Category Archives: industry

by | 15 June 2009 · 5:57 pm

Effect of Economic Sanctions on Japan, 1941

From The War of the World: Twentieth-Century Conflict and the Descent of the West, by Niall Ferguson (Penguin Press, 2006), pp. 487-488:

The sole obstacle to Japanese hegemony in South-East Asia was America. On the one hand, it was clear that the United States had scant appetite for war, in Asia or anywhere else. On the other, Americans had little desire to see Japan as sole master of China, let alone the whole of East Asia. But those who ran US policy in the Pacific believed they did not need to take up arms to prevent this, because of Japan’s dependence on trade with the United States and hence its vulnerability to economic pressure. Around a third of Japan’s imports came from the United States, including copious quantities of cotton, scrap iron and oil. Her dependence on American heavy machinery and machine tools was greater still. Even if the Americans did not intervene militarily, they had the option to choke the Japanese war machine to death, especially if they cut off oil exports. This was precisely what made it so hard for American diplomats and politicians to foresee the attack on Pearl Harbor. As normally risk-averse people, they could not imagine the Japanese being so rash as to gamble on a very swift victory when the economic odds were stacked so heavily against them. They assumed that the partial sanctions imposed after the Japanese invasion of Indo-China would send a clear enough signal to deter the Japanese. The effect was precisely the opposite.

The path to war in the Pacific was paved with economic sanctions. The Japanese-American Commercial Treaty of 1911 was abrogated in July 1939. By the end of the year Japan (along with other combatants) was affected by Roosevelt’s ‘moral embargo’ on the export of ‘materials essential to airplane manufacture’, which meant in practice aluminium, molybdenum, nickel, tungsten and vanadium. At the same time, the State Department applied pressure on American firms to stop exporting technology to Japan that would facilitate the production of aviation fuel. With the National Defense Act of July 1940 the President was empowered to impose real prohibitions on the exports of strategic commodities and manufactures. By the end of the month, after a protracted wrangle between the State Department and the Treasury, it was agreed to ban the export of high-grade scrap iron and steel, aviation fuel, lubricating oil and the fuel blending agent tetraethyl lead. On September 26 the ban was extended to all scrap; two months later the export of iron and steel themselves became subject to licence. No one knew for sure what the effect of these restrictions would be. Some, like the State Department’s Advisor on Far Eastern Affairs Stanley Hornbeck, said they would hobble the Japanese military; others, like the US ambassador in Tokyo, Joseph Grew, that they would provoke it. Neither view was correct. The sanctions were too late to deter Japan from contemplating war, since the Japanese had been importing and stockpiling American raw materials since the outbreak of war in China. Only one economic sanction was regarded in Tokyo as a casus belli and that was an embargo on oil. That came in July 1941, along with a freeze on all Japanese assets in the United States – a response to the Japanese occupation of southern Indo-China. From this point, war in the Pacific was more or less inevitable.

1 Comment

Filed under China, economics, industry, Japan, U.S., war

by | 20 April 2009 · 10:23 pm

March 1933: Similar Talk, Different Results

From The War of the World: Twentieth-Century Conflict and the Descent of the West, by Niall Ferguson (Penguin Press, 2006), pp. 221-225:

It was March 1933. The national mood was feverish and yet expectant. In the wake of his sweeping victory, the country’s charismatic new leader addressed people desperate for change. Millions crowded around their radios to hear him. What they heard was a damning indictment of what had gone before and a stirring call for national revival….

The action the new leader had in mind was bold, even revolutionary. Jobs would be created by ‘direct recruiting by the Government itself, treating the task as we would treat the emergency of war’; men would be put to work on ‘greatly needed projects to stimulate and reorganize the use of our natural resources’…. He would introduce a system of ‘national planning for and supervision of all forms of transportation and of communications and other utilities’ and ‘a strict supervision of all banking and credits and investments’ to bring ‘an end to speculation with other people’s money’ – measures that won enthusiastic cheers from his audience….

Not content with this vision of a militarized nation, he concluded with a stark warning to the nation’s newly elected legislature: ‘An unprecedented demand and need for undelayed action may call for temporary departure from … the normal balance of executive and legislative authority.’ If the legislature did not swiftly pass the measures he proposed to deal with the national emergency, he demanded ‘the one remaining instrument to meet the crisis – broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe’. This line brought forth the loudest applause of all.

Who was this demagogue who so crudely blamed the Depression on corrupt financiers, who so boldly proposed state intervention as the cure for unemployment, who so brazenly threatened to rule by decree if the legislature did not back him, who so cynically used and re-used the words ‘people’ and ‘Nation’ to stoke up the patriotic sentiments of his audience? The answer is Franklin D. Roosevelt, and the speech from which all the above quotations are taken was his inaugural address as he assumed the American presidency on March 4, 1933.

Less than three weeks later, another election victor in another country that had been struck equally hard by the Depression gave a remarkably similar speech, beginning with a review of the country’s dire economic straits, promising radical reforms, urging legislators to transcend petty party-political thinking and concluding with a stirring call for national unity .The resemblances between Adolf Hitler’s speech to the newly elected Reichstag on March 21, 1933, and Roosevelt’s inaugural address are indeed a great deal more striking than the differences. Yet it almost goes without saying that the United States and Germany took wholly different political directions from 1933 until 1945, the year when, both still in office, Roosevelt and Hitler died. Despite Roosevelt’s threat to override Congress if it stood in his way, and despite his three subsequent re-elections, there were only two minor changes to the US Constitution during his presidency: the time between elections and changes of administration was reduced (Amendment 20) and the prohibition of alcohol was repealed (Amendment 21). The most important political consequence of the New Deal was significantly to strengthen the federal government relative to the individual states; democracy as such was not weakened. Indeed, congress rejected Roosevelt’s Judiciary Reorganization Bill. By contrast, the Weimar Constitution had already begun to decompose two or three years before the 1933 general election, with the increasing reliance of Hitler’s predecessors on emergency presidential decrees. By the end of 1934 it had been reduced to a more or less empty shell. While Roosevelt was always in some measure constrained by the legislature, the courts, the federal states and the electorate, Hitler’s will became absolute, untrammelled even by the need for consistency or written expression. What Hitler decided was done, even if the decision was communicated verbally; when he made no decision, officials were supposed to work towards whatever they thought his will might be. Roosevelt had to fight – and fight hard – three more presidential elections. Democracy in Germany, by contrast, became a sham, with orchestrated plebiscites in place of meaningful elections and a Reichstag stuffed with Nazi lackeys. The basic political freedoms of speech, of assembly, of the press and even of belief and thought were done away with. So, too, was the rule of law. Whole sections of German society , above all the Jews, lost their civil as well as political rights. Property rights were also selectively violated. To be sure, the United States was no utopia in the 1930s, particularly for African-Americans. It was the Southern states whose legal prohibitions on interracial sex and marriage provided the Nazis with templates when they sought to ban relationships between ‘Aryans’ and Jews. Yet, to take the most egregious indicator, the number of lynchings of blacks during the 1930s (119 in all) was just 42 per cent of the number in the 1920s and 21 per cent of the number in the 1910s. Whatever else the Depression did, it did not destroy American democracy, nor worsen American racism.*

(*Roosevelt nevertheless opposed the Costigan-Wagner Anti-Lynching Bill for fear that to support it might cost him the Southern states in the 1936 election.)

Leave a comment

Filed under democracy, economics, Germany, industry, military, nationalism, U.S.

by | 12 December 2008 · 10:33 pm

Japan’s Many Failed Stimulus Plans

In Wednesday’s Washington Post, Amity Shlaes chronicles the failure of Japan’s attempt to stimulate its economy during the 1990s by heavy government investments in infrastructure.

The situation in Japan then was similar in some ways to that in the United States today. A dramatic market crash and a plunge in real estate prices shook what had been a confident nation. Japan turned inward; economists talked earnestly about paradigm shifts. The obsession with exporting no longer seemed to be serving the country well. Leaders cast aside their previous concerns about budget deficits. The then-Ministry of International Trade and Industry sorrowfully let it be known that there were “areas in which Japan lags behind major developed nations.”…

The projects were similar to some infrastructure plans under discussion here today. Bridges? Japan put up the longest suspension bridge in the world. Airports? Kansai International, yes, on an artificial island, but also local fields such as Ibaraki Airport near Mito. Roads? Japan built new streets and highways, including the famous New Tomei Expressway. For biotech and telecommunications, Japan poured out the subsidies.

When one plan proved insufficient, another was begun…. Between 1992 and 2000, the Japanese launched 10 stimulus packages that included public works. The Land of the Rising Sun became the Construction State. Other worthy issues, such as consistent tax reform, lagged. In fact, fiscal reform overall was postponed. After the 1995 Kobe earthquake claimed thousands of lives, the focus on infrastructure was reinforced….

“The construction state is in some respects akin to the military-industrial complex in cold-war America (or the Soviet Union), sucking in the country’s wealth, consuming it inefficiently, growing like a cancer and bequeathing both fiscal crisis and environmental devastation,” commented Gavan McCormack, a professor at the Australian National University. The stimulus plans had the opposite effect of what was expected. Appalled at the country’s new deficits, Japanese consumers closed their wallets.

Worst, though, was the failure on jobs. Unemployment fell in many nations in the 1990s. In Japan, the ’90s were a lost decade: The unemployment rate more than doubled and surpassed the U.S. rate — an unthinkable occurrence just a few years earlier.

Leave a comment

Filed under economics, industry, Japan, U.S.

by | 20 October 2008 · 5:53 pm

India’s Huge Informal Labor Sector

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 211-213:

The poor in India are a vast reserve army of cheap labour. Organized labour in the ‘formal’ sector of the economy is a comparatively small part of the total labour force. In 2003 the public and private sectors together employed 27 million workers. The private sector is the smaller one with 8.4 million but a greater share of the ‘manufacturing’ category with 4.7 million as against only 1.5 million in the public sector. According to the theory of W. Arthur Lewis, in a ‘dual economy’ (traditional and modern) there is a reserve army of labour in the traditional sector which supplies the modem one with a steady flow of new recruits. But the Indian economy is not a dual one: it consists of two parallel economies. Since the reform of 1991, employment in the formal sector has practically stagnated; there has been only a slight shift from the public to the private sector, the first losing and the latter gaining 1 million employees. These figures would confirm the frequent comments on the phenomenon of jobless growth. But, of course, this refers only to the formal sector; the actual growth takes place in the informal sector. In fact, from 1978 to 2000, the share of the informal sector in the total labour force increased slightly from 91.3 to 92.4 million, although one would have expected a decrease of informal labour in a period of steadily increasing economic growth. The wage differential between the two sectors is enormous. For employees in the public sector, official statistics show an average daily per capita rate of Rs 681. According to the National Sample Survey mentioned earlier, the daily wages for male casual labourers in urban areas are Rs 75 and in rural areas Rs 56; the rates for female labourers are Rs 44 and 36 respectively. The figure for the public sector would, of course, include the high salaries of the Class I officials, but they are a small minority when compared to the legions of humble Class IV officials who do manual work or errands for the higher-ups. Nevertheless, even these humble people are head and shoulders above the casual labourers in the informal sector. Moreover, their jobs are secure and permanent, unlike the ‘informal’ jobs, which are subject to the rule of ‘hire and fire’.

Subjection to the rule of ‘hire and fire’ has increased with the growing casualization of informal labour. New forms of contracting labour have developed which permit the employer to shift the onus of hiring and firing casual labour to agents who are told how many workers are needed at any given time. Casualization has particularly affected women workers who were previously not very active in the labour market but have joined it in recent years in increasing numbers. Concerned social scientists have coined the term ‘feminization of poverty’ in order to characterize this phenomenon.

The ‘informal’ proletarians are not protected by any trade unions, which for good reasons concentrate on the organized sector of the economy. Very few of the recognized trade unions can depend on regular fees paid by their members. Accordingly, union leaders must look for other sources of income. They usually squeeze the employers by threatening to stir up trouble. There is no collective bargaining in India: wages are set by officially appointed tribunals and there are also tribunals which try the cases of individual workers who have been made redundant or have not been paid the wages due to them. Therefore most labour leaders are lawyers who spend their time pleading before those tribunals. The informal proletariat has no contact with such tribunals or lawyers.

The usual staff of a workshop in the informal sector consists of the boss and fewer than ten workers. In small firms which operate as subcontractors for manufacturers, the boss may even be an engineering graduate. Capital investment in such workshops is minimal so very often they band together and help each other out. One has a lathe, the other a drilling machine, etc.; if the piece of work requires both, it is carried from one shop to the other. The ignorant observer may think that this cluster of workshops is a slum, but on closer inspection he will be surprised to see the quality and variety of their products. Bigger firms rely on such subcontractors for two reasons: first of all, they can keep the number of workers and the investment in machines limited; and, secondly, if there is a slack in demand they can cut the orders farmed out to the subcontractors. This explains the phenomenon of jobless growth in the organized sector. The huge number of subcontractors who have the reserve army of labour on their doorstep shield the organized sector against risks but can also respond very quickly to increased demand. There is, however, a growing gap between labour productivity in the organized and in the informal sectors. In 1983 labour in the organized sector was about six times more productive than that in the informal one; by 1999 the differential had increased to nine times. This would also account for the wage differentials between the two sectors.

The wages paid by subcontractors, particularly if they work for manufacturers producing cars or machine tools, have to be higher than the wages of casual labourers mentioned above, but they would still be much lower than those in the organized sector. The qualifications of the informal proletariat working for subcontractors range from those of skilled workers to that of untrained people. The skilled workers in workshops would be the ‘creamy layer’ of the informal proletariat and they would be above the poverty line. But the great majority of the reserve army of informal labour are quite poor, something that would be particularly true of the many landless labourers who are at the beck and call of the landowning peasantry. Earlier systems of permanent attachment of such labour to the households of their employers have long since disintegrated because the employer can always find casual labour and does not need to retain labourers in the off-season. Even at times when the harvest or other seasonal operations suddenly require additional labour, there are nowadays migrant labourers who make themselves available for seasonal employment. Workers from Tamil Nadu will show up in the Punjab or elsewhere at a distance of 1,500 kilometres from their home. Here, too, the informal proletariat shows its usefulness as a reserve army of labour. About 43 per cent of India’s rural population are landless. If one deducts from this about 8 per cent for traders, carters, and so on there would still be 35 per cent of labourers who depend on their daily wages.

Of course, ‘casualization’ is hardly limited to India or to informal sectors of large economies. One report last year estimated that 70% of the faculty in American universities now depend on part-time or limited-term contracts. So, to twist the clause that begins this passage: An oversupply of postgraduate degrees provides a vast reserve army of cheap labour for universities.

Leave a comment

Filed under economics, India, industry, labor

by | 28 September 2008 · 11:53 am

India’s Infrastructure: Bad News, Good News

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 157-160:

Next to airports, India’s seaports require thoroughgoing modernization. The biggest and most famous of them all, Mumbai, has a notorious reputation for terrible delays and incompetent handling of goods. A few years ago, turnaround time was about eight days, regardless of the size of the vessel; this has improved somewhat but even now about four days are required to load or unload a ship. This is due to deliberate negligence as the port earns more by collecting demurrage charges than by any other means. The trick of this trade is the stranglehold which Port Authority labour has on the loading and unloading of goods. In most other ports around the world, the port authority is merely a landlord, providing berths and cranes, etc. but no labour, with loading and unloading done by labour hired by the shipowner or his agent. The port authority with ‘dedicated’ labour is a British legacy. In British ports it may have made sense to retain a labour force specialized in loading and unloading ships, particularly in the past when most of this work was not mechanized. Nobody would have thought that delay rather than speed would be the result of retaining specialized labour. Making money on demurrage charges is, of course, a flagrant example of being penny-wise and pound-foolish. No shipowner in his right mind would enter a port such as Mumbai unless he absolutely has to because it is his destination. Bulk breaking is taking place elsewhere in efficient ports like Singapore or Colombo. Many a ship with only part of its load to be delivered to India would rather call at those ports than enter an Indian port. Jawaharlal Nehru Port across the bay from the old port of Mumbai is supposed to be somewhat more efficient than the old one, but it is first and foremost a container port under the management of the Indian railways and is thus not a direct competitor of the old port. Although Jawaharlal Nehru Port is India’s largest container port, it handles only about 10 per cent of the freight handled by Hong Kong, the world’s largest port of this kind. The inefficiency of Indian ports is not only delaying imports, it is also harming the export trade. In the old days of ‘export pessimism’ this was ignored, but now when producers in India wish to export some of their production to achieve economies of scale, they may give up such plans as their goods get stuck in the port….

The story of Sunil Bharti Mittal, who is now the biggest private operator in this field, is a good example of the rise of the new type of Indian telecom entrepreneur. He is not related to the famous steel tycoon Lakshmi Niwas Mittal, and his rather unusual family name Bharti is made up. His father, who belonged to a caste of traders, married a woman of a higher caste. This inter-caste marriage was frowned upon at that time and the couple adopted the name Bharti. Sunil started making cycle parts in Ludhiana. In 1983 when many imports were still banned, he hit upon the idea of manufacturing push-button telephones and then launched his Airtel brand of mobile phones in 1995. From making phones it was only one further step to acquiring two mobile phone licences and one fixed net licence. Subsequently Mittal expanded his operations and now provides his services in all 23 mobile telephone circles of India in which field he has overtaken the public sector firm BSNL. In order to raise the capital for this relentless expansion he linked up with foreign investors. In 2001 the American firm Warburg Pincus acquired about 6 per cent of Bharti Televentures; later the Singapore firm SingTel and the British firm Vodafone also acquired shares in Mittal’s company, but they are all minority shareholders. Meanwhile Sunil Mittal dominates the Indian telecom scene and continues to win prizes both in his personal capacity as an exemplary entrepreneur and for his company as the best in its field. He has also pioneered broadband connectivity in various fields and is always a step ahead in adopting new technologies. Mittal had started from scratch as an innovative entrepreneur. As he has stated, he was inspired by Mahatma Gandhi’s words: ‘First they ignore you, then they laugh at you, then they fight you, and then they lose.’

Leave a comment

Filed under economics, India, industry, labor

by | 20 September 2008 · 12:31 pm

India’s Sweatshop Diamonds

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 96-97:

When India had shielded its economy behind tariff walls, its share in world trade had dwindled into insignificance. As mentioned earlier, ‘export pessimism’ was the prevailing mood at that time. It was not easy to change this mood so only new branches of export production could escape it. Nowadays three new types of commodity account for more than half of India’s total exports. Diamond processing was the first and the most unexpected success story of them all. Of course, India had been known as a source of beautiful diamonds in ancient times, but in modern times South Africa has been the leading producer of raw diamonds and the processing is done in Western Europe in places such as Antwerp. Only a few decades ago Jewish merchants controlled almost the entire diamond trade and Jewish artisans participated in the processing of these precious stones. Suddenly a community of Gujarati merchants from Palanpur cut into this trade and made use of cheap and skilled labour available to them in places such as Surat and other towns of Gujarat as well as on the outskirts of Mumbai.

India has to import the raw diamonds; the contribution of its export industry is the value added by expert processing. A breakthrough was provided to this new industry by the creative use of industrial diamonds. Only about a quarter of all diamonds mined are normally fit for jewellery; the rest are passed on to the makers of machine tools for cutting and grinding. Most industrial diamonds are small. Gujarati entrepreneurs knew how to get these tiny stones processed and adopted novel designs of jewellery which sparkled due to the collective effect of many small stones rather than the individual radiance of larger and very expensive diamonds. This created a new market of middle-class consumers who could not afford expensive jewellery. But the Gujarati entrepreneurs also ventured into the market for very precious stones. They even created new brands such as the Nakshatra diamonds endorsed by the Indian actress Aishwarya Rai, a former Miss World.

The buying of diamonds in places like Antwerp is done by the so-called ‘sightholders’, experts entitled to inspect raw diamonds and select them for their respective companies. Earlier these sightholders were a charmed circle of insiders, but the Gujarati merchants gained access to the circle and now almost dominate it. Eleven of twelve diamonds processed in the world are now processed in India. This, of course, means that the fast growth which this Indian industry registered in recent years is bound to level off. The value of Indian exports of precious stones – mostly processed diamonds – has expanded by leaps and bounds. In 1966 the value of these exports was a mere US$ 25 million; by 2004 it amounted to US$ 14 billion.

India’s greatest advantage is the low wage paid for the rather demanding job of diamond processing. The fixture in which the diamond is held during processing is called a dop. With a semi-automatic dop a worker can polish 800 to 1,000 diamonds per day. The wages of Indian workers in this line are about 10 per cent of those earned by their colleagues in Antwerp. This is why more than 800,000 workers are employed in the various workshops in Surat whereas in Antwerp there are only about 30,000 still active in this field. Surat is just one of the Indian centres of diamond processing, though perhaps the largest. The conditions of the workers are generally quite miserable and children are also recruited for this work. Large profits are reaped only by the entrepreneurs, who have now extended the scope of their work to other Asian countries and even to Russia.

Leave a comment

Filed under Belgium, economics, India, industry, labor

by | 20 September 2008 · 7:05 am

India’s ‘Fraternal Capital’ and Contractor Networks

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 100-101:

Tiruppur, a town near Coimbatore in Tamil Nadu, has emerged as a major centre of knitwear production and Sharad Chari has made a fascinating study of the mode of production in this town. He has described the emergence of ‘fraternal capital’ as a typical form of cooperation among small-scale entrepreneurs in this field. Most of the owners of the small workshops and even a large number of their employees belong to the Gounder caste of peasants who have made a successful transition to industrial production. The Gounder peasants are used to hard work in intensive agriculture where the landholder and his labourers are working together and this style of operations has been transferred to the shop floor where the owner is always present, usually controlling the stitching table where the cloth is converted into garments. Gounders who want to emphasise the special features of their work often make it appear as a kind of ‘work ethic’. Actually it helps them to justify the control of labour in their small-scale industry. They do not strive for economies of scale as these would be diseconomies under the official rules favouring small-scale enterprises. Accordingly, successful entrepreneurs do not invest their capital in expanding their production, but in setting up ‘fraternal’ enterprises run by other members of the Gounder caste, albeit these people are not necessarily related to them in terms of family ties. Total production has thus grown very quickly and whereas earlier only men worked in this industry, more and more women have been recruited in recent years. Most workers are paid by piece rate or they work under various types of contracts rather than receiving regular wages.

When production for export increased, a new elite of export merchants arose from the ranks of these small entrepreneurs. Smart young men in business suits, wearing sunglasses, can be seen chatting with their relatives on the shop floor who provide them with the material which they market in New York or elsewhere. Many of these exporters are assemblers rather than producers. The links of fraternal capital connect all these people and make it difficult for outsiders to penetrate this business. In this way fraternal capital provides horizontal and vertical linkages which are otherwise only found in big corporations. Decentralized supervision – and exploitation – of labour is an asset in this type of business organization. Contracting in and out enables the small entrepreneurs to respond to changing demand. Such an organization helps to defend the class of entrepreneurs against labour unions, which have a strong tradition in this area.

Another interesting example of the control of labour in this region is the putting-out system practised by a producer of rag carpets in the adjacent Erode District. He uses rags from the hosiery industry and gets carpets woven for the big Swedish firm IKEA. Initially it was traditional weavers who got involved in this business, but soon the putting-out system was extended to villages whose supply of labour was of a very different kind. In a Gounder village affected by water scarcity, the peasants took up carpet weaving in order to survive. In another village inhabited by migrant construction workers, the women who had also participated in this work shifted to carpet weaving, which they could do at home. Tapping labour resources of different kinds for export production is a characteristic feature of the informal sector of India’s economy.

Similar features of decentralized production and exploitation of labour can be observed in the garment industry of Ahmadabad, a city once famous for its large composite textile mills, most of which have long since closed down or are ‘sick‘. But in the 1990s hundreds of small workshops producing ready-made garments sprang up. Their production is supplemented by home-based women who stitch garments for entrepreneurs who operate a putting-out system. These women had been used to stitching petticoats and children’s wear; they own very simple sewing machines. When they were required to stitch more complicated garments for export their skills and their machines often proved insufficient for the new tasks. They usually earn piece rates which amount to about 2 to 5 per cent of the value of the articles they produce. With such low wages they can hardly afford to invest in add-ons to their sewing machine for new lines of production. Nevertheless, they somehow managed to get on with their work. This area of Gujarat is also famous for its embroidery, which has been successfully adapted to the requirements of export production, a line of production in which India is ahead of China.

Leave a comment

Filed under economics, India, industry, labor

by | 23 August 2008 · 2:09 am

India’s Rise: Sick Mills vs. Powermills

From India: The Rise of an Asian Giant, by Dietmar Rothermund (Yale U. Press, 2008), pp. 88-89:

In the years of the Great Depression, the Indian textile industry was partially protected under the regime of imperial preference, Production for the home market expanded, but there was hardly any investment in new machinery. Moreover, India had no textile machine industry of its own. During the Second World War, no machinery could be imported, but the mills worked around the clock under the regime of government procurement. By the end of the war, spindles and looms were worn out and mill-owners would have liked to have invested in new machinery. However, foreign exchange was scarce as India had no immediate access to its reserves accumulated in the Bank of England. At this stage something happened which had terrible consequences for the future of the Indian textile industry. Mahatma Gandhi had compelled the Indian government to abolish the food-grain controls introduced during the war. Prices fell after the controls had been abolished – as Gandhi had predicted. His followers then tried to apply the same rule to cotton texiles, which had also been subjected to controls. The mill-owners warned the government that they would not be able to cope with the rising demand with their decrepit looms. Nevertheless, the controls were abolished and prices rose. Controls were then re-imposed in August 1948. At the same time positive discrimination in favour of the products of handloom weavers was introduced. These weavers were dear to Gandhi as he regarded them as the paragon of the type of cottage industry which he preferred to the mills. The well-meaning protectors of the handloom weavers did not notice that these weavers had to a large extent been replaced by powerloom weavers, whose rise will be described below. The mills were now prevented from modernizing their equipment and expanding their production. They were turned into living fossils. The mill-owners continued production half-heartedly. There seemed no longer to be any future for this industry. Some mills were closed down as early as the 1950s and 1960s. To make matters worse, a prolonged strike of textile labour in Mumbai in the 1980s sounded the death knell for the industry in this metropolis.

It was quite natural that textile labour should be frustrated under these conditions, but resorting to a strike in an industry which was already doomed proved to be counterproductive. The workers turned to Dr Datta Samant, an independent labour leader who had organized a very succesful strike for the workers of the Premier automobile factory in Mumbai. This strike ended with a substantial increase in wages, which were tied to a productivity index. Samant was a medical doctor who knew nothing about economics and thought that his recipe would work in the textile industry just as it had done in the automobile industry. He was a charismatic leader and inspired the workers to continue their strike, which started in 1982, for eighteen months. (His life ended tragically when he was openly gunned down by gangsters in 1997.) The result of the strike which he had led was perverse: the workers shifted to the powerlooms in order to earn a living and the mill-owners procured cloth from these power looms and marketed it. By the time the strike ended the powerlooms had taken over most of the production and the mills were ‘sick’.

The phenomenon of a ‘sick mill’ can only be understood in the Indian context. Elsewhere a sick mill would go bankrupt and close down. In India, however, where there are no unemployment benefits, laid-off workers are politically dangerous and therefore the government will nurse sick mills to keep them alive even if they cease to produce anything. The mill-owners soon learned to make a profit out of being sick. The Reserve Bank of India sanctioned favourable loans for such sick mills. Clever manipulators could siphon off enough money from such loans and use it for other purposes. The production of mill-made cloth declined steeply under such conditions, from about 3.4 to 2 billion metres in the decade of the 1980s. In the same period the production of powerlooms increased from 5 to 11.4 billion metres.

1 Comment

Filed under anglosphere, economics, India, industry, labor

by | 17 July 2008 · 8:43 pm

Lankov on the Origins of Commercialized Prostitution in Korea

In my reduced blog-reading of late, I’ve been a little slow to note an interesting take, by Andrei Lankov in the Korea Times, on the origins of what is now a highly developed industry in Korea (and elsewhere, in both supply and demand): commercialized prostitution.

Traditionally, most East Asian countries have had few scruples with regard to extramarital sex as far as males were concerned, but before 1900, Japan was remarkable in the development of commercial prostitution on a grand scale.

In this regard it was different from Korea, where in old times only the rich and famous could afford to buy expensive sexual services from gisaeng girls, while the “low orders” usually had no access to commercial sex whatsoever.

The Korean nationalists love to stress this fact, explaining it as another indication of the alleged “spiritual purity” of Koreans. Well, less lofty explanations are more likely, but it is difficult to deny that the large-scale prostitution industry was created by the Japanese presence.

In the 1850s, Japan was “opened” to the world, but for decades afterward it remained a very poor place, so “export-oriented” prostitution became a major industry there.

The Japanese working girls, known as “karayuki-san” (“those going overseas”), plied their trade across Asia, from Sydney to Vladivostok, from Shanghai to Singapore, usually supervised by Japanese brothel owners.

A Japanese prostitute and brothel remained ubiquitous components of urban life in the Asia-Pacific for the decades between 1870 and 1920, and remittances from these girls, who duly sent their earnings back home, were said to be the third biggest foreign currency earner for Japan at the turn of the 20th century.

Of course, neighboring Korea became one of the areas where Japanese prostitution flourished. Contrary to the now common misperception, typical commercial sexual encounters in Korea before 1900 did not involve a poor Korean girl serving some lusty Japanese male.

If anything, the situation in which a Korean male purchased sex from a Japanese female was probably more common. Until the 1910s, the vast majority of prostitutes operating in the country were Japanese.

Koreans may want to blame Japan for commercializing prostitution in Korea, but Japan can hardly be blamed for the growth of prostitution everywhere else in East, Southeast, and South Asia, except insofar as it led the way in creating a model of economic growth that spread the wealth beyond a narrow elite.

via The Marmot

Leave a comment

Filed under China, economics, industry, Japan, Korea, Philippines, Southeast Asia

by | 6 May 2008 · 8:56 pm

Stakhanovites as the New (Leisure) Class

From: Sacred Causes: The Clash of Religion and Politics, From the Great War to the War on Terror, by Michael Burleigh (HarperCollins, 2007), pp. 89-91 (reviewed here and here):

The Soviet Union was not immune to what was emerging as a global cult of celebrity, or notoriety, focused on athletes, aviators, boxers, film-stars, gangsters, mountaineers and, as we have seen, dictators. Already, the commissar for heavy industry, Sergo Ordzhonikidze, had launched the search for ‘new people’, saying, ‘In capitalist countries, nothing can compare with the popularity of gangsters like Al Capone. In our country, under socialism, heroes of labour, our Izotovites, must become the most famous,’ a reference to Nikita Izotov, a miner whom colleagues described rather sourly as ‘the human cutting machine’. But Izotov was destined to be eclipsed, along with the new hybrid Marx, Aristotle and Goethe.

In 1931 Pravda ran features under the slogan ‘The Country Needs to Know its Heroes’, consisting of photographs of aviators, collective farmers, shock-workers and the like. The concept of the exemplary elite was primarily associated with Aleksei Stakhanov, a thirty-year-old Donbass coalminer, who in August 1935 managed to cut 102 tons of coal (or fourteen times his norm) in a single shift—moreover, with the aid of a trusty Soviet-produced pneumatic pick. Stakhanov had migrated from a village in Orel, working his way up from pony-brakeman to manual pick operative, before getting his hands on the air-powered pick that brought him fame and fortune. Of course the work was done at night, enabling Stakhanov to maximise his labours as compressed air went to his pick alone, and his six-hour continuous stint was facilitated by a lengthy logistical chain beginning with the men installing timber props behind him. Nonetheless, the anonymous battalions of shock-workers were thenceforth superseded by a Soviet Hercules with a human face. ‘Recordmania’ spread like a feverish sickness, with managers and foremen sweating too lest they be denounced as ‘bigwigs’, ‘windbags’, ‘routiners’, ‘wreckers’, or ‘saboteurs’ for failing to make these ‘Stakhanovite’ feats feasible, rendering them liable to what the Kremlin’s own Al Capone sinisterly called ‘straightening out’ or ‘a tap on the jaw’. It mattered not that these epic episodes tended to deplete machinery and leave ‘Stakhanovites’ spent, or that some workers resented the diversion of resources, the subsequent lifting of their own norms, or the rich rewards such Promethean heroics brought. Schadenfreude best describes those who said of a young female Stakhanovite, who had been rewarded (one hopes she was grateful) with the selected works of Lenin: ‘That’s what the whore deserves!’ Resentment towards Stakhanovites bestriding the factory floors ‘like gods’ was compounded when they became fixtures of the factory ‘production courts’.

Much of the time of stellar Stakhanovites was increasingly spent on tour, whether visiting the Kremlin, addressing other workers or venturing confidently into places—such as the opera or theatre—where workers already did not comfortably go. Even society pages in the newspapers included such gems as ‘The brigadier-welder Vl. Baranov (28), the best Stakhanovite at Elektrozavod, glided across the floor in a slow tango with Shura Ovchinnovka (20), the best Stakhanovite at TsAGI. He was dressed in a black Boston suit that fully accentuated his solidly built figure; she was in a crepe de chine dress and black shoes with white trimming.’

In other words, although they talked incessantly about work, Stakhanovites did less and less of it, recalling it, like millionaire footballers or pop stars from humble origins, as something that took on roseate hues in memory of things past. Of course, Stakhanovites had a role to play within a wider myth-in-the-making. As an explicitly hierarchical society replaced one allegedly based on fraternity, they had to acknowledge the crucial guiding role of the nation’s father-figure, whose speeches had allegedly originally inspired them to break through artificial barriers while using technology almost as an extension of their own brain. Stakhanovites, who were often not members of the Party, were also model citizens in respects other than dutiful sons and daughters of the ultimate patriarch. Their lifestyle was supposed to exemplify the theme that ‘life is joyous, comrades’, and since they were showered with official munificence while simultaneously enjoying very high wages, the joyous life seemed like an idyllic shopping spree, for clothes, clocks, furniture, motorbikes, perfume, phonographs and so forth. Thus adorned and kitted out, Stakhanovites appeared having their leisurely breakfasts, reading the papers, lunching with friends, playing a little volleyball, tea and a game of checkers, while their wives undertook charitable work as ‘housewife-activists’ and their children were exhorted to their own heroics at school.

Leave a comment

Filed under economics, industry, Russia, USSR