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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,
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”
© 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 Region-
History. 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

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

List of illustrations x
List of tables xii
List of contributors xiv
Preface xv

1 Region and history 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
2 Region and nation 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

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
3 Comparisons between the development of big business in the 78
north-west of England and in Osaka, 1900–1990s
Size of firm 78
Industrial activity 82
Location of head office 88
Strategies and structures 89
Chairmen 96
Survivors 96
Conclusion 98
Notes 98
4 Japan, Lancashire and the Asian market for cotton manufactures, 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 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

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 144
Indies and India
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
5 Labour management in the textile industry 160
Notes 175
6 Electronics manufacturers in Osaka and Manchester: a comparison 178
of Matsushita and Ferranti
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
7 A comparison of Cammell Laird and Hitachi Zosen as shipbuilders 209
Acknowledgement 227
Notes 227
Sources 228
8 Management education in Japan and the United Kingdom: 229
regional dimensions
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

Postwar educational reform in Japan and the business response 238

Business schools in Britain: a revolution? 242
Conclusion 245
Notes 247
9 Industrial research in Osaka and north-west UK from the 1920s to 255
the 1960s
Introduction 255
Public research organisations 256
Private industrial research 271
Conclusion 294
Acknowledgements 296
Notes 296
10 Region and strategy 303
Significant issues arising from the comparison of the Lancashire and Kansai 303
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

Frontispiece Sanji Muto (1867–1934) in 1931. He served Kanegafuchi ii

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
Map 4 Kansai, 1990. xxiv
2.1 Tomoatsu Godai (1835–85). At the end of the Edo period as a 17
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.
3.2 Coming from the mill, 1990: the Lily Mill, Linney Lane, Shaw, 97
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).
4.1 The more-looms proposal in the Lancashire weaving trade, 1931. 137
4.2 Japanese competition in the Indian market, 1931. 147
4.3 Great expectations were aroused in Lancashire by the Cotton 149
Industry Reorganisation Act of 1939 which was, however, shelved
on the outbreak of war.
6.1 Konosuke Matsushita (1894–1989), the founder of Matsushita 180
Electric in 1983 at the age of 89.
6.2 Sebastian Ziani de Ferranti (1864–1930). the founder of Ferranti 180
Ltd, robed in his doctoral gown in 1926 at the age of 62.
7.1 British shipbuilding, 1957. 210
7.2 HMS Ark Royal before its launch at Birkenhead in 1937. This 212
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.
7.3 Japanese shipbuilding, 1900–90. 213
7.4 A Japanese supertanker constructed in 1971 at the Sakai Shipyard 219
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.

2.1 Population of the cities of Manchester, Osaka, Liverpool and Kobe, 17

1871–1991 (thousands)
2.2 Employment in the North-west region of England, 1911–90 48
2.3 John Friedmann’s hierarchy of thirty world cities, 1990 55
3.1 Employment sizes of the fifty largest firms in the North-west and Osaka 79
c. 1907, 1935, 1955 and 1992
3.2 Aggregate North-west employment of NW50 compared to UK 80
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, 81
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 83
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 89
and Osaka c. 1907, 1935, 1955 and 1992 (%)
3.6 Numbers of firms among the fifty largest with 100 per cent of their 89
workforces within the region
3.7 Organisational forms of the fifty largest employers in the North-west 90
and Osaka
3.8 Chairmen as entrepreneurial types (%) 95
3.9 Survivors: firms present among the regional fifty largest employers, 97
3.10 The fifty largest companies in Cheshire and Lancashire, as measured by 100
employment within the region, in 1907, 1935, 1955 and 1992
3.11 The fifty largest companies in Osaka Prefecture, as measured by 108
employment within the region, in 1902, 1931, 1954 and 1993
5.1 Machine hours worked per year, 1953–63, in the British and Japanese 173
cotton industries
6.1 The growth of Matsushita, 1920–95 183
6.2 The growth of Ferranti, 1907–87 185
6.3 Domestic production of electrical appliances in Japan, 1950–70 194

7.1 Ships built with the support of subsidies under the Shipbuilding 214
Encouragement Act between 1897 and 1910
7.2 Ships launched in Japan, the United Kingdom and the world, 1936–38 215
and post-Second World War, 1949–85 (thousand gross registered tons)
7.3 Tonnage of ships launched/completed by Cammell Laird and Hitachi 217
Zosen, 1950–95 (thousand tons)
7.4 Structure of sales at Hitachi Zosen in the 1995 financial year (% of 218
7.5 Targets for reductions of shipbuilding capacity in the Stabilisation 224
Master Plan
7.6 Indices of labour productivity at Cammell Laird (Birkenhead) and in 225
the Hitachi Zosen Group 1957–80
8.1 The diffusion of internal management training in Japan by 1970 241
9.1 The number of staff, patents obtained and value of budget and expenses 261
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 266
Institute, 1916–65
9.3 Number of guidance, tests and other activities by Osaka Prefectural 268
Industrial Research Institute, 1953–70
9.4 R&D in north-west England, 1920 272
9.5 R&D in north-west England, 1930–47 277
9.6 R&D in north-west England, 1964 282
9.7 List of private industrial research organisations in Osaka (at the end of 283
1923 and in April 1943)
9.8 List of private industrial research organisations in Osaka (post-war 287
9.9 Innovations in north-west England 296

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
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
Kingo Tamai is Professor of Social Policy, Faculty of Economics, Osaka City
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.

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

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.

Map 2 The Lancashire region, 1990.


Map 3 Kansai, 1894.



Map 4 Kansai, 1990.

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 North-
west 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.

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

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

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.

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

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

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

The pre-eminence of Osaka in the regional historiography of

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
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

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,
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

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

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.

The place of publication of all sources cited below is London unless otherwise

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.

5 Oswald Spengler, The Decline of the West (1918).

6 Julien Benda, La Trahison des Clercs (Paris, 1927), translated as The Great Betrayal
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).
Region and nation
Douglas A.Farnie and Tetsuro Nakaoka

The primacy of commerce in the initiation of global economic

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
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

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 Western-
style 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.

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 Sino-
Japanese 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 Russo-
Japanese War it nationalised the main lines of the private railway companies and,
under the leadership of the National Railway, undertook the domestic manufacture

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

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 city-
regions 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

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 Sino-
Japanese 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.

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

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.

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.

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

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),
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

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.

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.

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

The changing relationship between Lancashire and London,

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.

• 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


• 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 non-
cotton 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

the largest decennial increase of the whole century and suffered no recession before
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

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 Co-
operative 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

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 profit-
seeking 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,

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

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

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 cut-
throat 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

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 triple-
expansion 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

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.

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 bargaining-
power of employees, so encouraging the labour movement by mechanics within the

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 cast-
iron 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

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 internal-
combustion 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

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

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 sub-
contracting 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 cost-
control 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.

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. Sub-
contractors 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 auto-
tricycles by concluding a contract with Toyota in 1967, strengthening its

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

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
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

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

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 American-
style ‘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

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

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 off-
shore 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

the number of new factories established, a reduction in the number of innovation-

based 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 North-
west 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

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 sub-
assembly 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

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 mass-
media. 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

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 North-
west 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

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

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, Euro-
railheads 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, machine-
broking 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

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.
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

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 part-
time 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 lone-
parent 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

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
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

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 all-
pervading atmosphere of football pools, greyhounds and horses’.136 They impressed
unsympathetic observers as a true lumpenproletariat, cocooned within a siege-
mentality, 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

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
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 enterprise-
culture 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

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,

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

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

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
* 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.

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 one-
third 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 under-
estimated 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 pre-
eminence 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.

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).

The transition from a manufacturing economy to a service


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 North-
west the transition occurred some ninety years later, after manufacturing
employment reached its all-time historic regional peak in the Census of 1921, forty-
five 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

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

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 mail-
order 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
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

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

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

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
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.

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

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 material-
processing 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

• the creation of a variety of information-centres and an R&D institute for future
• 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

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.

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

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
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 semi-
rural 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

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.

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.

The place of publication of all English language sources cited is London, unless
otherwise indicated.

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53 Amagasaki City, Amagasaki Shi-shi [A History of Amagasaki City], vol 3 (Amagasaki,
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54 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 Undo-
shi [A History of Socio-Labour Movement in Osaka] vol 1 (Osaka, 1986), 34, 85, 165–
55 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.
56 Tetsuro Nakaoka, ‘From Shipbuilding to Automobile Manufacturing’, op. cit.,
(1996), 50–52.
57 Minoru Sawai, Nippon Tetsudosharyo Kogyo-shi [A History of the Japanese Rolling Stock
Industry] (Tokyo, 1998), 55–66.
58 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.
59 Kaoru Sugihara and Kingo Tamai (eds), Taisho, Osaka, Suram [Taisho, Osaka and the
Slums] (Tokyo, 1986).
60 Osaka Shakaiundo Kyokai, op. cit, 397–408, 515–22.
61 Kojo Tokeihyo [The Census of Factories] 1929 (Tokyo, 1930).
62 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.
63 Trans-Pacific (Tokyo), 21, 30 Nov 1933, 21, ‘Japan takes Lead in Bicycle Export’.
64 Kawasaki Jukogyo [Kawasaki Heavy Industries], Gifukojo 50nen-shi [Fifty Years’
History of Gifu-factory] (Kakamigahara, 1987), 17–42.
65 Colin Clark, The Conditions of Economic Progress (1940), 125. Ibid. (third edn, 1957)
618, 623. W.A.Lewis, Economic Survey 1919–39 (1949).
66 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.

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.

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.

117 R.I.D.Harris, op. cit, 30. A.J.Brown, op. cit., 58–60.

118 North West Business Insider, May 1998, 16–21.
119 Osaka Shiritsu Daigaki Keizai Kenkyujo (eds), op. cit, 198.
120 Viv Caruana and Colin Simmons, ‘Municipal Enterprise in Pursuit of Profit:
Manchester Airport, 1945–78’, Manchester Region History Review 10, 1996, 62–69.
121 R.W.Vickerman, ‘The Channel Tunnel: Consequences for Regional Growth and
Development’, Regional Studies, 21:3, June 1987, 190.
122 Paul Barker, ‘Europe’s Merseyside’, New Society, 46, 14 Dec 1978, 623.
123 North West Business Insider, Nov 1992, 20.
124 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).
125 A.J.Brown, op. cit, 56, 210–11.
126 Regional Trends, 30, 1995, 79.
127 Ibid., 6. 1971. 9.
128 North West Business Insider, June 1991, 10–13.
129 R.M.Titmuss, Poverty and Population. A Factual Study of Contemporary Social Waste
(1938), 288.
130 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.
131 North West Business Insider Jan 1994, 10–11.
132 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.
133 North West Business Insider, Sept 1991, 5; Sept 1993, 20–22; Nov 1993, 8; June 1995,
24– 26.
134 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.
135 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.
136 The Pilgrim Trust, Men Without Work (1938), 98, 124.
137 G.Moorhouse, op. cit, 135.
138 H.B.Rodgers, op. cit., 153.
139 North West Business Insider, Aug 1997, 15–17.
140 A.J.Brown, op. cit, 311. R.I.D.Harris, op. cit, 245–46.
141 E.Hammond, op. cit. 13.
142 North West Business Insider, July 1993, 10–12; Nov 1993, 8–10.
143 Regional Trends, 17, 1982, 146; 27, 1992, 133.
144 Ibid., 17, 1982, 146; 30, 1995, 164.
145 Ibid., 28, 1993, 31.
146 M.Muggeridge, Chronicles of Wasted Time, Part 1, The Green Stick (1972), 203.
147 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.
148 Theodore Levitt, ‘The Globalisation of Markets’, Harvard Business Review (1983).

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–
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–
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

to Regeneration’. Leon Kreitzman, ‘The 24-hour Society’, Sunday Times, 14 Feb

176 C.Clark, op. cit. (1940), 182, 192–93, 373.
177 Osaka Shiritsu Daigaku Keizai Kenkyujo (eds), op. cit, 43.
178 C.Clark, op. cit., 13.
179 World Bank, World Tables 1995 (Baltimore, 1995), 5, 9, Tables 1 and 2, measuring
income in 1987 US dollars.
180 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).
181 Asahi Shimbun, 30 Dec 1989, citing a forecast current amongst traders on the stock
182 Keizai Kikaku-cho Keizai Kenkyujo (ed), op. cit. (1993). Nippon Ginko Chosa Tokei-
kyoku (ed), op. cit.
183 Financial Times, 8 Oct 1997, Survey of Kansai, 4, C.Smith.
184 Asahi Shimbun, 4 Sept 1997.
185 Harold Wilson (1916–95) was MP for Huyton from 1950 to 1983.
186 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.
187 Panorama of EU Industry 97 (Brussels, 1997), ii, 23–67.
188 B.R.Mitchell, International Historical Statistics Africa, Asia and Oceania 1750–1993
(third edition, 1998), 41, 43.
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

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.
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.

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 3.3 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

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.

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

(b) 1930s

(c) 1950s

(d) early 1990s


Source: Tables 3.10 and 3.11.

(e) Summary

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
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

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.

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

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-

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.

The NW and Osaka multiplant figures are almost certainly under-estimates.

estimates the situation. Just two of the Osaka50 were single-plant businesses that

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
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,

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.

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.

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
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

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 home-
based or foreign-based (incoming). In 1907 all the MNEs in the NW50 bar one

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 long-
lived 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.
Table 3.8 Chairmen as entrepreneurial types (%)

Source: Data collected for Tables 3.10 and 3.11.


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.

Table 3.9 suggests that members of the NW50 have been more successful as long-
term 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 Co-
operative 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

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

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 North-
west 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 North-
west 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


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

Itami, Tadao Kagono and Motoshige Ito (eds.), Nippon no Kigyo Shisutemu [The
Company System in Japan] vol. 2 (Tokyo: Yuhikaku, 1993), pp. 108, 127.
5 David J.Jeremy, A Business History of Britain, 1900–1990s (Oxford University Press,
1998), pp. 569–74.
6 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.
7 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).
8 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.
Table 3.10 The fifty largest companies in Cheshire and Lancashire, as measured by employment within the region, in 1907, 1935, 1955 and
199 2

(a) 1907

(b) 1935

(c) 1955

(d) 1992
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.
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
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).
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.

(b) 1931
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 Nen-
shi (50 Years’ History of Osaka Shosen Kaisha) (OSK, Osaka, 1934).
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

(c) 1954
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.
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.

(c) 1954
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.
The data are those for the end of March 1994.
* data include employees of the adjacent prefectures.

CO means the city of Osaka.

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

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

The industry had in fact failed to accumulate the reserves necessary for any large-
scale 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

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 short-
time 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
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

constant monitoring of performance and by the extensive use of incentive bonus


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

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

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 non-
factory 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-

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 import-
substitution. 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 consumer-
goods 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
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
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 out-
numbered 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

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,

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

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
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

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

of cotton had been extended into the field of munitions by the invention of gun-
cotton 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

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.

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) Sino-
Japanese 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

self-acting mules, each with 700 spindles specially adapted to the spinning of short-
stapled 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
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

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
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

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 manning-
levels, 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

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 closely-
guarded 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

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

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 efficiency-
combines, 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

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

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

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

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

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-to-
date 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.

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 piece-
goods during the depression, Japan, Spain, Portugal and Russia, only one made a
major contribution to world consumption. Japan’s exporters benefited from state-
aid 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).

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

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

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

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 extra-
territoriality 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

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 Sino-
Japanese 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.

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

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 piece-
goods 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.

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 man-
made 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

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,

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 twenty-
five 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.

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 night-
shifts 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.

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.

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
7 Margaret Cole (ed.), Beatrice Webb’s Diaries, 1924–1932 (1956), 115, 10 September
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

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.).
10 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.
11 Gregory Clark, ‘Why Isn’t the Whole World Developed?: Lessons from the Cotton
Mills’, Journal of Economic History, 47, 1987, 141–73.
12 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.
14 H.Kawakutsu, op. cit., 177.
15 Ibid., 179–80.
16 Ibid., 177
17 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.
18 J.E.Orchard, Japan’s Economic Position, The Progress of Industrialisation (New York,
1930), 432.
19 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.
20 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.
21 The Rocket, 15 Oct. 1896, 229,‘Lancashire v. Japan. Is the CottonTrade Doomed?’
22 North American Review, 163, Aug. 1896, 148, Robert P.Porter (1852–1917), ‘Is
Japanese Competition a Myth?’, quoting Kentaro Kaneko (1853–1942), the Vice-
Minister for Agriculture and Commerce (1894–98) and a Harvard graduate. Robert
Porter had been the Superintendent of the Eleventh US Census of 1890.
23 Mass and Lazonick, op. cit., 33–49.
24 J.E.Orchard, op. cit., 219–20, for a dissenting opinion.
25 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 Cotton-
Yarns (1817), 16.

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,
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 Pre-
war 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.

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–
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
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.

72 Carl Crow, Four Hundred Million Customers (1937).

73 J.E.Orchard, op. cit., 455.
74 Ibid., 451.
75 Manchester Guardian, 6 June 1911, 10 v, 9 June, 12 iv; 13 June, 13 iv, 28 June 14 v,
A.S. Lewis.
76 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.
77 L.Hsiao, China’s Foreign Trade Statistics, 1864–1949 (Cambridge, Mass., 1974).
78 China Weekly Review, 23 Dec. 1922, 142.
79 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).
80 Tetsuya Kuwahara, op. cit., 159, 163.
81 Ibid., 153, 164.
82 Takeshi Abe, op. cit. (1995).
83 G.E.Hubbard, Eastern Industrialisation and its Effect upon the West (1935, 1938), 200,
84 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.
85 C.F.Remer and W.B.Palmer, A Study of Chinese Boycotts (Baltimore, 1935), 222.
86 W.G.Fitzgerald (‘Ignatius Phayre’), ‘Japan’s “World War” in Trade’, Quarterly Review,
Jan. 1935, 11.
87 Freda Utley, What’s Wrong with the Cotton Trade? An Explanation of the Present
Depression (1930), 17.
88 Idem, Japan’s Feet of Clay (1936), 53, 201. G.C.Allen, Appointment in Japan.
Memories of Sixty Years (1983), 79, 176.
89 Daily Dispatch, 30 May and 1 June 1946, ‘Lancashire Told to Follow Japan’s
90 Takeshi Abe, op. cit. (1998), 25–35.
91 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.
92 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,
93 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,

329. Idem, ‘The Cotton Industry of Japan, China and India’, International Affairs, 11,
1932, 651.
94 B.Bowker, ‘How Can Lancashire Stop the Rot?’, Daily News, 13 Jan. 1930.
95 Takeshi Abe, op. cit. (1995)
96 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.
97 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.’
98 J.R.McCulloch, A Descriptive and Statistical Account of the British Empire (1854), I,
99 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.
100 John G.Roberts, Mitsui (New York, 1973).
101 H.Shimizu, Anglo-Japanese Trade Rivalry in the Middle East in the Inter-war Period
102 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.
103 Ibid., 51, 61.
104 H.Kockelkorn, ‘Conjunturele ontwikkeling van de Twentse katoenindustrie, 1925–
1965’, Textielhistorische Bijdragen, 29, 1989, 100.
105 E.J.Hobsbawm, The Age of Revolution, 1789–1848 (New York, 1962), 53.
106 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.
107 J.E.Orchard, op. cit. 438, 442.
108 A.K.Bagchi, Private Investment in India, 1900–1939 (Cambridge, 1972), 227.
109 M.K.Gandhi, The Wheel of Fortune (Madras, 1922, bound in khadi and reviewed in
the Manchester Guardian Commercial, 15 June 1922, 743).
110 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).
111 Manchester Guardian, 4 May 1938, 8 ii, ‘Back to 1852?’, by A.P.Wadsworth.
112 R.Robson, op. cit., 345.
113 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.
114 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.

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,
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.
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

in labour welfare might well be interpreted as symptomatic of their wish to pre-

empt 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
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

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
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

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

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 co-
operation 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

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
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

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

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

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

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

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
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

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 four-
fifths 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

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

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

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

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

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


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

reeling and cotton spinning industries, 1870s–1930s’, Proceedings of the British

Association for Japanese Studies, 1984, vol. 9, pp. 64–85.
15 J.Turner, ‘The key to industrial peace’, Journal of the British Association of Managers of
Textile Works, 1922–3, vol. 2, n.p.
16 S.Yonekawa, ‘University graduates and Japanese enterprise before the Second World
War’, Business History, 1984, vol. 26, p. 196.
17 ‘Do textile managers require scientific training?’, National Federation of Textile Works
Managers’ Associations Journal, 1936–37, vol. XVI, p. 38.
18 Pearse, Cotton Industry, p. 26.
19 ‘Do textile managers require scientific training?’, p. 36.
20 Quoted in K.Seki, The cotton industry of Japan (Tokyo, Japan Society for the
Promotion of Science, 1956), p. 70.
21 Muto, Employers and workers, p. 11.
22 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.
23 Reported in ‘Trade union problems’, British Association of Managers of Textile Works
Journal, 1925–26, vol. 5, p. 27.
24 Church and Outram, Strikes and solidarity: coalfield conflict in Britain, 1889–1966, p.
25 S.Harada, Labor conditions in Japan (NewYork, Columbia University Press, 1928), p.
26 Utley, Lancashire, pp. 143–44.
27 Ibid., p. 150.
28 Ibid., p. 181.
29 Ibid., p. 152.
30 Ibid., pp. 143, 149.
31 H.Spender, Worktown people: photographs from northern England, 1937–38 (Bristol,
32 Pearse, Cotton industry, p. 91.
33 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.
34 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.
35 J.Robertson, ‘Welfare work in the cotton trade,’ Blackburn and District Managers’
Mutual Assoaation Journal, 1936–37, vol. XVI, p. 111.
36 Ibid., pp. 112–13.
37 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.
38 H.Leak and K.Maizels, ‘The structure of British industry’, Journal of the Royal
Statistical Society, 1945, vol. 108, pp. 161, 186.

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.
Electronics manufacturers in Osaka and
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
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

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 case-
studies, 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

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

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

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

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.

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

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.

The domestic environment and early company growth to the

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

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

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

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.

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

substantial losses throughout the 1930s in spite of the consumer market’s rapid
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
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

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.

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

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

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 well-
led 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
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

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

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
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

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 self-
sufficient 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.

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
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.

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 two-
thirds 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

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 Alun-
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.

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.

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

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.

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

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 long-
term 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.

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
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

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-

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


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
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–

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.
7 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).
8 The brother-in-law, Toshio Iue, would later establish the rival firm of Sanyo.
9 E.H.Schein, Organisational Culture and Leadership (London: Tavistock Press, 1985).
10 See R.T.Pascale and A.G.Athos, The Art of Japanese Management (London: Penguin
Books, 1981), pp. 28–57.
11 Kotter, Matsushita Leadership, p.5.
12 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.
13 Pascale and Athos, The Art of Japanese Management, pp. 49–51. See also Bartlett and
Ghoshal, Transnational Management, pp. 82–3.
14 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.
15 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.
16 Pascale and Athos, The Art of Japanese Management, pp. 30–1.
17 Dicken, Global Shift, p. 336.
18 See Jeremy, Abe and Sasaki, Chapter 3, this volume
19 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.
20 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).
21 See Wilson, Ferranti. A History, Ch.l, for an analysis of this culture.
22 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.
23 T.Burns and G.M.Stalker, The Management of Innovation (London: Tavistock Press,
1961), pp. 56–7.
24 See Kenneth D.Brown, Britain and Japan. A Comparative Economic and Social History
since 1900 (Manchester: Manchester University Press, 1998), pp. 36–40.
25 Kotter, Matsushita Leadership, pp. 49–58.
26 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.
27 Kotter, Matsushita Leadership, pp. 98–101.
28 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.

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–
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
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.

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.
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 sub-
region 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

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.

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
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

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

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.

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,

Table 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)

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
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
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

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
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.

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.

* 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

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 time-
honoured method of riveting steel plates was at last commonly replaced by all-
welded 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 sub-
assemblies, 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

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

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 nick-
name 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
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

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
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

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

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 cut-
backs 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

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.

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

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

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

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.

Professor Takamatsu wishes to acknowledge the assistance he has received from Mr
Yoshito Hirota.


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.

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
Woytinsky, W.S. and E.S. (1953) World Population and Production: Trends and
Outlook, New York: Twentieth Century Fund.
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
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

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

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-year-
old 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

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

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 supply-
side 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
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

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
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

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 self-
employment, 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

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.

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

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

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

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
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 best-
practice production techniques, by 1958 the JPC had started full-time, one-year
management courses, as well as specialised seminars and short courses for practising
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,

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.

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 wealth-
creating 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

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

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

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 post-
experience 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

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

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-

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, North-
west 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.


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).

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–
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–
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–
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.

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.
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
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 In-
FirmTraining 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–
41 See Brown, Britain and Japan, pp. 131–34.
42 Gospel and Okayama, ‘Industrial Training in Britain and Japan’, p. 27.

43 This section is based on Nishizawa, ‘Education Change and In-FirmTraining in Post-

War 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.

69 See especially Locke, ‘Higher Education and Management’, pp. 38–45.

70 Nishizawa, ‘Business Studies and Management Education’, pp. 96–110.
71 Brown, Britain and Japan, pp. 195–201.
72 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
1893 Industrial Supplementary School
Regulations (establishing industrial
supplementary schools)
1895 LSE established (Railway Dept. by
1899 Industrial Schools Act (A-and B-
level 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 1903 Victoria University of Manchester

higher commercial schools 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

1918 University Act boosts number of 1918 Manchester College of Technology

specialised universities starts Dept. of Industrial
1919 Osaka City Higher Commercial
1920 University Act sponsoring local
1921 Osaka Chamber of Commerce
sponsors lectures on scientific
1922 Osaka Management Society
1925 Osaka Prefectural Institute for
Industrial Management
1926 Rowntree’s Management Research
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 1947 Urwick Committee on management
GHQ after American Education education leads to start of Diploma
Mission enforces radical changes in scheme (to be supervised by newly-
the system established British Institute of
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
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.

1963 Ministry of Education report on 1963 Franks Report

manpower development
1965 Manchester Business School,
London Business School and
Oxford Centre for Management
Studies opened
Industrial research in Osaka and North-west
UK from the 1920s to the 1960s
Minoru Sawai and Geoffrey Tweedale

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.

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

authorities, providing both trained personnel and offering analysis and testing
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

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, Metropolitan-
Vickers 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

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

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

• Osaka Industrial Research Institute (OIRI), which was nationally administered

and was established in 1918.21

• 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 small-
enterprises (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
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
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.
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.

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 heat-
resistant 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
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

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
‘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

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

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.
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

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

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.
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

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
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

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

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

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 ‘in-
house’—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-

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 mid-
nineteenth century and then lost the commercial lead in coal-tar technology to
science-based German competitors by 1914 is well known.57 However, the North-
west 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

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 North-
west. 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

“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 well-
known 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

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; high-
voltage 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
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 North-
west 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

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 North-
west 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
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,
In some cases, figures cited (such as those for ICI) refer to UK, not simply the North-west.

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
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

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

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)
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.
* Annual expenses and the number of staff for 1923 is unknown.

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 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 high-
growth 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 high-
growth 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
Table 9.8 List of private industrial research organisations in Osaka (postwar period)
Source: The Science Council of Japan (ed.), Zenkoku Kenkyukikan Soran [Directory of the Research Institutes and Laboratories in Japan] (Tokyo, 1956 and 1967).
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
2. The number of staff of organisations which are presumed to be successors are shown, though the names of organisations are changed.

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 high-
voltage 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

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

prior to the amalgamation in 1969, and then to about 270 immediately after the
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 co-
operation 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

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

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.

A comparison of the development of industrial research in Osaka with the north-
west of England reveals some important differences in approach. Both regions
adopted a mixed strategy to R&D, blending public sponsorship with private
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 co-
operation 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

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

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 North-
west, in electronics, computing, textiles and pharmaceuticals (see Table 9.9). A
laissez-faire approach to R&D, it seems, does have its merits.

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.


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.

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,
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.
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

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).
21 This succeeded the original Osaka Prefectural Industrial Research Institute which had
been first established in 1903.
22 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.
23 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 50-
Year History of Osaka Industrial Research Institute] (Osaka, 1986), pp. 1–21.
24 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.
26 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.
27 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.
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.
29 OMTRI (ed.), Soritsu, p. 80.
30 OMTRI (ed.), Soritsu, pp. 126–44.
31 OMTRI, ‘Osaka Shiritsu Kogyo Kenkyusho Soritsu 20-nen Shi’, p. 24.
32 Tadahiro Shono, ‘Gakusha ha Kakuatte Hoshii’ [Scholars Should be Like This],
Kagaku to Kogyo 9, No. 2 (February 1944), p. 11.
33 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.
34 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.

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.

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.
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–
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.
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.
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

E.T.Williams and C.S.Nicholls (eds.), Dictionary of National Biography 1961–70

(Oxford, 1981), pp. 574–76.
68 J.Wilson, Ferranti: A History (Lancaster, forthcoming).
69 J.D.Scott, Siemens Brothers 1858–1958 (London, 1958), pp. 152–60.
70 A.Simon, The Simon Engineering Group (Cheadle Heath, 1953), pp. 109–19.
71 A.Simon, Simon Engineering, p. xxviii.
72 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.
73 F.Robinson, Contribution to Victory (1947), pp. 21–44.
74 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).
75 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).
76 D.J.Jeremy, ‘Survival Strategies in Lancashire Textiles: Bleachers’ Association Ltd to
Whitecroft plc, 1900–1980s,’ Textile History 24 (1993), pp. 163–209.
77 D.A.Farnie, ‘The Marketing Strategies of Platt Bros & Co Ltd of Oldham, 1906–
1940,’ Textile History 24 (1993), pp. 147–61.
78 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.
79 Shirley Institute 1919–1969 (1969); M. Sawbridge (ed), The Story of Shirley: A History
of Shirley Institute, Manchester, 1919–1988 (Manchester, 1988).
80 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.
81 This work earned Black a knighthood, fellowship of the Royal Society and a Nobel
Prize. See From ICI to Zeneca (1994).
82 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.
83 By 1969, the laboratories were united at Risley, with the creation of a Reactor
Engineering & Materials Laboratory.
84 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.
85 Industrial Research in the United Kingdom (London, 13th edn, 1989).
86 Society for the History of Science (ed.), Nippon Kagaku Gijutsushi Taikei [History of
Japa Science and Technology in Japan] (Tokyo, 1967), pp. 179–80.
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.

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,
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.
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

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
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
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?

12. Which region has made the transition from manufacturing to services most
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 insig