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Labor Scarcity and the Problem of American Industrial Efficiency in the 1850's*

Published online by Cambridge University Press:  03 February 2011

Peter Temin
Peter Temin
Affiliation:
Massachusetts Institute of Technology
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Extract

Europeans have been coming to America and commenting about the nature of American technology for over a century. Despite the evident economic changes in the course of this century, the comments on the differences between American and European technology—or, more properly for the nineteenth century, on the differences between American and British technology—have stayed remarkably constant. The factors noted by a few British visitors of the 1850's, perhaps the first technically qualified foreign group to take a careful look at American manufacturing, still form the backbone of discussion today. Chief among the factors noted is the high cost of American labor, but this explanation of American peculiarities by no means stands alone.

Type
Articles
Information
The Journal of Economic History , Volume 26 , Issue 3 , September 1966 , pp. 277 - 298
Copyright
Copyright © The Economic History Association 1966

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References

1 See Sawyer, John E., “The Social Basis of the American System of Manufacturing,” Journal of Economic History, XIV (Dec. 1954), 361–79.CrossRefGoogle Scholar

2 Great Britain, Parliamentary Papers, Vol. XXXVI (Reports), 1854, George Wallis, “Special Report on the New York Industrial Exhibition” (hereafter cited as Wallis); ibid., Joseph Whitworth (same title; hereafter cited as Whitworth); ibid., Vol. XVIII (Reports), 1854, “Report from the Select Committee on Small Arms” (hereafter, “Report on Small Arms”) Qq. 1691, 1919–23; ibid, Vol. L (Reports), 1854–55, “Report of the Committee on the Machinery of the United States of America” (hereafter “Report on Machinery”), pp. 1–3. These reports are summarized in Burn, D. L., “The Genesis of American Engineering Competition,” Economic History, Supplement to Economic Journal, II (Jan. 1931), 292–311Google Scholar.

3 Report on Machinery, p. 1. See also Wallis, pp. 2–3; Whitworth, p. 41.

4 If we knew the isoquants in the two countries—that is, the locus of different factor combinations that produced the same output—we could make a much stronger statement. We could then say whether either country had an incentive to use the technology of the other at the factor prices most favorable to it. Normally, however, we do not know the full isoquants. We know only those points at which production was carried on, and we can talk only of the incentives in each country to use the actual factor combinations of the other. In the case illustrated by points A and B, there is no incentive for either country to adopt the practice of the other, and we do not know if the technology of either country provided unexploited opportunities for the other.

5 Whitworth, pp. 13–14; Report on Machinery, pp. 20, 64.

6 Wallis, p. 23; Whitworth, p. 8; Wilson, John, Special Report on the New York Industrial Exhibition, British Parliamentary Papers, 1854, XXXVI, pp. 100–1Google Scholar; Report on Machinery, pp. 12, 13, 19, 20, 33; Report on Small Arms, Q. 2043.

7 Report on Machinery, p. ii.

8 Whitworth, p. 26; Report on Small Arms, Qq. 1979, 2137. Whitworth's estimate of the cost of the machinery—16 machines—was of the right order of magnitude, although not much better than that. The Committee on American machinery paid $30,000 for a set, or about £6,250; Report on Machinery, p. 75.

9 Whitworth, p. 13; Report on Machinery, p. 38; Wilson, pp. 100–1; Roe, Joseph Wickham, English and American Toolbuilders (New York: McGraw-Hill, 1926)Google Scholar, ch. iii.

10 Whitworth, p. 11; Report on Machinery, pp. 20, 32, 69, 70; Burn, pp. 294–95.

11 Habakkuk, H. J., American and British Technology in the Nineteenth Century (Cambridge, Engl.: The University Press, 1962), pp. 5, 95Google Scholar. Whitney's name should probably be replaced by John Hall's in this context. See Woodbury, Robert S., “The Legend of Eli Whitney and Interchangeable Parts,” Technology and Culture, I (Summer 1960), 235–53.CrossRefGoogle Scholar

12 Whitworth, p. 42; Burn, pp. 297–301.

13 For iron, see Temin, Peter, Iron and Steel in Nineteenth-Century America (Cambridge: M.I.T. Press, 1964)Google Scholar. Difficulties of evidence in other areas may be illustrated by the example of flour milling. Habakkuk (p. 93) followed other investigators in stating that the primary importance of Oliver Evans' innovations was in their reduction of labor requirements. Yet Evans himself calculated that only 10 per cent of the savings came from this source, and the actual savings are not known. See Greville, and Bathe, Dorothy, Oliver Evans: A Chronicle of Early American Engineering (Philadelphia: Historical Society of Pennsylvania, 1935), p. 168Google Scholar.

14 These themes are interwoven throughout the primary documents, but see particularly Wallis, pp. 2–4, 68; Whitworth, pp. 5, 41–42; Report on Machinery, pp. 32, 38.

15 E. Rothbarth, “Causes of the Superior Efficiency of U.S.A. Industry as Compared with British Industry,” Economic Journal, LVI (Sept. 1946), 383–90.

16 Habakkuk, p. 76.

17 The appendix contains a proof that the equilibrium capital-labor ratio does not depend on the money wage rate. See Samuelson, Paul A., “A New Theorem on Non-Substitution,” in Money Growth and Methodology, published in honor of Johan Akerman (Lund, Sweden: Gleerup, 1961)Google Scholar, for a summary of the relevant literature. Habakkuk (p. 8) showed that he was aware of this problem: “If it paid American entrepreneurs to replace expensive American labour by machines made by expensive American labour, why did it not pay English entrepreneurs to replace the cheaper English labour by machines made with that cheaper labour?” His efforts to deal with it will be analyzed next.

18 Habakkuk, p. 26; see also p. 18 for another statement of the importation argument.

19 This is evident in any of the primary sources and was recognized by Habakkuk at the outset of his discussion (p. 5).

20 A third possible way to validate the stated argument would be to assume some kind of technological change in the production of machines. As this would be an assumption of the conclusion, it is hardly a satisfactory solution.

21 Homer, Sidney, A History of Interest Rates (New Brunswick, N. J.: Rutgers University Press, 1963), pp. 195–96, 286–87Google Scholar.

22 Habakkuk noted both the flimsiness of American capital (pp. 85–89) and the theoretical problem (pp. 19–21). More empirical evidence that conflicts with the view of the British visitors is also available. For example, Abram Hewitt, visiting Britain from the United States in 1867, wrote back that “the new rolling mills beat us to death by the use of hydraulic cranes everywhere to lift and carry the iron. They do not employ half the men we do for the same work”; quoted in Nevins, Allan, Abram S. Hewitt (New York: Harper, 1935), p. 246Google Scholar.

23 This is the well-known factor-price equalization theorem; see Samuelson, Paul A., “Prices of Factors and Goods in General Equilibrium,” Review of Economic Studies, XXI, No. 1 (1953), 1–20CrossRefGoogle Scholar.

24 Several estimates of real per capita incomes in Britain and the United States fail to show higher incomes in America; see Robert Gallman, “Gross National Product in the United States, 1834–1909” (paper delivered to the Conference on Research in Income and Wealth, Chapel Hill, Sept. 1963). Data on the costs of farms, collected to refute the “safety-valve” thesis, are consistent with this discounting of abundant land; see Danhof, Clarence, “Farm-Making Costs and the ‘Safety Valve’: 1815–1860,” Journal of Political Economy, XLIX (June 1941), 317–59CrossRefGoogle Scholar.

25 How high would such a tariff have to be? If the interest rates in the two countries were the same, the tariff would have to be enough to raise the price of manufactured goods as much as the money wage rate in America exceeded the money wage rate in Britain. In this case the relative factor prices in manufacturing would be the same in both countries, and the manufacturing sector in the United States would be a smaller replica of the one in Britain. With different interest rates, the problem becomes more complex, and different rates would be required on different goods, the exact rates for different industries depending on the capital-intensity of production.

26 Habakkuk, p. 9.

27 Habakkuk, pp. 50, 159.

28 For theoretical analyses of the inducements to seek labor-saving or capitalsaving innovations when the search for new methods of production is viewed as an differinvestment—that is, when various types of technological change are assumed to be produced at a known cost—see Kamien, Morton I. and Schwartz, Nancy L., “Optimal ‘Induced’ Technical Change”(paper presented to the Conference on the Microeconomics of Technological Change,Philadelphia,Mar. 1966)Google Scholar and Samuelson, Paul A., ‘A Theory of Induced Innovation Along Kennedy-Weizsäcker Lines,” Review of Economics and Statistics, XLVII (Nov. 1965), 343–56.CrossRefGoogle Scholar

29 This argument is due to Rothbarth.

30 Wallis, pp. 5, 67–68; Report on Machinery, p. 38.