The finance and growth of the Lancashire cotton textile industry, 1870-1914
Using accounting records and financial data, a business history of the Lancashire textile industry from 1870 to 1914 is presented. Issues of technology and industry structure, which have attracted a great deal of comment are first re-addressed. The discussion is then widened to include other aspects of the industry which have previously been neglected, namely the social processes of capital accumulation with reference to those evolving relationships between managers and shareholders which, in the context of broader economic change, helped forge the special characteristics of Lancashire capitalism. The industry is found to be generally healthy and competitive, although its fortunes were dangerously dependent on the overseas value of the pound. Whilst the original technologies of the industrial revolution were maturing, the alternative twentieth century means of automated throughput had still not been developed. External economies and flexibility associated with vertical specialisation thus continued to outweigh those of integrated throughput production. Meanwhile a transformation of the industry occurred in terms of its ownership, as the previously influential small shareholder was forced to surrender influence to a rising class of promotional and financial capitalists, a trend accentuated by, inter alia, a very serious stock exchange crash in the 1890s which forced many to sell their holdings. A shift of industry value added from labour to capital and record profits after 1900 are identified. These attracted capital into cotton and reinforced the position of the newer owners of the industry. Important features of their behaviour are examined, primarily their ability to construct impressive business empires through personal shareholdings and interference in day to day management, and their corresponding reluctance to establish professional management hierarchies, which, although increasingly common in other industries, were compromised by preference for individual, and not corporate, accumulation. Characterised as they were by their easy access to financial resources, these new capitalists might well have made sweeping changes to industry structure and technology had they chosen to do so. However, although ring spinning was found to be in general more profitable, the basis of that superiority was an extension of the process of increased specialisation. All specialised companies, whether ring spinners, mule spinners, or weavers, tended to do much better than their vertically integrated counterparts in the period after 1900. Evidence from this period has implications for our understanding of subsequent developments. If the industry could have been restructured before 1914, then so it could have been after the First World War when it arguably became more necessary. Pre 1914 technical constraints are identified and it is also noted that it was in the inter-war period that the means to remove them were fully developed. However, considering technical issues in conjunction with characteristics of capital ownership, it is concluded that, as the industry failed to attract investment when profit signals turned negative, for example in the 1890s, and attracted a lot of capital in the booms of the early 1900s, any constraint did exist to prevent restructuring it was financial rather than organisational. The process and character of capital accumulation is therefore advanced as a crucial ingredient of our understanding of business history. In short, the established financial, technical, and organisational structure, when combined with buoyant overseas monetary and trading conditions, is found to have created the synthesis of a profitable industry; when external conditions changed, financial, technical, and organisational constraints became important but in that strict and steeply descending order. Lancashire was highly vulnerable to the world market; that vulnerability was accentuated by the way in which capital was created. It was the social process of capital accumulation which was the principal determinant of the development, and perhaps therefore ultimately the decline, of a once great industry.