The role of the financial and service sectors in global industrialization
As stated above, one of the main targets of the authors' attack is the straightforward association frequently made between the rise and relative decline of industrial capitalism, and economic and political strength.
I would like to begin by confirming that this association has also been largely accepted in the works on modern Asian economic history (roughly from 1850 to 1945), at least until very recently. Firstly, Britain was seen to be the superpower which colonized many South and Southeast Asian countries, forced the East Asian doors open in the nineteenth century, and introduced an entirely new set of technologies and organizations to the region.5 Secondly, Britain has been regarded as a model which countries like Japan attempted to emulate, or a target against which anti-Western nationalist sentiments were aimed. In many writings, the British experience was assumed to be a typical example of capitalist development, and this perception played an important role in the understanding of the nature of capitalist development in East Asia.6If such a 'British model' was inaccurately conceived, and the British case was in fact best described as 'gentlemanly capitalism' rather than all-powerful industrial capitalism, then it helps us to understand that there could be a strong element of complementarity between the British service sector interests and Japanese industrial ambitions. In Japanese historiography, emphasis had been traditionally placed on the significance of imports of British textiles to Japan for the fate of Japanese hand-spinners and hand-weavers, or, for the later period, of Japanese competition for the fate of British textile manufacturers. In other words, the two countries had been seen to be competing with each other. Essentially the same observation can be made with regard to the historiography of other Asian countries such as China and India.
Britain's stake in financial and service sector activities in East Asia was not fully considered, although, with regard to India, a large stake in British investment was directly associated with colonial rule. However, British consular reports viewed Japan's industrial development as something which Britain should welcome, because it would enable her to export capital, textile and other machinery to Japan.7 Moreover, as Cain and Hopkins suggest, British interests in China during the nineteenth century were heavily oriented towards financial and service activities. Such British attitudes, in turn, provided an environment in which Japan was able to pursue her industrial ambitions and export promotions. During the early twentieth century, the balance of power between British interests and Asian economic forces gradually shifted in favour of the latter, and the former became increasingly dependent on the growth of intra-Asian trade which was largely generated by the industrial growth of Japan and other Asian countries, and the networks of Chinese and Indian merchants.8 Since Cain and Hopkins's picture of British imperialism places a new emphasis on Britain's service sector interests and its persistence throughout the period in question, it fits better than the old model in accounting for Asian economic development under the British-dominated international order between the 1880s and the 1930s. Their approach enables Asian economic historians to better appreciate the crucial role that Britain played. The British presence was a declining but positive force behind modern Asian economic development.However, Cain and Hopkins concentrate on accounting for the motivations behind the British presence in Asia, and do not go beyond discussing direct gains and losses from that presence. While the British presence was instrumental in stimulating industrialization in East Asia, the process of industrialization was actually carried out by East Asians themselves, without accepting full British supremacy.
The reason why the City's political influence continued was that East Asia emulated industrial technology rather more quickly than it was able to upgrade its capacity to conduct a large flow of international capital. It was easier for East Asia to imitate the former because it was easier to separate industrial technology from European culture, while, as Cain and Hopkins demonstrate, London's global financial supremacy was based on the accumulation of knowledge and experience which was much more culture-specific. We shall return to this point later, but it is important to recognize here that this particular kind of 'division of labour' was found to be acceptable to both sides.9Why did East Asia fail to establish an alternative financial centre for the growth of intra-Asian trade between 1850 and 1945? In fact a number of such plans were contemplated, especially during the First World War and also in the 1930s.10 Moreover, Hong Kong and Singapore had functioned as sub-centres of international financial transactions to some extent, for most of the period under review. Nevertheless, unlike Britain, Japan as Asia's first industrial nation did not opt for service sector specialization. She did not try to imitate this aspect of the 'British model', for gentlemanly capitalism did not ideologically embrace a comprehensive set of capitalist development options, and did not suit Japan's national purpose, which was to become an internationally competitive industrial power. This Japanese choice had an important implication for the fate of the City, insofar as it represented a more general trend in which late-developers could exploit other developmental options. The City survived by adapting and finding a new role in the world economy, and, as the authors emphasized, even strengthened its relative position vis-à-vis other financial centres. Paradoxically, it did so by increasingly exposing the partial nature of its interests in global industrialization, and the City increasingly came to depend on the global diffusion of industrialization.
By the 1930s, it became apparent that it was Japan, not the City, that was putting Lancashire into trouble. It was the strength of East Asian industrialization, not the strength of the City, that sustained the tacit alliance between them. The nature of local British politics (which occupy a central place in the discussion of the strength of the City in the Cain and Hopkins narrative), such as the disproportionate influence of the southern counties, cannot fully explain the strength of the City. It was the complementarity between the City and the manufacturing interests in other industrializing countries that enabled the City to dominate British politics. In other words, international relations shifted the balance of British domestic politics in a significant way.
It seems to me that essentially the same point could be made with regard to the history of the relationships between the City, and the industrial economies of Continental Europe and the United States.11 Once these late-developer countries had acquired international manufacturing competitiveness, there emerged the possibility of an international division of labour where Britain specialized in financial and service sectors, while industrial Europe and the United States specialized in manufacturing. It is important to view this shifting balance of power between the City, and Continental Europe and the United States during the first half of this century, not just as a process generated by the rising industrial powers, but as a result of the pursuit of financial and service sector supremacy by Britain. She was to remain the centre of the multilateral patterns of world trade and international capital flows, as well as the centre of the system of the international gold standard. The expectation was that international adjustments between major powers could occur smoothly for mutual gain. This can be contrasted with the conclusion of Lenin who, while recognizing the importance of coalitions between major powers, regarded imperialist power struggles and war as inevitable. A general point is that, while the authors examine the City's economic strengths, together with Britain's political strengths, from the perspective of national and imperial history, it is in the last analysis impossible to accurately assess these strengths without locating them in the development of the capitalist world economy.
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