

320 INDEX

Matsushita Radio 281 ‘Matsushita Spirit’ 180, 189, 200 Matsumoto, Y. 14 Maurette, F. 164, 169 Meiji era 25, 128, 228 Meiji Restoration 5, 15, 27, 29 Meijibo 107 Meisei Boshoku 109 merchant dynasties 16, 49, 305 Mersey Docks & Harbour Board 96–7, 99, 101, 103 Merseyside 42, 50, 68, 75, 209 Merseyside Transport 89, 105, 106 metallurgy 33, 254, 264, 266–7, 271 Metropolitan Cammell 210 Metropolitan Vickers Electric 255, 269, 271, 273, 293 Mexico 193 Mills, J. 275 Ministry of: Agriculture & Commerce 10, 28; Commerce & Industry 294; Education 228, 231–2, 256; Finance 197; Industry & Trade (MITI) 75, 197, 205– 6; Labour 168, 171; Munitions 264; Public Works 10, 26, 27; Technology 198; Transport 223, 287 Minolta 114 missiles 187–8, 215, 218 Mitsubishi 20, 53 Mitsubishi Bank 114 Mitsubishi Chemical Industries 261 Mitsubishi Electrical Manufacturing 32, 176, 288, 289–90, 291 Mitsubishi Heavy Industries 267 Mitsubishi Internal Combustion Engine 32 Mitsubishi Kobe 20, 29, 211, 289 Mitsubishi Nagasaki Zosen 27, 91 Mitsui 12, 32, 128 Mitsui Bank 92 Mitsui Bussan Kaisha (MBK) 128–9, 132, 138,142–3 Mitsui Toatsu Chemicals 114 Miyamoto, Mataji 5,

Miyamoto, Matao 70, 153 Mond, L. 269 Moore, C.W. 271 Moore, H. 271 Moore, L.M. 151, 157 Moores, John 59; see also Littlewoods motorways 47, 52, 69, 203 Mukaishima 221 Mullard 94, 104 Multi-Fibre Arrangement (MFA) 151 multi-national enterprise see firm munitions see armaments Muramoto, F. 231 Muspratt, E.K. 254, 269 Musulin Boshoku 107 Muto, Sanji 123, 160, 162 Myrdal, G. 4 Nagasaki Boshoku 94, 110 Nagoya 32–3, 36, 39, 42, 55, 65, 142 Nairn Williamson 279 Nakayama Chemical Laboratory 280, 281 Nakayama Steel Works 111, 113 Nakayama Taiyodo 286 Namura Shipbuilding 219 Naniwa Spinning 124 Nankai Wool Spinning 112 Nara 15, 28, 57, 68 National Association of Independent Weavers 123, 139 National Coal Board 103 National Development Plans 37, 39 National Enterprise Board 198 National Federation of Textile Industry Workers’ Unions 169 National Freight Corporation (NFC) 106 National Insurance Acts (1911, 1920) 166 National Mobilization Law (1938) 185 National Physical Laboratory 253 National Physics Laboratory 256 National Renmeiten 180, 191 National Research Development Corporation 198 National Shipbuilders Security 218 National Westminster Bank 196 Netherlands 2, 16, 46, 54, 69, 189–90, 270

INDEX

New York 53, 54, 129 Nippon Aluminium 284 Nippon Brush 107 Nippon Chemical Industries 261 Nippon Chemical Machinery 281 Nippon Crucible 282, 286 Nippon Dye 280, 281 Nippon Electric Power (later Kansai Electric Power) 109 Nippon Flannel 108 Nippon Kokan 281 Nippon Life Assurance 4 Nippon Menka 231 Nippon Metal Goods 108 Nippon Oils & Fats 282, 286 Nippon Paint 281, 286 Nippon Railways 28 Nippon Shokubai Kagaku Kogyo 286 Nippon Steel 11, 39 Nippon Steel Casting 30 Nippon Synthetic Chemical 282, 283 Nippon Synthetic Fibre 282 Nippon Victor 190 Nippon Yusen Kaisha (NYK) 29, 118, 127 Nipponbo (later Unitika) 107 Nishizawa Sewing Machine 285 Nisshin Steel 114 Nitto Electric Industrial 285 Noble, J. 59 Noguchi Institute 282 Nokia 304 Nomura 231, 282 Nomura, T. 231 Nonconformity 52 non-governmental organisations (NGOs) 63 Norman, E.H. 70 North Group 279 North-South divide 36, 44, 51, 52 Northern Foods 106 NORWEB 105 NWRA 51 NorthWest Water 105 North & North-east Lancashire Cotton Spinners and Manufacturers Association (UKTMA from 1961) 168 nuclear engineering 256, 266 nuclear physics 255 nuclear power 218, 278

321

Odum, H.W. 3 Ogawa Chemical 281 Ogawa Perfumery 285 Ogura, M. 267 Ohashi Lacquer 285 Ohmi Silk Spinning 169 oil trade 34, 45, 52, 216–17 oil-price shocks 37, 38–41, 46, 55, 190, 213, 215–17, 238 Okabe, K. 265 Okamura Oils & Fats 285 Okayama Prefecture 124 Okayama, R. 173, 220, 233 Okubo, T. 15, 136 Oldham 16, 30, 62, 82, 97, 117, 122, 128, 143 Olympic Games 63, 67 Ono Ironworks 108 Oriental Paint 282 Osaka: Asia-Pacific Trade Center 66; canals 13; commerce 68; historiography 5–6; image 13, 33, 57; industry 37; merchants 14, 16, 28, 68, 305; population 15, 18–19, 29, 34, 57; press 14–15; Sampin Exchange 118, 120, 132, 138; social democracy 30–1, 231; World Trade Center 66–7 Osaka Asahi Newspaper 110 Osaka Asaito 107 Osaka Beer (later Asahi Breweries) 108 Osaka Bureau of Japan National Railway 109, 111 Osaka Carpet 108 Osaka Cement 108 Osaka Ceramics & Cement 111 Osaka Chain & Machinery 281 Osaka Chamber of Commerce 16, 37, 229– 30 Osaka Chemical 280 Osaka City Bureau of Electricity 109 Osaka City University (formerly Osaka Commercial Training School, Osaka Higher Commercial School, Prefectural

322 INDEX

Osaka Commercial School, Osaka City University of Commerce) 5, 16, 227, 229 Osaka Commercial Museum 229 Osaka Economic Year Book 39 Osaka Electric 266, 281 Osaka Electric Copper 108 Osaka Electric Power 184 Osaka Electric Railway see railways Osaka Enamel Frit 286 Osaka Exhibition 37 Osaka Flour Milling 285 Osaka Gas 110, 113, 280, 281, 285 Osaka Godobo (merged in Toyobo in 1931) 107 Osaka Industrial Association 31, 267 Osaka Industrial Research Institute 256 Osaka Institute of Hygienic Sciences 294 Osaka International Airport 46 Osaka Iron Plate 280 Osaka Iron Works see Hitachi Zosen Osaka Machinery (later OKK) 110 Osaka Mainichi Newspaper 110 Osaka Management Society 231, 250 Osaka Metal Industries 281 Osaka Military Arsenal 32, 107, 109 Osaka Municipal Life Science Institute 294 Osaka Municipal Technical Research Institute 256, 261–3, 294 Osaka Oils & Fats 285 Osaka Prefecture 13, 35, 36–8, 49, 65, 67, 72, 217, 219, 229; statistics 19, 28, 72 Osaka Prefectural Agricultural Experiment Station 294 Osaka Prefectural Animal Breeding Farm 294 Osaka Prefectural Industrial Research Institute 257, 265, 294 Osaka Prefectural Institute for Industrial Management 231, 250 Osaka Prefectural Metal Material Institute 264 Osaka Prefectural Textiles Research Institute 295 Osaka Prefectural Training Centre for Industrial Engineering 231 Osaka Printing 108 Osaka Roentgen Ray Works 284

Osaka Rolled Copper 284 Osaka Shipyard 111 Osaka Shosen Kaisha (OSK) 14, 20, 27, 29, 32, 72, 107, 109, 111, 127 Osaka Special Steel Works 274 Osaka Spinning (Osakabo, later Toyobo) 27, 57, 71, 90–1, 107, 109, 119, 122–3, 128, 133, 296 Osaka Stock Exchange 16, 28, 36–7, 38, 64 Osaka Sulfuric Acid 108 Osaka Technical School (later merged into Osaka Imperial University) 257 Osaka Transformer 285 Osaka Twist 108 Osaka University (formerly Osaka Imperial University) 5, 257, 265 Osaka University of Economics 5 Osaka University Institute of Scientific and Industrial Research 285 Osaka Weaving 109 Osaka Woolen Fabric 109 Osaka Yogyo Semento 286 Otsu 27 Otsu, I. 266 Otsu Rubber 285 Ouchi, A. 289 Owadabo 110 packing trade 147 Panasonic 193 paper manufacture 45, 214, 304 Patent Shaft Steel 214 patents 125, 258–60, 283 Pathology, Incorporated Liverpool Institute of Comparative 254 Patterson, R. 255 Peace and Happiness through Prosperity (PHP) Institute 189 Pearse, A.S. 142, 164 Peninsular & Oriental Steam Navigation Co. (P & O) 127 Peel Holdings 60 Penketh Tanning 275 Perkin Jr., W.H. 254, 269, 293 petrochemicals 37, 219 Petty, W. 58 pharmaceuticals 50, 254, 256, 270, 273, 277

INDEX

Philippines 143 Phillips 181, 189–90 Pilkington Bros. 47, 94, 96, 99, 101, 103, 106, 269, 271, 273, 275, 278, 279, 293 Pittsburgh 261, 271 plastics 261, 270 Platt Bros. 16, 82, 99, 128–9, 142, 277, 297 Platt Bros. & Co. (Holdings) 103 Platt, H. 255 Platt J.W. 240 Platt-Toyoda Automatic Loom 142–3 Plaza Hotel Accord (1985) 41, 194 Plessey 177 Pollard, S. 4, 8 polyester 150 polythene 270, 293 Poor Law 3 Porrits & Spencer 275 Port Sunlight 50, 99, 270 Portugal 24, 140 Premier Waterproof 275 Prestbury 50, 75 Preston 92, 100, 166, 175, 272, 275 Preston, Sir Walter 142, 147 Price’s (Bromborough) 279 Priestley, J.B. 36, 44 property market 47, 82, 92–3 Queen Elizabeth II 218 Quilt Manufacturers 102 radar 187, 255, 271, 273, 289, 293 radio: communications 267; receivers 180, 191; valves 185, 189, 271, 293 Radio Corporation of America (RCA) 193 Railway, South Manchuria 139 railways 21–3, 28, 31, 47, 59, 91–2 railways, British: Cheshire Lines 99, 102; Great Central 100; Lancashire & Yorkshire 63, 91–2, 99; London & North-western 91–2, 99; London Midland & Scottish (LMS) 101 railways, Japanese: Hankai 28; Hankaku 107;

323

Hankyu 91, 109, 111, 113; Hanshin 113; Japan National 11–12, 21, 109, 111; Kansai 29, 107; Keihan 29, 107; Nankai 91, 96, 107, 109, 111, 113; Osaka Electric (later Kintetsu) 109, 111, 113; Shinkansen 55; Tokaido 55; West Japan 113 Rathbone’s 254 rayon 142 Refuge Assurance 100, 102 region: hinterland 13; intellectual reflection 3; origins 1–2; resurgence 1 regional: analysis 3, 54, 300–1; banks 64; contrasts 68, 300; convergence and divergence 1, 5, 29, 34, 36–7, 51, 53–5, 57, 65–7, 119, 140–6, 213, 300, 302–3, 305; cuisine 52; culture 52, 300; development 21–2, 36; dualism 36, 300; employment 25; giants 97, 300; GDP 51–2; planning 37, 51, 219, 221; problems 25, 36, 40, 51–2; statistics 4, 6, 19, 21–2, 301–2 Regional Development Association 51 Regional Survey Association 3 Regional Trends 4, 69, 30l regionalism 3–5 Renold, H. 272, 275 Research, Association of Scientific & Industrial 267–8 Research Department, Naval 287 Research, Department of Scientific & Industrial (DSIR) 253, 277 Research Institute of Aeronautics, Naval 266

324 INDEX

Research, Institute of Physical & Chemical 267 Research, Mellon Institute of Industrial 261 Research, Shioni Institute of Physical and Chemical 281 Research, Taniguchi Foundation for Industrial 266, 296 research and development (R & D) 41, 65 116, 131, 134, 190, 252–99 research associations, textile 116, 277 Research Council, Manchester Joint 273, 297 Research Mobilization, Council for 296 retail price maintenance 61, 192 Reynolds, J.H. 234, 254 Rigunaito 282 Robertson, Dr. J. 164 Rochdale 59, 100, 255 Roe, A.V. 273, 275 Rolls-Royce 104, 294 Roscoe, H. 253–4 Rostow, W.W. 301 Rowntree, 250 Royal Brush 107 Royal Hotel, Osaka 113 Royal Insurance 102 Royal Ordnance 45 rubber industry 21, 257, 261, 275 Rubber Regenerating 275 Rubinstein, W.D. 71 Runcorn 269, 273 Russia 2, 4, 40, 140, 148, 301 Rylands & Sons 91, 99, 101 Sainsbury 105 St. Helens 47, 99 Saitama 127 Saito, O. 153 Sakai 31, 39, 211, 216, 221 Sakai Chemical 284 Sakaibo 107 sake 21 Sakura Color Products 285 Sakurajima 211–12, 214, 221 Sakuranomiya Chemical Institute 282 Sale, K. 8 Salford 44, 49, 102, 253, 275, 279

Salt Union 100 Sampei 107 Sanbazuru Chemical Institute 285 Sandberg, L. 115 Sanderson, M. 268, 272, 293 Sanobo (later Teikoku Sangyo) 110 Sanwa Bank 113, 219 Sanyo 35, 111, 113, 176 Sasakura Machinery 284 Satsuma 10, 16, 136 Satsuma-Choshu alliance 5, 20 Savoy Group 240, 242 Saxonhouse, G. 138 Schein, E.H. 179, 203 Scientific Instrument Research Association 271 Schumpeter, J.A. 4, 140 Schuster, A. 253 Scotland 43, 47, 51, 52 Seki, K. 132 Sekisan Seiko 282 Sen’nan (South Osaka) 34, 38, 65 Senshu 31 Senshu Bank 114 Senshu Weaving (later Teikoku Sangyo) 109 Senshubo 107 service industries 15, 23, 43, 48–9, 55, 57– 63, 64–7, 68, 76, 96–7 Settsu Oils & Fats 282, 285 Settsubo 107 sewing machines 264–5 Shanghai 14, 20, 54, 128, 129 Shanghai Incident (1925) 301 Sharp Corporation 35, 113, 193, 281, 285, 288 Sharples Engineering 279 Sheffield 61, 99, 209, 240, 254, 256 Shell Oil 92,104, 273, 279 Shell Refinery 275 Sheridan, K. 159 Shibusawa, E. 18, 27, 128 Shiga, 68 Shikibo 112, 284 Shikoku 32 Shimada Glass (later Toyo Glass) 108, 280 Shimano 31, 35, 40 Shindo, T. 115 Shinko Woolen 109

INDEX

Shinto Paint 285 Shionogi 288 Shinnippon Chemical 285 shipbuilding 10–11, 20, 26, 29, 32, 39, 41, 207–25, 266, 288, 296; bulk carriers 213; oil tankers 39, 213, 216–17; rationalisation 209–10, 214; scrap and build scheme 220; submarines 218; technical revolution 215–16, 267, 288; warships 210, 218 Shipbuilding Encouragement Act (1896) 29, 211, 220 Shipbuilding Industry Act (1967) 220 shipping: coastal 26, 71; steam 26 shipping freights 59, 120, 130, 139 Shirley Developments 277 Shirley Institute (BCIRA) 277 Shoji, I. 257 Shoseigumi 108 Showa Silk Yarn 109 Siemens Bros. 181, 275, 293 silicon chips 190 silk industry 6, 11–12, 20, 57, 120, 126, 133, 140–1, 142, 268 Simon Engineering 269, 279 Simon, E. 272 Simon, H. 272, 275, 279 Singapore 21, 54, 69, 136, 194 size of firms see firm Skelmersdale 51 Slumberland 279 Small & Parkes 275 Smith, Adam 12, 141 Smith, R. 45 Smith, W.H. 96 Snow, C.P.75 soap industry 27, 32, 257, 270–1 soda 271 Sogo 114 Somerwell Bros 275 Sony 190 South-east Asia 36, 143, 192 Spain 2, 4, 47, 62, 94, 140, 210 Spence, P. 275, 279 Spender, H. 164

325

Spillers 275 spinning: garabo 131; mule 128; ring 120, 124–5, 137–8, 167; piecers 161 sport 3, 62–3; see also gambling sporting clubs 63, 125 sporting goods 61 sporting press 61 Stamford, Earl of 50 Standfast 275 steam power 24, 28, 186 Stevenson, H. 275 Stewart, K. 162 Stirling Varnish 275 Stone-Platt 279 Storey Bros. 279 subsidies 29, 36, 140, 211 Sugihara, K. 73, 127, 153 Sugiyama, S. 157 Suminoe Textiles 280, 284 Sumitomo 16, 20, 27, 32, 93, 200, 229, 267 Sumitomo Bank 113, 185, 188 Sumitomo Chemical 111, 285, 288 Sumitomo Copper & Steel Pipe (later Sumitomo Metal) 110, 280, 283 Sumitomo Electric Industries 111, 113, 281, 283, 285, 287, 288 Sumitomo Electric Wire (later Sumitomo Electric Industries) 109, 287 Sumitomo Foundry (later Sumitomo Metal) 96, 108 Sumitomo Metal Industries 111, 114, 280, 281, 283, 284 Sumitomo Steel Casting (later Sumitomo Metal) 30, 96, 108, 109, 280 Sumitomo Trust and Banking 114 Summers, John 102, 103 Sun Mill 122 Sutcliffe Speakman 275 Suzuki Alloy 284 Suzuki, Bunji 159 Suzuki Shoten 20 Switchgear & Cowan 275 Switzerland 2, 24, 94

326 INDEX

T & N 106; see also Turner & Newall Tabuchi Electric 285 Taguchi, U. 19 Taisho era 230 Tait, A.W. 204 Taiwan (Taipei Province of China) 36, 149, 192 Takada Aluminium (later Showa Aluminium) 281, 284 Takahashi, A. 181, 193 Takamatsu, T. 257 Takamura, N. 155 Takaoka, H. 261, 295 Takarazuka 92 Takase Dyeing 112, 285 Takashimaya 111, 113 Takeda Chemical 111, 114, 285, 288 Takeda Pharmaceutical 280, 282, 283, 287 Tanabe Seiyaku 112, 280, 285 Tanaka, G. 282 Tanaka Machinery 218, 284 Tanaka Plan 38 Taniguchi Foundation 266 Taniguchi, F. 90, 296 Taniguchi, T. 37, 73, 98 Taniguchi, Y. 156 Tanii, A. 194 Taoka Dye 285 tariffs 24, 118, 121, 125–6, 136, 138, 140, 144; non-tariff restrictions 143, 148, 149 Tate, H. 254 Taylorism 118, 231 tea trade11–12, 26 Technical Industrial Services 279 technology, high 40, 50, 65–6, 198, 302 Technology, Agency of 256 Teikoku Kako 286 Teikoku Sangyo (later Tesac) 111, 284 Teikoku Seima (later Teikoku Sen-i) 169 Teikoku Sharyo (merged in Tokyu Car in 1968) 111, 284 telecommunications 21–2, 23 television 63, 72 Temma Boshoku 110 Temma Weaving 107, 109 Teradabo 110

terylene 273, 293 TESCO 106 Textile lnstitute of Batavia (TIB) 144 textile machinery 24, 30, 129–30, 139, 142– 3, 144, 150 Textile Machinery Makers 101, 277, 299 textile managers’ association 173–4 Textiles Science, Institute of 282 Thompson, J.J. 253 thread manufacture 142 Thünen, J.H. von 4 tiger economies 34, 39, 148–9 Tillotsons 275 Toa Chemical 281 Tochigi 127 Toda Plywood 286 Toho Chemical Institute 281 Tokugawa era 15, 25, 302, 305 Tokuhisa, M. 290 Tokyo (an inversion of ‘Kyo-to’, formerly Edo), 5–6, 15, 21, 27, 38, 53–7, 66, 184, 267; Greater Tokyo 53 Tokyo Higher Commercial School 231 Tokyo Prefecture 53, 124 Tokyo Stock Exchange 36–7, 53 Toms, J.S. 152 Tonoi Tobacco 108 Tootal Broadhurst Lee 100, 102, 164, 273, 276–7, 293, 299 Tootal Ltd. 94, 104 Toppan Printing 112 Toshiba (Tokyo Denki) 91, 114, 176, 185 Touche, Ross & Co. 204 tourism 59, 65, 68, 305–6 Toyo Cloth 286 Toyo Electro Chemical Institute 282 Toyo Glass 112 Toyo Menka 129, 144 Toyo Podar 129, 144 Toyo Rayon 129 Toyo Rubber 286 Tovo Seikan 114 Toyo Steel 284 Toyo Tire & Rubber 112 Toyo Umpan 284 Toyobo 57, 90, 94, 109, 111, 118, 136, 143, 160, 165, 171, 280–1, 284, 288

INDEX

Toyoda 129, 142–3 Toyota 35–6, 39, 91, 143 Toyozaki, M. 231 trade: domestic 14, 23, 147, 180–1; export 12, 24–5, 33, 41–2, 44–7, 125– 6; import 11, 41; international 9–12, 14–15, 29, 38, 41; invisible exports 59; retail 16, 18, 59–61, 97; warehouses 14, 32, 139 trade associations 34, 53, 116, 163, 268 Trade Conferences, Anglo-Japanese 148 Trade Facilities Act (1920) 220 trade missions 128, 130, 137 trade secrets 132 trade unions 24, 40, 116–17, 134–6, 147, 152, 222 TUC 117, 148 trade war: Anglo-Japanese 140, 148; Indo- Japanese 132, 144 Trafford Centre 61 Trafford Park 71, 275 Trevithick, R.F. 21 Tsubakimoto Chain 31, 35, 284 Tsuda, S. 91, 93 Tsutsunaka Celluloid 285 Turnbull & Stockdale 276 Turner & Newall 94, 101, 104, 255, 276, 279 Turner, F.J. 3 Twente 143 Ueno, Y. 231 UMlST see Manchestcr College of Technology Unigate 106 Unilever 94, 96, 101, 104–5, 270, 273, 278– 9 United Alkali 99, 269–70 United Textile Factory Workers’ Association 117 urban hierarchy 53–4 urban land values 66 urban problems 30

327

urban utilities 31 Urwick, L. 240 USA: business enterprise 93, 185; business organisation 93; cotton exports 127, 129; cotton spindleage 146; defence equipment 196; economic history 6, 306; electricity 181, 201; financial institutions 200; GDP 40, 64, 305; high technology 65, 94; industrial research 261; labour management strategy 158; man-made fibre 34; management education 230–1, 236; market 36, 94, 140, 193; MNEs in automobiles 42, 94; radio 193; regions 2; relations with Japan 34, 82, 185, 283; telephony 94; textile technology 129; trade unions 31; West 20; world cities 54 USSR see Russia US Textile Mission 141 Utley, F. 141, 142, 156, 163–4 Utsumi Boshoku 110 Vantona Textiles 276 Verhaeren, E. 23 Vicars, T. & T. 276 Vickers-Armstrong 101 Vickers Ltd. 92, 94, 96, 103, 187, 271 Vickers Son & Maxim 99 Vickers PLC 106 video recorders 40, 190, 193 VSEL Consortium 105, 213 Wadsworth, A.P. 70, 157 Wakayama 28, 57, 68 Wakayama Iron Works 281 Wales 5, 51 Wallpaper Manufacturers 100, 102, 276

328 INDEX

Walpamur 276 Walker, B. 254 Walker, M. 255 Warburtons 105 Ward, Blenkinsop 276 Warrington 50, 100, 104–5, 254, 278 wars: Arab-Israeli (1973) 38; Cold War (1947–90) 45, 187; Crimean (1853–6) 45; First World (1914–18) 3, 12, 30, 72, 91, 137, 139–40, 158, 209, 212, 230, 232–3, 253, 277; French (1793–1815) 130; Korean (1950–3) 34, 82, 187, 189, 192; Russo-Japanese (1904–5) 12, 29, 123, 136, 230, 232; Second World (1941–5) 3, 12, 93, 168, 172, 184, 194, 218, 235–6, 250, 256, 272; Sino-Japanese (1894–5) 12, 21, 29, 128– 9; Sino-Japanese (1937–45) 33, 79, 121, 146, 287; US Civil (1861–5), 2, 22 weaving: automatic 117, 132, 142–3, 170; disputes 135–6, 167; districts (sanchi) 123; domestic 122–3; hand 26–7, 123, 137, 144, 146; power 123; rural 28, 123 Webb, S & B. 117, 134 Weber, A 4 Wednesbury 214 Weinstock, A. 203 Weizmann, C. 269 West Japan Economic Conference 37 Westinghouse 32, 271 Whitbread 105 Whittaker, J. 60–1 Widnes 269, 273 Wigan Coal & Iron 99 Wigan Coal Corporation 101 Williams & Williams 276 Williams, B. 241 Williams, F.C. 253, 255

Williams, J.D. 59 Willliams, J.G. 300, 306 Williamson, James 99, 276 Williamson, W.C. 253 Wilson, H. 50, 68, 76, 198 Winterbottom, F.S. 141 Wolf, V. 279 Wolfson, I. 61 woollen industry 21, 142, 277, 280 Woolworth, F.W. 59, 94, 102, 104 work ethic 16, 221 work study 170 works councils 160 World Bank 227 World Cotton Congress (1921) 24 world economic depression (1929–32) 9, 26, 33, 40, 140–2, 146–7 Wrigley, E.A. 151 X-rays 253, 271 Yagi, H. 265, 295–6 Yamada 281 Yamamoto, K. 156 Yamanobe, Takeo 56–7, 124, 128, 153 Yamaoka Hatsudoki (later Yanmar Diesel) 31, 35 Yamazaki Baking 113 Yasuda Commercial 107 Yawata Steel 11, 217 yen, exchange-rate of 34, 39, 41, 64, 140, 143, 174–5, 194, 238, 243 Yodogawa Steel 111 Yokohama 6, 20, 32, 36, 68–9 Yokohama Specie Bank 118 Yonekawa, Shin-ichi 115, 174, 245 Yorkshire 52, 61, 268 Yoshikawa Oils & Fats 282 Yoshimi Boshoku 109 Yuaikai 30, 159 Yuasa Battery 280, 281, 287 Yukawa, H. 265–6 zaibatsu 20, 31, 91, 124, 180, 184, 188, 200; Big Three 32, 129; Big Four 93 zaikabo (spinning mills in China) 94, 138–9 Zenatia 217 Zurich 54, 151