Implications for global history
One of the main issues on global history in recent years has been the assessment of the 'East Asian miracle' and its historical roots. Many writers, including myself, have argued that there was in fact an East Asian pattern of economic development, which has its own roots going back at least to the sixteenth century.24 While some writers were inclined to play down the significance of the Western impact during the nineteenth century altogether,25 others such as Gunder Frank suggested that Western dominance was a divergence from the general pattern of East Asia-centred global history for the last six thousand years, for a 'brief' period of a few centuries.26
I have instead argued for the significance of the industrial revolution in Britain for the modernization of the Asian economies, though in a different way from that expressed by the more Eurocentric writers.
Japan's industrialization since the late nineteenth century occurred, not through a straightforward application of Western technology, but as a result of its extensive adaptation to an environment where land was extremely scarce and labour abundant. This adaptation helped develop the international competitiveness of some Japanese industries, the technological and institutional path of which assumed strong labourintensive and resource-saving bias. It is inappropriate to view this process simply in terms of 'catching up' with the West, as it was simultaneously an effort to find a new pattern of complementarity in the growth of the capitalist world economy.On the European history front, The Great Divergence by Kenneth Pomeranz has recently put forward a perspective, which corresponds to mine in a number of respects.27 Pomeranz acknowledges the significance of the industrial revolution, but argues that it occurred, not as a natural outgrowth of earlier technological and institutional developments in Western Europe, but as a result of two highly contingent factors that were available to England and some other regions of Western Europe, namely the availability of cheap, good quality coal in or near proto-industrial regions, and an access to vast natural resources in the new continents, especially North America.
An implication of this argument is that the more general pattern of economic development based on the growth of the market, commercialization of agriculture and proto-industrialization, was in fact present not just in Western Europe but in several parts of the world before 1800, and that the growth of the Atlantic economy, with the heavy use of fossil fuel and other natural resources, was a 'great divergence' from this general trend. It is certainly the case that until recently, industrialization was associated with the development of capital- and resource-intensive technology, the use of which was highly contingent upon their availability. The intrinsic value of labourintensive and resource-saving technology for the steadier and wider diffusion of industrialization has not been the focus of study.Yet the majority of the world population in manufacturing has clearly been engaged in those industries which belong to the latter category over the last one hundred and fifty years. The East Asian experience amply demonstrates this; so much so that it is impossible to understand why Japan, and later other Asian countries, industrialized at all, without appreciating the region's strong focus on labour-intensive, and more recently human capital-intensive, technology. The region was generally land-scarce and labour-abundant, so the direction of technological development tended towards more labour-intensive and less resourceusing, before the Second World War (with or without the Japanese influence). East Asia was 'allowed' to industrialize under the dominance of the Western powers because it found a Ricardian justification vis-à-vis the West, to carry out industrialization. After the war, on the basis of the differences in factor endowments between the resource-rich West (which was released from the constraints of land and other natural resources by the growth of the Atlantic economy) and the resource-poor East Asia, the new international division of labour sketched above emerged as a main pattern of global development.28
After the 1960s high economic growth gradually pushed up the Asian wage level, first in Japan and then in the NIEs, encouraging labour-intensive industry based on low-wage labour to move further to ASEAN, China and other developing countries.
An important result of this 'flying geese pattern of economic development' was a massive absorption of low-wage labour in China (and India and elsewhere) into the industrial sector directly connected to the world market. The textile industries of China and India today are by far the single largest providers of industrial employment in the world. The global diffusion of industrialization has finally reached the world's largest reservoirs of 'unlimited supplies of labour'.It seems to me that there is room for enriching this ongoing story of the growth of the Asia-Pacific economy by incorporating the Cain and Hopkins perspective into it. One of the less explicit agendas behind their work has been the historical reassessment of the industrial revolution in Britain in the light of the dominance of landed elites and the vital role of financial and service sectors in the first half of the nineteenth century. Their argument calls for a revision of our understanding of industrialization, because they imply that the first industrial revolution was already dependent on the political forces linked to the economic interests outside manufacturing, which created a framework of 'imperialism of free trade' and promoted the growth of the international division of labour.29 More generally, the Cain and Hopkins perspective encourages us to focus on a link between manufacturing, and finance and services as a central element of the development of capitalism. If Pomeranz tried to isolate the Atlantic bias from our understanding of industrialization in order to grasp the more general pattern of economic development, Cain and Hopkins have extracted the role of financial and service sectors for the global diffusion of industrialization. They effectively identified the necessity of these sectors for economic development in general.
Since the late nineteenth century, therefore, there emerged an additional international division of labour between manufacturing as a whole, and finance and services, which ensured complementarity between the City of London and industrial economies such as Germany and Japan.
Looking at it from the perspective of the non-European world, the essence of 'Western impact' was not just the introduction of manufacturing technology, but a combination of that and the availability of international financial capital and services. In other words, the City of London acted as a vital facilitator of technological transfer from the West to East Asia (and eventually to the rest of the world), enabling the global diffusion of industrialization to take place. Insofar as the City's financiers globalized faster and in many ways negotiated with politics more closely than the manufacturers themselves, they were at the frontier of globalization. Gentlemanly capitalism, with emphasis on openness and respectability, pushed this trend forward. In the last analysis, however, it was the global diffusion of industrialization that penetrated into different civilizations and changed the shape of the modern world. From the perspective of global history, the deepest impact of the City of London lay in demonstrating its facilitator role in that great transformation, more clearly than had ever been imagined.Notes
1 This chapter is a revised and substantially enlarged version of my review article of Cain and Hopkins, British Imperialism, published in Keizai Kenkyu (Economic Review), 49-3,July 1998, pp. 277-81. I am grateful to Professors Cain and Hopkins for their comments on the original version, as well as on the draft of this paper.
2 Some main Japanese-language publications in the more recent period include: Takeshi Hamashita, Kindai Chugoku no Kokusaiteki Keiki: Choko Boeki Shisutemu to Kindai Ajia (International Factors Affecting Modern China: Tributary Trade System and Modern Asia) (Tokyo Daigaku Shuppankai, Tokyo, 1990); Heita Kawakatsu, Nihon Bunmei to Kindai Seiyo: 'Sakoku' Saiko (Japanese Civilization and the Modern West: 'Seclusion' Reconsidered) (Nihon Hoso Shuppan Kyokai, Tokyo, 1991); Takeshi Hamashita and Heita Kawakatsu (eds), Ajia Koekiken to Nihon Kogyoka: 1500-1900 (Asian Trading Networks and Japan's Industrialization) (new edition, Fujiwara Shoten, Tokyo, 2001); Kaoru Sugihara, Ajia-kan Boeki no Keisei to Kozo (Patterns and Development of Intra-Asian Trade) (Mineruva Shobo, Kyoto, 1996); Takeshi Hamashita, Choko Shisutemu to Kindai Ajia (Tributary Trade System and Modern Asia) (Iwanami Shoten, Tokyo, 1997); Shinya Sugiyama and Linda Grove (eds), Kinndai Ajia no Ryutsu Nettowaku (Distribution Networks in Modern Asia) (Sobunsha, Tokyo, 1999); Naoto Kagotani, Ajia Kokusai Tsusho Chitsujo to Kindai Nihon (The Asian International Trading Order and Modern Japan) (Nagoya Daigaku Shuppankai, Nagoya, 2000); Kazuko Furuta, Shanhai Nettowaku to Kindai Higashi Ajia (Shanghai Networks and Modern East Asia) (Tokyo Daigaku Shuppankai, Tokyo, 2000); Shigeru Akita and Naoto Kagotani (eds), 1930-nendai no Ajia Kokusai Chitsujo (The Asian International Order in the 1930s) (Keisuisha, Hiroshima, 2001).
3 Main English-language publications other than those cited in the following footnotes include: Heita Kawakatsu, 'International Competition in Cotton Goods in the Late Nineteenth Century: Britain versus India and East Asia', in Wolfram Fischer et al.
(eds), The Emergence of a World Economy, 1500-1914, Beitrage zur Wirtschafts- und Sozialgeschichte, Band 33, 2 (Franz Steiner, Wiesbaden, 1986); Takeshi Hamashita, 'The Tribute Trade System and Modern Asia', Memoirs of the Research Department of the Toyo Bunko, 46, 1988, pp. 7-25; A.J.H. Latham and Heita Kawakatsu (eds), Japanese Industrialization and the Asian Economy (Routledge, London, 1994); Satoshi Ikeda, 'The History of the Capitalist World-System vs. the History of East-Southeast Asia', Review, 19-1, winter 1996, pp. 49-77; Kaoru Sugihara (ed.), The Growth of the Asian International Economy: the Chinese Dimension (forthcoming).4 Parts of Vol. 1 are devoted to the period from 1688 to 1850, and the continuity between the mercantilist era and the first half of the nineteenth century is an important point of their thesis. However, the bulk of their work, particularly on the history of the Empire, relates to the period after 1850.
5 Kenzo Mori, Jiyu Boeki Teikokushugi (Imperialism of Free Trade) (Tokyo Daigaku Shuppankai, Tokyo, 1978).
6 See Kaoru Sugihara, 'The Japanese Capitalism Debate, 1927-1937', in Peter Robb (ed.), Agrarian Structure and Economic Development, Occasional Papers in Third-World Economic History 4, SOAS, London, 1992, pp. 24-33.
7 Shigeru Akita, '“Gentlemanly Capitalism”, Intra-Asian Trade and Japanese Industrialization at the Turn of the Last Century', Japan Forum, 8-1, March 1996, pp. 51-65.
8 Kaoru Sugihara, 'Patterns of Asia's Integration into the World Economy, 1880-1913', in Wolfram Fischer etal. (eds) The Emergence of a World Economy, 1500-1914, Beitrage zur Wirtschafts- und Sozialgeschichte, Band 33, 2 (Franz Steiner, Wiesbaden, 1986) (reprinted in C.K. Harley (ed.), The Integration of the World Economy, 1800-1914, Vol. 2 (Edward Elgar, Cheltenham, 1996); Kaoru Sugihara, 'Intra-Asian Trade and East Asia's Industrialization, 1919-1939', in Gareth Austin (ed.), Industrial Growth in the Third World, c. 1870-c. 1990: Depressions, Intra-regional Trade, and Ethnic Networks, LSE Working Papers in Economic History, 44/98, London School of Economics and Political Science, London, 1998, pp.
25-57.9 In fact there was also competition between Britain and Asia in some areas, for example between British and Japanese shipping lines, as they both sought market shares in Asian waters. On the whole, however, adjustments were made by creating the more finely tuned 'division of labour' where, for example, certain local and regional routes were taken by the Japanese lines which used Japanese ships and either Japanese trading companies or Chinese merchant networks, while long-distance routes were secured by the British lines which often worked with Western merchants, bankers and insurance companies.
10 For a brief list of references, see Kaoru Sugihara, 'Japan as an Engine of the Asian International Economy, c. 1880-1936', Japan Forum, 2-1, April 1990, pp. 141-2.
11 As far as the authors' treatment of the relative strengths of the United States and Britain is concerned, they acknowledge general changes in the balance of power, and bring them into the narrative in an effective way. However, their understanding of the relative strengths of American and British influence in East Asia may be questioned to some degree, along the line of the argument here. See Shigeru Akita, 'British Informal Empire in East Asia, 1880-1939: a Japanese Perspective', in Raymond E. Dumett (ed.), Gentlemanly Capitalism and British Imperialism: the New Debate on Empire, Longman, London, 1999.
12 For a more general discussion on the effects on colonial development, see Kaoru Sugihara, 'Trade Statistics of British India, 1834-1947', Discussion Papers in Economics and Business, Graduate School of Economics, Osaka University (2002).
13 Kaoru Sugihara, 'Japan's Industrial Recovery, 1931-1936', in Ian Brown (ed.), The Economies of Africa and Asia during the Interwar Depression, Routledge, London, 1989.
14 Much has been discussed about the tariff protection in British India against Japanese textiles since the late 1920s, and the import tariff did go up, at one time to as much as 75 per cent for certain categories of cloth. Nevertheless, after the trade negotiations of 1933 and 1934, the Japanese share in Indian imports did not decline, largely because the effects of the tariff were more than offset by the devaluation of the yen against the rupee. See Sugihara, 'Intra-Asian Trade and East Asia's Industrialization'. A similar point is made with regard to Dutch colonial rule in Kagotani, Ajia Kokusai Tsusho Chitsujo to Kindai Nihon, ch. 5.
15 For a comparative assessment of the effects of imperial preference, individual tariff and quota restrictions, and the exchange rates, see Sugihara, 'IntraAsian Trade and East Asia's Industrialization'.
16 For the role of Japan in this process, see Nobuko Nagasaki, Indo Dokuritsu: Gyakko no naka no Chandora Bosu (India's Independence: a Perspective from the Study of Subhas Chandra Bose) (Asahi Shinbunsha, Tokyo, 1989).
17 Foreword to the second edition of British Imperialism, p. 17.
18 The term 'link' is used hereafter to indicate that, although the value of the local currency was not completely 'pegged' to sterling, its exchange rate was consciously kept stable, allowing for minor fluctuations only.
19 Most authors, including Cain and Hopkins, have not regarded East Asia as part of the 'sterling area', but the usage here is consistent with the spirit of those who tried to understand the depth of its global influence. See, for instance, Ragnar Nurkse, International Currency Experience: Lessons of the InterWar Period, Geneva, 1944, ch. 3.
20 Kaoru Sugihara, 'Higashi Ajia ni okeru Kogyokagata Tsuka Chitsujo no Seiritsu' (The Emergence of an Industrialization-promoting Monetary Regime in East Asia), in Akita and Kagotani (eds), 1930-nendai no Ajia Kokusai Chitsujo.
21 Kaoru Sugihara, 'The Economic Motivations behind Japanese Aggression in the late 1930s: the Perspectives of Freda Utley and Nawa Toichi', Journal of Contemporary History, 32-2, April 1997, pp. 259-80.
22 Kaoru Sugihara, Ajia-Taiheiyo Keizai-ken no Koryu (The Rise of the Asia-Pacific Economy) (Osaka Daigaku Shuppankai, Osaka 2002).
23 Jagdish Bhagwati, 'The Capital Myth: the Difference between Trade in Widgets and Dollars', Foreign Affairs, 77-3, May-June 1998, pp. 7-12.
24 Kaoru Sugihara, 'The East Asian Path of Economic Development: a Longterm Perspective', Discussion Papers in Economics and Business, 00-17, Graduate School of Economics, Osaka University, Oct. 2000.
25 I have argued that Hamashita's work has this tendency, although we are in complete agreement in our determination to correct the Eurocentric bias in our historiography. See Kaoru Sugihara, 'Kindai Ajia Keizaishi ni okeru Renzoku to Danzetsu: Kawakatsu Heita, Hamashita Takeshi-shi no Shosetsu o megutte' (Continuity and Discontinuity in Modern Asian Economic History: a Critique of the Works of Heita Kawakatsu and Takeshi Hamashita), Shakai Keizai Shigaku, 62-3, Aug.-Sep. 1996, pp. 80-102.
26 Andre Gunder Frank, Re-Orient: Global Economy in the Asian Age (University of California Press, Berkeley, 1998).
27 Kenneth Pomeranz, The Great Divergence: China, Europe, and the Making of the Modern World Economy, Princeton University Press, Princeton, 2000. For an exchange of views, see pp. 12-13 in his comments on my work and my response in Sugihara, 'The East Asian Pattern of Economic Development'.
28 See Sugihara, 'Patterns of Asia's Integration into the World Economy' and 'The East Asian Path of Economic Development'.
29 In the Japanese case too, industrialization crucially depended on the support of economic interests outside manufacturing. For example, following the Sino-Japanese War victory of 1894-95, the Ministry of Agriculture and Commerce staged a series of supra-ministerial conferences, meeting three times between 1896 and 1898, and approving a number of important industrial policy proposals. As most export industries were small-scale at that time, the main supporters that helped the implementation of this policy were export-related business interests led by shipping, banking, insurance and
storehouse sectors as well as by large trading companies. This was the case, in spite of the fact that the Japanese strategy was firmly on the promotion of industrial exports rather than of internationally competitive financial and service sectors. Kaoru Sugihara, 'Keiei Hatten no Kiban Seibi' (The Development of an Institutional Infrastructure for Modern Business), Matao Miyamoto and Takeshi Abe (eds), Nihon Keieishi 2: Keiei Kakushin to Kogyoka (Iwanami Shoten, Tokyo, 1995), p. 57.