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Rh The specialism of the two main branches of the industry has been followed by the specialism of sub-branches and by the localization of specialized parts. Of the localization of certain sections of the cotton industry

the late Mr Elijah Helm, who spoke with the authority of great local knowledge, has written as follows:—

“Spinning is largely concentrated in south Lancashire and in the adjoining borderland of north Cheshire. But even within this area there is further allocation. The finer and the very finest yarns are spun in the neighbourhood of Bolton, and in or near Manchester, much of this being used for the manufacture of sewing-thread; whilst other descriptions, employed almost entirely for weaving, are produced in Oldham and other towns. The weaving branches of the industry are chiefly conducted in the northern half of Lancashire—most of it in very large boroughs, as Blackburn, Burnley and Preston. Here, again, there is a differentiation. Preston and Chorley produce the finer and lighter fabrics; Blackburn, Darwen and Accrington, shirtings, dhooties and other goods extensively shipped to India; whilst Nelson and Colne make cloths woven from dyed yarn, and Bolton is distinguished for fine quiltings and fancy cotton dress goods. These demarcations are not absolutely observed, but they are sufficiently clear to give to each town in the area covered by the cotton industry a distinctive place in its general organization.”

The present local distribution of the cotton industry, as far as it is displayed statistically, is revealed in the table beneath, based upon the figures of spindles and looms given by Worrall and those of operatives in the census returns of 1901.

Distribution of Cotton Operatives in Lancashire and the Vicinity&#8193; &#8193; according to the Census Returns of 1901, together with the Number of Spindles and Looms according to Worrall.

Local markets have steadily lost in importance, partly owing to railway development, and it is now almost entirely in Manchester, on the Exchange, that dealing in yarns and fabrics takes place, and arrangements are made for export. The old Manchester Exchange, built in 1729, was taken down in 1792. A new Exchange, reared on a contiguous site, was opened in 1809, the first stone having been laid in 1806. The present building was erected in 1869. The great bulk of the exports of cotton goods proceeds from Liverpool, though London used to be the leading port, and Liverpool is still the chief English market for raw cotton, though now from one-sixth to one-eighth of English cotton supplies come up the Manchester Ship Canal.

To understand the present organization of the cotton industry the reader must begin by mentally separating the commercial from the industrial functions. By the industrial functions are meant the arrangements of factors in

production—choosing the most suitable machinery and hands, combining them in the most economical system, adapting the material used to this system, and keeping its working at the highest attainable level. The commercial functions consist in business which is not industrial. Analysis will show that there are, broadly speaking, two classes of commercial functions, namely (1) arranging for purchases and sales, and (2) the bearing of risks. The character of the former is apparent; it consists, as regards yarn, in discovering for each manufacturer which spinner makes the yarn which is best adapted to his requirements at the lowest cost, and in finding the most suitable customers for spinners. Risk-bearing is a commercial function of another kind. Every business that involves anticipation involves commercial risks. Thus the spinner who sells “forward” yarn, trusting that the price of cotton will not rise, is taking commercial risks, and so is the spinner who produces for stock, trusting that the class of yarn that he is making will continue in demand. These two instances will suffice to indicate what is meant by the carrying of commercial risks. To make the rest of our argument clear it will be well to write down formulae. Let A and B represent respectively the industrial operations of spinning and manufacturing. Let a and represent respectively the commercial operations implied by the separate existence of A, that is, the buying of cotton and the selling of yarn; and let b and stand for the commercial operations associated with manufacturing, that is, the buying of yarn on the one hand, and the finding of customers and arranging for their purchases on the other hand. Then, A and B being distinct businesses, it is obvious that a range of schemes is possible of which the extremes may be roughly represented as follows:—

where the brackets signify independent businesses. In case 1 each spinning business would be engaged with three problems, namely, (i.) buying material at the most favourable time, (ii.) producing at the lowest cost, and (iii.) finding buyers and selling at the highest price, including the arranging for the performance of the most remunerative work. But in case 2 the spinner would confine his attention to purely industrial matters, while the problem of finding cotton and arranging for the bearing of the risks as to future prices would rest with other persons, and the business of bringing spinner and manufacturer together and taking such risks as may be involved in ordering or disposing of yarn would be the function of yet others. In case 2 the commercial functions may be said to have differentiated completely from the main body of the industry. We need hardly give illustrations of the intermediate arrangements that formally lie between cases 1 and 2. A may retain commercial risks but find customers through intermediaries; in such an event there would be only partial differentiation of the commercial functions. The reader must be reminded also that for the sake of simplicity in the formulae we have overlooked different classes of A and of B, omitted bleaching, dyeing, printing and finishing, and drawn no distinction between the various classes of commercial work covered by one letter, for instance, selling in the home market and selling abroad.

It may help the reader to appreciate the organic growth of the cotton industry if we now run over the main lines of its evolution. Originally the industrial units were held together in one homogeneous commercial setting. The Manchester merchants bought cotton and warps, put them out to the weavers, and arranged for the finishing of the cloth and then for its sale, so far as they had not been acting on orders already received. There were variations of this system—for instance, in early years weavers sometimes bought their own yarns and cotton and sold their cloth—but just before the industrial revolution the arrangement sketched above was the most usual. Adverting to our formula, the Manchester merchants, we observe, performed functions