Debate on De-industrialization Revisited: The Process of Decline of Traditional Flexible Manufacturing

Traditional Flexible Manufacturing

The roots of the word manufacturing consist of two Latin words—Manu and Facers. Here, manu means ‘hand’ and facers means ‘to make’. This signifies that manufacturing in earlier times was associated with handcrafts. Most of the economies of the world, especially, the economies of Europe, South and Southeast Asia, experienced the emergence of a peculiar form of handicraft manufacturing during the fifteenth and sixteenth centuries, which has been variously described as ‘protean stage of industrialization’ (Hobsbawm, 1954), industry before industrialization (Tilly and Tilly, 1971), ‘protofactory’ (Mendels, 1972), ‘nascent capitalism’ (Levine, 1977), ‘Commercial Manufacturing’ (Perlin, 1983) and ‘Proto-Industry’ (Freudenberger and Redlick, 1964). Of all the terms used to describe this form of handicraft based method of production, the term proto-industry caught the attention of large number of scholars. Initially the term was used by Freudenberg and Redlick in 1964. However, scholars gave it due attention once it was described by Mendels (1972, 1982).

The term ‘proto’ used as a prefix to the term ‘proto-industry’ belongs to the Greek language, which means embryonic, original, first time, the earliest and primitive. In this sense, proto-industry stands for a stage which contained the seeds (i.e., necessary conditions) of modern manufacturing. This stage of industrialization encompasses the period between the emergence of putting out system and consolidation of factory form of production organization. Some of the scholars view proto-industrializations as a transitional stage from ‘kauf’ system to verlag system (Kriedte et al., 1981). With the popularity of the concept of proto-industry, it also attracted lots of criticism. Most of the critics of the concept challenged the premise on which it was described as a stage in the evolution of industry (Ogilvie and Cerman, 1996); in order to overcome the criticism of using it as a stage of industry, we are using the term to describe it as a form of organization of production.

Proto-industrializations as a form of organization of production was characterized by the dominance of craft method of production, carried out in small household based workshops. The process of production was based on division of labour, whereby production process was subdivided into separate specialized craft functions. This form of production required circulating capital rather than fixed capital, as simple tools and equipments were used. The financial needs of the craftsmen to finance circulating capital and their subsistence needs were met by the merchants. These characteristics of the organization of production provided it several kinds of flexibilities that got embedded in the process itself. These same flexibilities are now built into the modern flexible manufacturing system as described by different scholars (Kenny and Florida, 1993; Knudsen, 1996; William et al., 1987; Womack and Jones, 1996; Womack et al., 1990). These flexibilities create similarities between proto-industry and modern flexible manufacturing. The only thing that separates them from each other is the level of technology being used. Therefore, by using one of the synonyms of the word proto, that is, primitive and one of the important characteristics of this form of organization of manufacturing, that is, flexibility, I have used the term primitive flexible manufacturing instead of proto-industry (Seth, 2002, 2003, 2008) in my earlier papers. However, realizing that the word primitive has connotation with primitive societies, I am using in the present article the term traditional flexible manufacturing. The traditional flexible manufacturing emerged as a consequence of loss of independence of craftsmen to the merchant, who supplied them raw materials, working capital along with their subsistence requirements to control the marketing of their final products for long distance markets. The emerging bondage of independent artisans to merchants was a product of market expansion. Market expansion resulted from centralized authority of state, monetization of the economy and emergence of urban centre and towns, which were integrated with global networks of long distance trade. In this kind of system of production, technology and scale of operation did not change at all, but isolated units of household workshops owned by craftsmen were made part of a network evolved by merchants. Since traders purchased raw materials in bulk quantities to supply them to craftsmen who were part of their network, they saved costs due to advantages of economies of bulk purchase. They also sold final products in bulk quantities in mass markets. It also helped them in earning substantial profits in this form of nexus between merchant and craftsmen and small household production units became dependent on traders. This happened because merchants have achieved advantage of large-scale marketing networks over scattered petty production units.

The traditional flexible manufacturing was based on the knowledge of merchants about the market fluctuations and also about consumer preferences. These advantages along with the resources at his command provided him control over decision regarding expanding or reducing the level of output. This advantage provided the merchant flexibility to develop a network of craftsmen in response to market conditions. They could adjust the size of their network according to market fluctuations by including or excluding craftsmen from their network without incurring the costs of lay-off or retrenchment incurred by modern manufacturing. The system also provided merchant flexibility to supply variety of products (i.e., economies of scope) customized according to the needs and choices of the consumers by adding additional craftsmen to produce products with varying specifications in his network.

The traditional flexible manufacturing created a system household workshop economy based on vertically disintegrated inter-industry and intra-industry specialization and dispersed productions units located in clusters in specific regions. These production units produced specific products, components or sub processes of a product with close networking through merchants of these units. Such organization of production has been conceptualized as flexible specialization (Piore and Sabel, 1984). These clusters of small workshops survived by reducing cost and by exploiting external economies.

Looking at the preconditions that were necessary for the success of traditional flexible manufacturing, one has to look at the historical events that were occurring in the Indian subcontinent around c. 1500. Around this time, two important historical episodes occurred, which in tandem, provided the necessary conditions for the growth of traditional flexible manufacturing. One of the episodes was the entry of European merchants through sea route after the discovery of sea route to India by Vasco-da-Gama in c. 1498. The other episode was the beginning of the Mughal Empire in c. 1526 with the entry of Mughals through land route. These two concurrent events set in motion necessary preconditions for the growth of traditional flexible manufacturing. If this period is viewed in the context of global economy, the period around c. 1500 stands at the cusp in the history of Indian manufacturing, when two distinct forces of globalization simultaneously impacted the manufacturing of the Indian subcontinent.

The first force of globalization was the beginning of the Mughal Empire. Empire building established connectivity among the fragmented political units of the Indian subcontinent. At this stage of human history, the processes of globalization emerged as a consequence of ‘barrel of the maximum gun’, gunpowder and the ferocity of nomadic horseman (Findley and Lundhal, 2006; Mc Neill, 1989). The second powerful force of globalization was ‘initiated’ by Vasco-da-Gama who discovered the sea route to India. The discovery of the sea route paved the way for establishing links with different European economies and facilitated its participation in an emerging rudimentary intercontinental economy evolved through European trading companies. The first episode created an integrated economy of continental size and the second episode expanded its commercial horizons to the European economies. However, in this intertwined process of globalization, until the death of Aurangzeb in c. 1707, the Mughal Empire determined the socio-political and economic environment for the growth of manufacturing.

The Mughal Empire has inherited a long tradition of crafts-based system of petty production, where manufacturing was organized in the artisanal household workshops. This system of production was not suited to the needs of economy during the Mughal Empire. The integration of polities and markets has created substantial increase in demand of product of manufacturers. The growing domestic demand was accompanied by a growing demand for Indian manufactured goods in global markets. To meet the expanding markets of manufactured goods, there was a need to expand scale of production. However, at this point in time, Indian artisans did not have resources to increase the scale of operation and did not have capacity to expand supply. These objective conditions, prevailing at this time, necessitated reorganization of the organization of production. The reorganization of manufacturing was initiated by the merchant who had substantial amount of financial resources in their hands, whereas scattered small craft-based workshops did not have enough capital. Therefore, to meet the growing demand of manufactured goods, merchants evolved network of artisans through putting-out system. The new system provided the capital needs of the artisans and also organized marketing and selling of their products. In this way, large-scale marketing networks created by merchants roped in small household workshops of craftsmen to supply products to mass markets. This reorganization of production in manufacturing emerged as a consequence of nexus between merchants and craftsmen.

During the Mughal period, this system was known as Dadni system (system for advance). This system created a particular kind of relationship between merchants and artisans. It was based as an agreement between merchant and craftsmen, which specified terms regarding quantity, quality, prices and dates of delivery of output and it also specified the amount of advance given by the merchant. The agreement was compatible with the law of Sillim (sales). The law of Sillim derived its jurisdiction from Quran. Here, it means delivery on stipulated date (Chaudhuri, 1979; Chowdhury, 1972).

The expansion in the domestic market and its integration with global trading system provided objective conditions for the growth of traditional flexible manufacturing in the different parts of the Indian subcontinent, where each region specialized in the production of a particular manufactured products. Looking at the size of the economy of the Mughal India, it is believed that the ‘Mughal Empire was wealthy and mighty empire, which dwarfed the European states. In 1700, population of India was twenty times that of United Kingdom. India’s share in total output (of the manufactured goods) at that time has been estimated at 24 percent’ (Ferguson, 2004; Maddison, 2003).

The rise of the Mughal Empire had created preconditions for the birth of traditional flexible manufacturing system. Some scholars believe that these conditions slowly disappeared with gradual erosion in the authority of the Mughal state. One region after another declared its autonomy from the Mughal Empire. The fragmentation of Mughal state into new political entities intensified ‘military’ conflicts’, plundry disruption in the functioning of trade-commerce and financial institutions. Markets also got fragmented due to the emergence of multiple currencies, issued by new successor states of the Mughal Empire and barrier to inter-regional trade.

Due to these reasons, like all other scholars, I also accepted the understanding ‘that the dawn and dusk of the traditional flexible manufacturing was intimately linked with the rise and fall of Mughal Empire’ (Seth, 2008). However, studies conducted by the scholars on different successor states of the Mughal Empire show that the preconditions that are necessary for the continuation of the traditional flexible manufacturing continued to exist. The successor states such as Awadh, Hyderabad, Maharashtra, Punjab, Rajasthan and Mysore continued to provide necessary conditions for the continuity of the traditional flexible manufacturing (Grewal, 1995; Marshall, 1978; Stein, 1985; Wink, 1985). Even historical evidence also suggests that India continued to be a large producer of the manufactured goods up to c. 1750 (Frank, 1998; Maddison, 2003).

Debate on De-industrialization

The gravity of the process of de-industrialization experienced by the manufacturing of the Indian subcontinent was revealed for the first time by William Bentick, who was Governor General of India during 1833–1835. He mentioned in greater details the consequences of the imported mill cloth of British textile mills on the decline of Indian cotton textile manufacturing. His view was later on quoted by Karl Mark in his book, when he mentioned ‘the bones of cotton weavers are bleaching the plains of India’ (Marx, 1868, p. 358). He mentions again about the process of de-industrialization experienced by the manufacturing of the Indian subcontinent in his article entitled British Rule in India, which appeared in the New York daily Tribune of 25 June 1853. He describes the process as ‘it was the British intruder who broke up the Indian Handloom and destroyed the spinning wheel’. England began with driving the Indian cotton from European markets; it then introduced the very mother country of ‘cotton with cotton’. He further adds in the same article that ‘From c1818-c1836, the exports of twist from Great Britain to India rose in proportion to 1:5200’. The consequences of this process was that the ‘British steam and Science uprooted over the surface of Hindoostan the union between agriculture and manufacturing’ (Marx [1853] (2006) pp. 16–17).

De-industrialization also assumed importance in the writings of nationalist scholars who used it as an important example of the failure of the British rule. According to the nationalist scholars, British manufacturers’ interest had forced the British government, which exposed the traditional flexible manufacturing of the Indian subcontinent without any protection against products produced by British mills. It was the lack of protection to the native manufacturing, which has caused de-industrialization. The argument advanced by the nationalist writers implicitly assumes that if at that point in time, India was ruled by national government, it would have definitely protected the interest of Indian manufactures, by protecting it from foreign competition. The writings by nationalist scholars began with the work of Dadabhai Naoroji (1901) and R.C. Dutt (1906); finally, it appeared in the book by Nehru (1947). In fact, one of the most important causalities of the process of de-industrialization Charkha (the spinning wheel) became an important symbol for the Gandhi-led independence movement of India.

Despite the fact that the process of de-industrialization has assumed significance in the imagination of the scholars, representing ideologically all the colours of rainbow, it has not resulted in settling of one of the most important issues related to the debate. The most contentious debate is regarding the timing of the beginning of process of de-industrialization. Timing of the process of de-industrialization is an important issue, because its timing will inform us about the factors that caused de-industrialization. Timing of the process of de-industrialization is also important to know, because it will tell us about the main actors who were active at that point in time. Regarding the timing of the process of deindustrialization that was spread over the period between c. 1750 and c. 1900, historians have identified two different sub-periods. According to some historians, it was the decline of the Mughal Empire which led to the process of de-industrialization. The other set of historians believes that the process of deindustrialization occurred because of penetration of the cheap machine-made manufactured products of British mills.

The contemporary debate on de-industrialization, began after the availability of data reported in the census of population, national income estimates and occupational structure of the working population after c. 1870s. Due to this reason, these studies have not been able to throw light on the period prior to c. 1872. The earliest contemporary empirical evidence regarding the occurrence of de-industrialization was reported in a study conducted by Clark (1950). His analysis was based on the census report of c. 1881 and c. 1911. He established that proportion of population engaged in manufacturing, mining and construction declined from 28 per cent to 12 per cent.

Similar results were obtained from the census data of the period between 1881 and 1931. The census data show that the employment in the manufacturing sector declined from 20 million to between 13 and 15 million, while percentage of workforce employed in agriculture increased from 62 million to 71 million. Scholars interpreted the process of movement of working population from manufacturing to agriculture as de-industrialization (Patel, 1952).

Daniel Throrner, challenged his estimates and used revised data on census of population from c. 1881 to c. 1931. His estimates show that sectoral composition of working population engaged in manufacturing registered insignificant change between c. 1881 and c. 1931. Therefore, according to his estimates, there is no evidence that de-industrialization in the Indian subcontinent occurred after c. 1881 (Thorner, 1962). Hence, he suggests that if at all de-industrialization occurred in India, it must have happened prior to c. 1881.

Harnetty’s observations regarding handloom show that the handloom weaving which was supplying the entire domestic demand along with exports, reached at its peak in value terms in c. 1800 and in terms of volume in c. 1802. Afterwards, exports of textiles to Britain declined due to emerging competition from British mills (Harnetty, 1991). Simmons used data set evolved by Paul Bairoch (1982), to understand the process of de-industrialization experienced by the economies which were periphery of the European economies. According to the Simmon’s analysis, the Indian subcontinent accounted for 25 per cent of the global output in manufacturing in c. 1750. By c. 1800, its share declined to 20 per cent, in 1860 it fell 10 per cent and by c. 1880 it was less than 3 per cent (Simmons, 1985). However, critics of these estimates argue that the decline in the global share of Indian manufacturing might have occurred not necessarily due to decline in the rates of growth of manufacturing in India, but perhaps due to faster rates of growth in manufacturing recorded by other economies. Bairoch also provided the data on per capita level of industrialization in India. The index of per capita level of industrialization declined from 7 in c. 1750 to 6 in c. 1830 and to 2 in c. 1880. This suggests that there was absence of dramatic change in the level of manufacturing in India between c. 1750 and c. 1830. The de-industrialization was more pronounced after c. 1830 (Bairoch, 1982; Simmons, 1985).

Krishnamurthy made an attempt to study the problem of de-industrialization with the help of shift in the occupational pattern of working population for the period c. 1881–c. 1951. He observed that occupational pattern was almost stationary during the period. His estimates show that the share of primary sector remained about 70 per cent, share of manufacturing remained at around 10 per cent and services occupation accounted for about 20 per cent. Even his exercise suggests that if there had been any event of de-industrialization in the Indian subcontinent it must have occurred prior to c. 1881 (Krishnamurthy, 1983).

The empirical exercise conducted by Clingingsmith and Williamson, covering much longer period than any of the earlier studies on de-industrialization (between c. 1750 and c. 1913) shows that the Indian subcontinent experienced the process of de-industrialization during the two sub-periods between eighteenth and nineteenth centuries. The first phase of de-industrialization occurred between c. 1750 and c. 1810, which he attributes to the decline of the Mughal Empire. The second phase covers the period between c. 1810 and c. 1860, resulting from the competition from manufactured products produced by British mills. According to them, the process of de-industrialization was complete by c. 1860. This is perhaps due to this reason; almost all the studies which cover the period after c. 1860 did not find any evidence of de-industrialization (Clingingsmith and Williamson, 2004). It is due to this reason that lots of scholars have suggested de-industrialization might have occurred much earlier (Clingingsmith and Williamsan, 2004; Markovits, 2000; Roy, 2000, Roy 2010).

It is quite interesting to note that most of the scholars who believe that de-industrialization occurred prior to c. 1860, attribute it to the decline of the Mughal Empire. These scholars are totally oblivious to the fact that the period between c. 1750 and c. 1860 was not only the period of the decline of the Mughal Empire but also the period of political ascendancy of the East India Company; due to this reason, they have neglected the role of the East India Company in creating precondition for the emergence of de-industrialization. It was the emergence of the East India Company as a political entity which encouraged it to monopolize trade in the Indian manufactured products. In the process of monopolization of trade in the manufactured goods, the company systematically marginalized the role of Indian merchants in the organization of production of Indian handicrafts. The process of marginalization of the role of Indian merchants broke the more than a century old nexus between craftsmen and merchants, which led to the decline of traditional flexible manufacturing or de-industrialization. This process had been narrated in the section that follows.

Consequences of the Rule of the East India Company on the Traditional Flexible Manufacturing

The process of territorial occupation of the India subcontinent by the East India Company began with battle of Plassey in c. 1757 and battle of Buxar c. 1764, which led to the grant of Diwani right to the East India Company by Mughal Emperor Shah Alam II. The granting of Diwani right to the Company transformed the East India Company into the ruler of Bengal (Dirk, 2006). This transformation converted the John Company (popular name for the East India Company) into Company Bahadur (Furber, 1970). With achieving the monopoly on political power in Bengal, the company used it to consolidate its position as monopolist of trade. By integrating these two monopolies, the East India Company obtained unrestricted access to the best products produced by the traditional flexible manufacturing in Bengal. The company followed the same strategy to consolidate its political control on other centres of traditional flexible manufacturing located in other parts of the Indian subcontinent.

The process began with Bihar (c. 1765) followed by eastern Uttar Pradesh (c. 1775), Malabar Coast and Mysore (c. 1792–c. 1801) and Surat and Ahmedabad (c. 1800–c. 1803). The transformation of East India Company into an agency of the British Empire resulted in restructuring of the relationship between the company and the economy of the Indian subcontinent. The new relationship restructured several macro- and micro-level processes, which had significant impact on the traditional flexible manufacturing.

Before the battle of Plassey, company officials were performing trading activities with the help of local merchants for purchasing the product produced by the traditional flexible manufacturing of the Indian subcontinent. The local merchants had organized networks of artisanal household workshops based on Dadni system. Through their networks, they procured and produced for selling the markets. These merchants facilitated the company officials in procuring products of Indian handicrafts for exports. The trading houses of Indian merchants such as the house of Jagat Seth and Umichand were far bigger in the size of their operations. The dependence on local merchants was far greater among the British employees of the East India Company, who were involved in private trade. The East India Company had given permission to its British employees for conducting trade on their own account to complement their earnings which they received as wages (Seth, 2012). The dependence on local merchants for their needs for credit had increased the incidence of indebtedness among the officials of the company to the local merchants (Om Prakash, 2007). Moreover, the East India Company also had to share trading space with other European trading companies operating in the Indian subcontinent. This phenomenon has been described as Mutual Mercantilism (Bhattacharya, 1982).

The transformation of the East India Company into Company Bahadur, entirely altered the mutual mercantilism. Though it newly acquired political power, it attempted to marginalize the role of Indian merchants. To make the Indian merchants ineffective in the markets, the company used market as well as non-market strategies to establish its own monopoly over trade in the products produced by the traditional flexible manufacturing. To begin with, the company declared its direct monopoly of trade in certain products. In the markets of these products, the company became sole buyer or monopolist. The process of monopolization of trade, using its political power began in c. 1758, when Mir Zafer gave away the monopoly of trade in Saltpetre to the East India Company. This was followed by monopoly of trade in salt and opium in c. 1793. The appropriation of monopoly right in trading of these products eliminated the role of Indian merchants in the trading of these commodities. In new circumstances, when company enjoyed twin monopolies, it also developed the capacity to manipulate prices in these commodities. Once the East India Company gained political power in the Indian subcontinent, the native merchants had to pay duties at various internal trading points, whereas British traders and their agents were exempted from such duties (Robinson, 1912; Sinha, 1968, Vol. III).

The East India Company also minimized the role of Indian merchants by marginalizing their role in the procurement of merchandise. For this purpose, company developed independent channels to procure goods produced by Indian craftsmen directly through Gomasthas (agents) employed by the company. To facilitate the process of procurement of Indian manufactured goods, the company divided markets into Aurangs consisting of important centres of traditional flexible manufacturing of certain specific products. Each Aurang was working under the supervision of a chief Gomastha, who in turn employed Gomasthas and Paikars for the purposes of procurement of products. These networks of independent supply chain, evolved by the East India Company, replaced the role of merchants in the organization of production of traditional flexible manufacturing.

After occupation of Awadh, to exploit its political power for commercial gains, the company employed 500 Gomasthas in Awadh alone. The British European traders who were close to top army officers and administrators of the company like Residents took maximum advantage of new circumstances under the patronage of Resident of Awadh Mr. Nathneil Middleton; Johnscott, a free merchant was able to establish a commercial empire of cotton piece goods in the Aurang at Tanda. Here, he exercised absolute monopoly which he used to appropriate output of weavers of the area at lower prices. Another trader who gained from the patronage of the Resident of Awadh was John Hyde (Marshall, 1957, p. 466). Finally, it gave the ultimate blow to the role of Indian merchants in the process of production and distribution of manufactured products produced by traditional flexible manufacturing of the Indian subcontinent, when the East India Company banned the Dadni system in c. 1770. The Dadni system was the basis of the emergence of primitive flexible manufacturing. It is by using all the above-mentioned strategies; the East India Company leveraged its political power to eliminate the symbiotic relationship which existed between Indian merchants and craftsmen. Such nexus between local officials of the army of the East India Company and its administrative officials and British traders emerged in most of the important centres of production of traditional flexible manufacturing.

In the same period, the British manufacturers developed competitive advantage over the products produced by the primitive flexible manufacturing of the Indian subcontinent. The emerging importance of British manufactures in the political economy of Britain forced the East India Company to share trading space with British manufacturers. It allowed entry of free merchants who acted as agents of the British companies to sell their products in the Indian markets. These agents formed agency houses, which were generally partnership companies, working under the patronage of the officials of the East India Company. Some of these agency houses were founded by the relatives of the officials of the Company. These companies became financially very strong as they began to attract the savings of the civil and military officials of the East India Company. Slowly, these companies began to function as banks and became important channels to facilitate remittance sent by the British citizens working in India to their relative in Britain (Hodgson, 1938; Singh, 1966). Most of these agency houses operated from the presidency towns, because they have evolved symbiotic relationships with the British citizens working in India. The first agency house that was founded in Bombay Presidency was Forbes Company in c. 1767, Alexandra & Company c. 1767 in Calcutta and Parry & Company in Madras Presidency in c. 1789. Apart from Alexandra & Company which established the Bank of Hindustan in Calcutta in c. 1770, Calcutta Presidency had the largest number of agency houses such as Ferguson & Company, Colive & Company and Pickard & Company. The largest agency house of Calcutta Presidency was Palmar & Co. which was established in c. 1810. Similarly, Bombay Presidency also had several other agency houses such as Bruce Fawcett & Co., established in 1790, Mackintosh & Company c. 1805, Richi Stewart & Company c. 1810 and Leaking & company c. 1810 (Tripathi, 2004).

These agency houses became more wealthy and more important in trade between Indian subcontinent and Britain. Some of them even began to monopolize local and inter-regional trade in the Indian subcontinent. Their trading networks resources and political patronage slowly replaced the significance of the native business houses, both in terms of their role in trading as well as in terms of their importance to the East India Company as a source of finance.

The East India Company also used its political power to impose several kinds of restrictions on the Indian craftsmen to break their nexus with Indian merchants. These regulations reduced their bargaining power, forced them to sell their products on preferential basis to the company at lower prices. The company prevented craftsmen to supply their products to other merchant, till they have produced their products to meet the requirement of the company. The East India Company introduced indenture (Khatbandi) regulation (c. 1770–c. 1780), which converted weavers into a kind of bonded labour, because this regulation facilitated the bondage of craftsmen exclusively with the agents of the company. Through this regulation, the East India Company denied artisans to sell their products in the open market or through Indian merchants. This regulation also reduced their bargaining power against the agent of the company. What began as a coercion or bullying of Indian craftsmen by the company agents after the battle of Plassey, ‘Khatbandi regulations made it official’ (Bhattacharya, 1982, p. 273).

The company also imposed Motarfa tax on weavers. This tax was imposed on looms owned by the weavers. Although this tax was abolished subsequently in Bengal Presidency in c. 1793 and in Bombay Presidency till c. 1844, it continued to exist in operation in Madras Presidency; from this tax alone, the company earned ₹ 1 million in c. 1850. According to the estimates of Dodwell, due to Mortafa tax, employment in textile manufacturing reduced by almost 50 per cent in Madras Presidency during the period (c. 1800–c. 1857, Dodwell, 1922, p. 2). Bolts, who has provided a detailed account of the company excesses on weavers, remarks that the company used all the methods of exploitation to exploit the weavers ‘such as fines, imprisonment, flogging and forcing bonds on them’ (Bolts, 1772/1998, p. 74).

Using its newly earned political power, the East India Company also forced craftsmen to work in the production centres organized by the company. Here, craftsmen were working on wages. In these centres, their wages were quite low and they were forced to work for longer hours. These centres of production were much lower in standards of working conditions in comparison to Karkhanas which were owned by the Mughal Emperor’s family members and high ranking mansadars of the Mughal Empire (Parthasarathi, 2001, p. 84). In these centres of production organized by the company, the impact of the tyranny of the company was so devastating for the weavers and silk winders of Dacca that they began the practice of self-mutilation by cutting their thumbs to avoid exploitation by the officials of the company. This practice slowly eclipsed the whole industry which was known for best quality Muslin-Malmal Khas (Robins, 2006, p. 60) This major shift in the relationship between the agent of the company and craftsmen has been described as a shift ‘from market determined to coercion based transactions’ (Om Prakash, 2007, pp. 1331–1368; Roy, 2010, pp. 135–139).

Through following different strategies mentioned above, the East India Company was able to break the nexus between local merchants and craftsmen’s household workshops. This nexus was the precondition for the existence of traditional flexible manufacturing.

The nexus survived the decline of Mughal Empire in the successor states of the Mughal Empire. However, its existence was made difficult by the emerging political power of the East India Company. The emerging disassociation between merchants and craftsmen led to disconnect between craftsmen and mass markets. This disconnect between craftsmen and mass markets facilitated the slow and systematic decline of traditional flexible manufacturing. Therefore, it would not be inappropriate to state that the traditional flexible manufacturing experienced decline along with the process of territorial occupation of the Indian subcontinent by the East India Company. This suggests that after the process of territorial expansions of the East India Company, craftsmen lost the support of merchants who were organizing them into networks, to sell their products in the mass markets. The breaking of the nexus between merchants and craftsmen exposed craftsmen to several kinds of risk and uncertainties. In new circumstances, a new symbiotic relationship emerged between the stakeholders (the company, Indian merchants and craftsmen). The new relationship that emerged between the three stakeholders was similar to the relationship that exists between ‘parasite and host’ where ‘parasite uses the structure of the host for its own sustenance’ (Dewey, 1988, p. 5).

Since Bengal was the first province which was politically occupied by the East India Company, the process of de-industrialization began with the occupation of Bengal. It is also an important historical fact that during this period, the most prosperous region of the Mughal Empire became the poorest region of the India subcontinent and experienced famine in c. 1770. Subsequently, the spatial spread of de-industrialization got related to the time when different regions of the subcontinent were politically occupied by the East India Company. Due to this reason, there occurred regional variations in the timing of the emergence of the process of de-industrialization. However, certain regions remained under native rulers such as Hyderabad, Mysore, Punjab, Rajasthan and Kashmir. In these regions traditional flexible manufacturing continued to exist.

Decline in traditional flexible manufacturing does not pari passu mean decline of handicrafts. Since traditional flexible manufacturing is just one of the methods of organizing handicrafts to supply products in mass market, crafts-based methods of production can be embedded into several kinds of organizational structures. However, it provided strength to the Indian handicrafts to cater mass markets. Therefore, it would be appropriate to suggest that the decline of handicrafts began with the political ascendancy of the East India Company which eliminated the preconditions that were necessary for the continuity of the traditional flexible manufacturing. Hence, it will not be unjustified to state that decline of handicrafts did not occur because of the decline of the Mughal Empire, but because of rise of the East India Company as the ruler of the Indian subcontinent.

Conclusion

In this article, an attempt was made to describe the process of de-industrialization in terms of the process of emergence and subsequent decline of the traditional flexible manufacturing. Traditional flexible manufacturing provided organizational structure to the production of handicrafts, which gave it advantage to sell the products made of handicrafts in the mass markets. The traditional flexible form of organization of production and distribution of handicrafts emerged with the formation of a nexus between craftsmen and merchants. So long as this nexus lasted, Indian subcontinent had capability to supply its manufactured items globally. This nexus obtained its peak during the Mughal Empire. After the decline of the Mughal Empire, the traditional flexible manufacturing continued to exist in the successor states of the Mughal Empire.

The process of decline of the primitive flexible manufacturing began with the territorial expansion of the East India Company. The emergence of the East India Company as a ruler of the Indian subcontinent gave it the advantage to use its political power to monopolize the trade in manufacturing products of the Indian subcontinent. It is while consolidating its monopoly over trade in the Indian manufacturing product; it followed the strategy of breaking the nexus between craftsmen and native merchants. Once the nexus between craftsmen and merchants was broken, decline in the handicrafts was inevitable. Therefore, it is not proper to associate decline of handicrafts with the decline of the Mughal Empire. Decline of handicrafts in India is related to the transformation of the East India Company from a trading company in to a political entity. However, the final blow to the existence of Indian handicrafts based method of production was received by the imports of British manufactured goods produced by British mills which flooded the markets in India after c. 1813, when monopoly of trade of the East India Company was removed.