Shares of current-price GDP overstate (perhaps doubling) manufacturing’s constant-price output decline relative to other sectors because of differing cost and price movements with in the economy. But the pattern is clear enough: for the developed countries as a whole, manufacturing’s share of GDP has halved in the last half-century to around 15%. From an all-time peak of 30% in 1943 and a peacetime high of 28% a decade later, the sector’s share of US GDP has fallen since the late 1960s from a quarter to a mere 11% in 2009. In Britain the proportion has plunged from 37% in 1955 to just 12%. France has seen a less precipitous decline, while Japan and Germany have kept their share above a fifth, down from around a third in the 1960s. The former USSR and eastern Europe experienced their own abrupt fall in the 1990s, coupled with severe drops in real GDP in the early part of the decade.
The absolute volume of output has of course shown a quite different trend to employment or GDP share, quintupling in the US since 1953 according to the Federal Reserve’s industrial production index, despite a slowdown from around 1970 and indications of another since 2000. Except in Britain, where output has only doubled, manufacturing in the west as a whole has followed a similar trend, with Europe lagging by a decade or so. But European economies too show signs of the deceleration in manufacturing growth following the high rates of the first postwar decades.
So today’s de-industrialisation is something of a misnomer in terms of output, where until the downturn of 2008 the sector continued to enjoy growth of 20% per decade in most of the older industrial countries. Output decline is – except in some of the worst-affected transition economies – only relative. The sector’s comparative eclipse is in part a manifestation of growing affluence, as an ever larger proportion of our rising spending goes on consumption of services, much as demand for industry’s output surpassed and ultimately dwarfed that for agricultural produce in 1780-1950. In terms of jobs, however, the phenomenon is a very real one for the millions displaced, often in localities heavily dependent on industrial earnings and with limited alternative job opportunities.
But de-industrialisation is itself nothing unique to the past six decades. Today’s shift of the centre of gravity of world industrial activity from richer toward poorer countries is only a reversal of the nineteenth-century trend which saw traditional manufactures driven from mass markets by cheaper factory goods. The difficulties facing older industrial economies today offer striking parallels to those encountered by producers in less developed countries in the earlier period. Problems of erosion of overseas market share and competitors’ encroachment on raw material supply were faced too by Britain in the later 19th century as the country lost its initial dominance in mechanised production, even while its factory output growth averaged 2¼% a year.
The scale of manufacturing production before modern industrialisation is notoriously difficult to gauge, even in more developed countries. Official returns until the 1950s tended to measure the output only of factories and workshops exceeding a given number of workers or value of output – sufficient to indicate 20th-century growth in industrial countries, but a poor guide to the pattern in traditional ones where manufacture tended to be more dispersed among small producers. Isolated estimates exist for parts of pre-industrial Europe, and even for regions of 19th-century India before the advent of modern census-taking. For England, we have reworkings of Gregory King’s calculations indicating nearly £8m of manufacturing value added in 1688 (more than £1.4 per head or nearly a sixth of national income), showing a country already in advance of most of its competitors. Recent research on occupational distributions has supported the existence of large “pre-industrial” industrial populations. But global manufacturing volume before the past half-century or so has remained a largely overlooked topic, with one notable exception.
Before we had Angus Maddison’s historical GDP estimates, there were Paul Bairoch’s figures for manufacturing output for the world and principal producing regions & countries for the period 1750-1980. Whenever you encounter a statement to the effect that 18th-century China produced a third of the world’s manufactures or India a quarter, it’s from Bairoch. Like Maddison’s data, Bairoch’s have become so embedded in discussion of long-run economic growth that they’re routinely cited with no indication that they might be anything but 100% accurate, and sometimes without even any identification of the source: to many they simply are “the” numbers.
In fact Bairoch has come in for considerable scholarly criticism over the years, not least for vague indication of sources and for guesstimating output levels before modern industrialisation. But his actual estimates have never been overturned: on the contrary, his finding of massive de-industrialisation in less developed countries has received indirect support from Maddison’s GDP data and more recently from Pomeranz’s finding of an 18th-century Chinese economy quantitatively not dissimilar to Europe’s: Maddison’s figures indeed indicate (rather implausibly) a Chinese economy larger (though of course far poorer in per capita terms) than that of the US as late as 1888.
Bairoch took a very different approach to Maddison (at least in theory), rejecting projection into the past of apparent growth rates as an unreliable indicator of early output levels. Instead he guesstimated plausible consumption of manufactures in pre-industrial societies, adding subsequent factory production and making a deduction for the part of traditional output supplanted by imports. In practice, Maddison has of course spliced similar benchmark observations into his GDP growth series for points far from his notional 1990 benchmark, hence the substantial compatibility of the two sets of data.
The first thing to be said of Bairoch’s “pre-industrial” numbers is, like Maddison’s for China and India, they’re big. Bairoch was sufficiently aware of the enormous pricing pitfalls in valuing output over time to limit his results to a volume index based on the UK’s 1900 level of manufacturing output. But since we know the approximate value of British manufacture in 1900 (and can indeed fairly reliably estimate that year’s global manufacturing value on the basis of existing national accounts calculations) we can value his global estimate for 1700 at roughly $5bn of gross output at 1900 prices – a vast quantity implying perhaps $2¼bn of value added, around a seventh of total world product and indeed little smaller a proportion than in 1900.
The focus of Bairoch’s work is however not so much the global trend but the geographical distribution of manufacturing activity. Here his conclusions are startling: Chinese output exceeded the whole of continental Europe’s (including Russia but excluding Britain) as late as 1830, while India produced nearly as much as Britain, France and Germany combined. The west’s subsequent de-industrialisation impact on Asia was still more startling: Indian output of manufactures fell by 73% in 1830-80, China’s less abruptly – by 39% over 1830-1913 - but by a similar absolute volume exceeding a billion dollars in annual gross value. Overall the non-European world (excluding Japan) lost some 47% of its manufacturing capacity, its share of world output plunging from 73% in 1750 to a mere 7% two centuries later.
It’s a shocking picture, but one resting on uncertain foundations. Taking the classic case of 19th-century de-industrialisation – India’s traditional cotton industry – it seems that while handspinning production indeed followed the course outlined by Bairoch’s data, its decline was partly offset by the expansion of mill output in the second half of the century, while the sector’s weaving branch fared better. Millions still lost their livelihoods and the country was for a time reduced from a leading world exporter to an industrial backwater as industrialisation took off elsewhere, but there is no evidence for quite the scale of output collapse portrayed in Bairoch’s estimates. Albert Feuerwerker has found a similar pattern in China, where his calculations indicate that traditional weaving grew slightly over 1870-1910 on the strength of mill yarn imports. Nor was this a distinctly Asian phenomenon: numbers in English handloom weaving had likewise risen in the early 19th century even as handspinning was becoming a thing of the past.
Textile products represent only a fraction of manufacturing. But in the first decades of the 19th century they represented the most dynamic sector in the transition to mechanised factory industry, accounting for half of British exports in 1830. If any traditional industry faced oblivion at the hands of British and later western European and US competition, it was handicraft cotton manufacture. The implication is that Bairoch overstates both Asian manufacturing output in the 18th and early 19th centuries and the scale of its decline from 1830. His other figures are, however, broadly of the right order of magnitude, and illustrate the retreat of traditional production not just at regional but at global level, from perhaps an eighth of global value added in 1700 to a mere 3-4% two centuries later.
And de-industrialisation has a history even older than the era of the industrial revolution. Gregory Clark finds evidence of relative decline in non-agricultural employment in areas of rural East Anglia as early as the 14th-16th centuries:
While only 39 percent of the employed in these parishes were in farming in 1381, by some of the decades in the early seventeenth century this share had risen to nearly 70 percent. Rural Suffolk was more “industrialized” in 1381 than in any years observable 1550-1700 up till 1831. Rural Suffolk seems to have experienced “de-industrialization” between 1381 and 1600.The story is repeated across early-modern France, Germany, Iberia and Italy, as new manufacturing districts arose to supplant rural crafts, or as competition from regions with more direct access to the centres of the new Atlantic economy brought a wholesale shift to the north and west.
De-industrialisation has been with us for many centuries. What’s new is the rapidity and scale of the downturn in manufacturing employment in parts of the western world over recent decades. History offers no miracle cures: few will want to emulate the “sink or swim” laissez-faire approach which saw the permanent loss of a quarter of Britain’s manufacturing jobs in 1979-83 alone, but protecting or shoring up declining industries has usually tended only to postpone eclipse in the absence of ongoing active promotion of research, modernisation and expertise. Britain’s 20th-century experience should serve as a warning against complacency and reliance on compliant markets: in the 21st there may be no place for rich countries’ products without constant effort to maximise the skills, innovation and creativity that gave them their initial lead.
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