On the Economy of Machinery and Manufactures

On the Exportation of Machinery

437.  A few years only have elapsed, since our workmen were not merely prohibited by Act of Parliament from transporting themselves to countries in which their industry would produce for them higher wages, but were forbidden to export the greater part of the machinery which they were employed to manufacture at home.  The reason assigned for this prohibition was, the apprehension that foreigners might av ail themselves of our improved machinery, and thus compete with our manufacturers.  It was, in fact, a sacrifice of the interests of one class of persons, the makers of machinery, for the imagined benefit of another class, those who use it.  Now, independently of the impolicy of interfering, without necessity, between these two classes, it may be observed, that the first class, or the makers of machinery, are, as a body, far more intelligent than those who only use it; and though, at present, they are not nearly so numerous, yet, when the removal of the prohibition which cramps their ingenuity shall have had time to operate, there appears good reason to believe, that their number will be greatly increased, and may, in time, even surpass that of those who use machinery.

438.  The advocates of these prohibitions in England seem to rely greatly upon the possibility of preventing the knowledge of new contrivances from being conveyed to other countries; and they take much too limited a view of the possible, and even probable, improvements in mechanics.

439.  For the purpose of examining this question, let us consider the case of two manufacturers of the same article, one situated in a country in which labour is very cheap, the machinery bad, and the modes of transport slow and expensive; the other engaged in manufacturing in a country in which the price of labour is very high, the machinery excellent, and the means of transport expeditious and economical.  Let them both send their produce to the same market, and let each receive such a price as shall give to him the profit ordinarily produced by capital in his own country.  It is almost certain that in such circumstances the first improvement in machinery will occur in the country which is most advanced in civilization; because, even admitting that the ingenuity to contrive were the same in the two countries, the means of execution are very different.  The effect of improved machinery in the rich country will be perceived in the common market, by a small fall in the price of the manufactured article.  This will be the first intimation to the manufacturer of the poor country, who will endeavour to meet the diminution in the selling price of his article by increased industry and economy in his factory, but he will soon find that this remedy is temporary, and that the market-price continues to fall.  He will thus be induced to examine the rival fabric, in order to detect, from its structure, any improved mode of making it.  If, as would most usually happen, he should be unsuccessful in this attempt, he must endeavour to contrive improvements in his own machinery, or to acquire information respecting those which have been made in the factories of the richer country.  Perhaps after an ineffectual attempt to obtain by letters the information he requires, he sets out to visit in person the factories of his competitors.  To a foreigner and rival manufacturer such establishments are not easily accessible, and the more recent the improvements, the less likely he will be to gain access to them.  His next step, therefore, will be to obtain the knowledge he is in search of from the workmen employed in using or making the machines.  Without drawings, or an examination of the machines themselves, this process will be slow and tedious; and he will be liable, after all, to be deceived by artful and designing workmen, and be exposed to many chances of failure.  But suppose he returns to his own country with perfect drawings and instructions, he must then begin to construct his improved machines:  and these he cannot execute either so cheaply or so well as his rivals in the richer countries.  But after the lapse of some time, we shall suppose the machines thus laboriously improved, to be at last completed, and in working order.

440.  Let us now consider what will have occurred to the manufacturer in the rich country.  He will, in the first instance, have realized a profit by supplying the home market, at the usual price, with an article which it costs him less to produce; he will then reduce the price both in the home and foreign market, in order to produce a more extended sale.  It is in this stage that the manufacturer in the poor country first feels the effect of the competition; and if we suppose only two or three years to elapse between the first application of the new improvement in the rich country, and the commencement of its employment in the poor country, yet will the manufacturer who contrived the improvement (even supposing that during the whole of this time he has made only one step) have realized so large a portion of the outlay which it required, that he can afford to make a much greater reduction in the price of his produce, and thus to render the gains of his rivals quite inferior to his own.

441.  It is contended that by admitting the exportation of machinery, foreign manufacturers will be supplied with machines equal to our own.  The first answer which presents itself to this argument is supplied by almost the whole of the present volume; That in order to succeed in a manufacture, it is necessary not merely to possess good machinery, but that the domestic economy of the factory should be most carefully regulated.

The truth, as well as the importance of this principle, is so well established in the Report of a Committee of the House of Commons ‘On the Export of Tools and Machinery’, that I shall avail myself of the opinions and evidence there stated, before I offer any observations of my own: 

Supposing, indeed, that the same machinery which is used in England could be obtained on the Continent, it is the opinion of some of the most intelligent of the witnesses that a want of arrangement in foreign manufactories, of division of labour in their work, of skill and perseverance in their workmen, and of enterprise in the masters, together with the comparatively low estimation in which the master manufacturers are held on the Continent, and with the comparative want of capital, and of many other advantageous circumstances detailed in the evidence, would prevent foreigners from interfering in any great degree by competition with our principal manufacturers; on which subject the Committee submit the following evidence as worthy the attention of the House: 

I would ask whether, upon the whole, you consider any danger likely to arise to our manufactures from competition, even if the French were supplied with machinery equally good and cheap as our own?  They will always be behind us until their general habits approximate to ours; and they must be behind us for many reasons that I have before given.

Why must they be behind us?  One other reason is, that a cotton manufacturer who left Manchester seven years ago, would be driven out of the market by the men who are now living in it, provided his knowledge had not kept pace with those who have been during that time constantly profiting by the progressive improvements that have taken place in that period:  this progressive knowledge and experience is our great power and advantage.

It should also be observed, that the constant, nay, almost daily, improvements which take place in our machinery itself, as well as in the mode of its application, require that all those means and advantages alluded to above should be in constant operation:  and that, in the opinion of several of the witnesses, although Europe were possessed of every tool now used in the United Kingdom, along with the assistance of English artisans, which she may have in any number, yet, from the natural and acquired advantages possessed by this country, the manufacturers of the United Kingdom would for ages continue to retain the superiority they now enjoy.  It is indeed the opinion of many, that if the exportation of machinery were permitted, the exportation would often consist of those tools and machines, which, although already superseded by new inventions, still continue to be employed, from want of opportunity to get rid of them:  to the detriment, in many instances, of the trade and manufactures of the country:  and it is matter worthy of consideration, and fully borne out by the evidence, that by such increased foreign demand for machinery, the ingenuity and skill of our workmen would have greater scope; and that, important as the improvements in machinery have lately been, they might, under such circumstances, be fairly expected to increase to a degree beyond all precedent.

The many important facilities for the construction of machines and the manufacturing of commodities which we possess, are enjoyed by no other country; nor is it likely that any country can enjoy them to an equal extent for an indefinite period.  It is admitted by everyone, that our skill is unrivalled; the industry and power of our people unequalled; their ingenuity, as displayed in the continuol improvement in machinery, and production of commodities, without parallel; and apparently, without limit.  The freedom which, under our government, every man has, to use his capital, his labour, and his talents, in the manner most conducive to his interests, is an inestimable advantage; canals are cut, and railroads constructed, by the voluntary association of persons whose local knowledge enables them to place them in the most desirable situations; and these great advantages cannot exist under less free governments.  These circumstances, when taken together, give such a decided superiority to our people, that no injurious rivalry, either in the construction of machinery or the manufacture of commodities, can reasonably be anticipated.

442.  But, even if it were desirable to prevent the exportation of a certain class of machinery, it is abdundantly evident, that, whilst the exportation of other classes is allowed, it is impossible to prevent the forbidden one from being smuggled out; and that, in point of fact, the additional risk has been well calculated by the smuggler.

443.  It would appear, also, from various circumstances, that the immediate exportation of improved machinery is not quite so certain as has been assumed; and that the powerful principle of self-interest will urge the makers of it, rather to push the sale in a different direction.  When a great maker of machinery has contrived a new machine for any particular process, or has made some great improvement upon those in common use, to whom will he naturally apply for the purpose of selling his new machines?  Undoubtedly, in by far the majority of cases, to his nearest and best customers, those to whom he has immediate and personal access, and whose capability to fulfil any contract is best known to him.  With these, he will communicate and offer to take their orders for the new machine; nor will he think of writing to foreign customers, so long as he finds the home demand sufficient to employ the whole force of his establishment.  Thus, therefore, the machine-maker is himself interested in giving the first advantage of any new improvement to his own countrymen.

444.  In point of fact, the machine-makers in London greatly prefer home orders, and do usually charge an additional price to their foreign customers.  Even the measure of this preference may be found in the evidence before the Committee on the Export of Machinery.  It is differently estimated by various engineers; but appears to vary from five up to twenty-five per cent on the amount of the order.  The reasons are:  1.  If the machinery be complicated, one of the best workmen, well accustomed to the mode of work in the factory, must be sent out to put it up; and there is always a considerable chance of his having offers that will induce him to remain abroad. 2.  If the work be of a more simple kind, and can be put up without the help of an English workman, yet for the credit of the house which supplies it, and to prevent the accidents likely to occur from the want of sufficient instruction in those who use it, the parts are frequently made stronger, and examined more attentively, than they would be for an English purchaser.  Any defect or accident also would be attended with more expense to repair, if it occurred abroad, than in England.

445.  The class of workmen who make machinery, possess much more skill, and are paid much more highly than that class who merely use it; and, if a free exportation were allowed, the more valuable class would, undoubtedly, be greatly increased; for, notwithstanding the high rate of wages, there is no country in whichit can at this moment be made, either so well or so cheaply as in England.  We might, therefore, supply the whole world with machinery, at an evident advantage, both to ourselves and our customers.  In Manchester, and the surrounding district, many thousand men are wholly occupied in making the machinery, which gives employment to many hundred thousands who use it; but the period is not very remote, when the whole number of those who used machines, was not greater than the number of those who at present manufacture them.  Hence, then, if England should ever become a great exporter of machinery, she would necessarily contain a large class of workmen, to whom skill would be indispensable, and, consequently, to whom high wages would be paid; and although her manufacturers might probably be comparatively fewer in number, yet they would undoubtedly have the advantage of being the first to derive profit from improvement.  Under such circumstances, any diminution in the demand for machinery, would, in the first instance, be felt by a class much better able to meet it, than that which now suffers upon every check in the consumption of manufactured goods; and the resulting misery would therefore assume a mitigated character.

446.  It has been feared, that when other countries have purchased our machines, they will cease to demand new ones:  but the statement which has been given of the usual progress in the improvement of the machinery employed in any manufacture, and of the average time which elapses before it is superseded by such improvements, is a complete reply to this objection.  If our customers abroad did not adopt the new machinery contrived by us as soon as they could procure it, then our manufacturers would extend their establishments, and undersell their rivals in their own markets.

447.  It may also be urged, that in each kind of machinery a maximum of perfection may be imagined, beyond which it is impossible to advance; and certainly the last advances are usually the smallest when compared with those which precede them:  but it should be observed, that these advances are generally made when the number of machines in employment is already large; and when, consequently, their effects on the power of producing are very considerable.  But though it should be admitted that any one species of machinery may, after a long period, arrive at a degree of perfection which would render further improvement nearly hopeless, yet it is impossible to suppose that this can be the case with respect to all kinds of mechanism.  In fact the limit of improvement is rarely approached, except in extensive branches of national manufactures; and the number of such branches is, even at present, very small.

448.  Another argument in favour of the exportation of machinery, is, that it would facilitate the transfer of capital to any more advantageous mode of employment which might present itself.  If the exportation of machinery were permitted, there would doubtless arise a new and increased demand; and, supposing any particular branch of our manufactures to cease to produce the average rate of profit, the loss to the capitalist would be much less, if a market were open for the sale of his machinery to customers more favourably circumstanced for its employment.  If, on the other hand, new improvements in machinery should be imagined, the manufacturer would be more readily enabled to carry them into effect, by having the foreign market opened where he could sell his old machines.  The fact, that England can, notwithstanding her taxation and her high rate of wages, actually undersell other nations, seems to be well established:  and it appears to depend on the superior goodness and cheapness of those raw materials of machinery the metals—­on the excellence of the tools—­and on the admirable arrangements of the domestic economy of our factories.

449.  The different degrees of facility with which capital can be transferred from one mode of employment to another, has an important effect on the rate of profits in different trades and in different countries.  Supposing all the other causes which influence the rate of profit at any period, to act equally on capital employed in different occupations, yet the real rates of profit would soon alter, on account of the different degrees of loss incurred by removing the capital from one mode of investment to another, or of any variation in the action of those causes.

450.  This principle will appear more clearly by taking an example.  Let two capitalists have embarked L10,000 each, in two trades:  A in supplying a district with water, by means of a steam-engine and iron pipes; B in manufacturing bobbin net.  The capital of A will be expended in building a house and erecting a steam-engine, which costs, we shall suppose, L3000; and in laying down iron pipes to supply his customers, costing L7000.  The greatest part of this latter expense is payment for labour, and if the pipes were to be taken up, the damage arising from that operation would render them of little value, except as old metal; whilst the expense of their removal would be considerable.  Let us, therefore, suppose, that if A were obliged to give up his trade, he could realize only L4000 by the sale of his stock.  Let us suppose again that B, by the sale of his bobbin net factory and machinery, could realize L8000 and let the usual profit on the capital employed by each party be the same, say 20 per cent:  then we have

Capital invested; Money which would arise from sale of machinery; Annual rate of profit per cent; Income

L         L    L        L
Water works            10,000    4000   20     2000
Bobbin net Factory     10,000    8000   20     2000

Now, if, from competition, or any other cause, the rate of profit arising from water-works should fall to 20 per cent, that circumstance would not cause a transfer of capital from the water-works to bobbin net making; because the reduced income from the water-works, L1000 per annum, would still be greater than that produced by investing L4000, (the whole sum arising from the sale of the materials of the water-works), in a bobbin net factory, which sum, at 20 per cent, would yield only L800 per annum.  In fact, the rate of profit, arising from the water-works, must fall to less than 8 per cent before the proprietor could increase his income by removing his capital into the bobbin net trade.

451.  In any enquiry into the probability of the injury arising to our manufacturers from the competition of foreign countries, particular regard should be had to the facilities of transport, and to the existence in our own country of a mass of capital in roads, canals, machinery, etc., the greater portion of which may fairly be considered as having repaid the expense of its outlay, and also to the cheap rate at which the abundance of our fuel enables us to produce iron, the basis of almost all machinery.  It has been justly remarked by M. de Villefosse, in the memoir before alluded to, that Ce que l’on nomme en France, la question du prix des fers, est, a proprement parler, la question du prix des bois, et la question, des moyens de communications interieures par les routes, fleuves, rivieres et canaux.

The price of iron in various countries in Europe has been stated in section 215 of the present volume; and it appears, that in England it is produced at the least expense, and in France at the greatest.  The length of the roads which cover England and Wales may be estimated roughly at twenty thousand miles of turnpike, and one hundred thousand miles of road not turnpike.  The internal water communication of England and France, as far as I have been able to collect information on the subject, may be stated as follows: 

In France

Miles in length

Navigable rivers 4668
Navigable canals 915.5
Navigable canals in progress of execution (1824) 1388

6971.5 (1)

But, if we reduce these numbers in the proportion of 3.7 to 1, which is the relative area of France as compared with England and Wales, then we shall have the following comparison: 

Portion of France equal in size to England and Wales

England(2)
Miles Miles

Navigable rivers              1275.5            1261.6
Tidal navigation(3*)           545.9
Canals, direct    2023.5
Canals, branch     150.6

2174.1      2174.1             247.4
Canals commenced               —–­               375.1

Total 3995.5 1884.1

Population in 1831 13,894,500 8,608,500

This comparison, between the internal communications of the two countries, is not offered as complete; nor is it a fair view, to contrast the wealthiest portion of one country with the whole of the other:  but it is inserted with the hope of inducing those who possess more extensive information on the subject, to supply the facts on which a better comparison may be instituted.  The information to be added, would consist of the number of miles in each country, of seacoast, of public roads, of railroads, of railroads on which locomotive engines are used.

452.  One point of view, in which rapid modes of conveyance increase the power of a country, deserves attention.  On the Manchester Railroad, for example, above half a million of persons travel annually; and supposing each person to save only one hour in the time of transit, between Manchester and Liverpool, a saving of five hundred thousand hours, or of fifty thousand working days, of ten hours each, is effected.  Now this is equivalent to an addition to the actual power of the country of one hundred and sixty-seven men, without increasing the quantity of food consumed; and it should also be remarked, that the time of the class of men thus supplied, is far more valuable than that of mere labourers.

Notes: 

1.  This table is extracted and reduced from one of Ravinet, Dictionnaire Hydrographique. 2 vols. 8vo.  Paris. 1824.

2.  I am indebted to F. Page.  Esq. of Speen, for that portion of this table which relates to the internal navigation of England.  Those only who have themselves collected statistical details can be aware of the expense of time and labour, of which the few lines it contains are the result.

3.  The tidal navigation includes:  the Thames, from the mouth of the Medway; the Severn, from the Holmes:  the Trent, from Trent Falls in the Humber; the Mersey from Runcorn Gap.