Appendix B1: Dundee! City of Empire.
For those unfamiliar with it's charms, Dundee is a city on the east coast of Scotland worthy of our attention due to it's close and incredibly representative relationship with the Empire and wider world. Dundee is proverbially famed for the three 'J's; Jam, Journalism and Jute, but we are concerned with only one of those in this section. The travails and triumphs of the Fourth Estate are in general beyond our scope and we shall consider Jam (or more technically marmalade) when we look at the fruit inspired nexus formed by the international citrus trade, cross-border credit financing and the Spanish Civil War. This leaves us with Jute, not perhaps the most exciting material but an important one and an industry deeply tied up with the economic complexities of Empire. Jute is a fibrous plant native to Bengal which, when processed and weaved, will produce the cheap, tough, hard-wearing and breathable material Hessian. This combination of properties made it the material of choice for transporting agricultural products (everything from wool to coffee beans to flour was shipped in Hessian sacks), backing a quality carpet and, in times of war, it proved itself an ideal material for sandbags.
Dundee thrived on Jute and soon gained the nickname Juteopolis, such was it's dominance of the product and the city's dependence on the trade. For 50 years the Dundee factories had a virtual monopoly on the market and at it's peak almost 50% of the city's population worked in the mills. However, just as Empire had enabled Dundee to build it's monopoly by stopping her continental rivals getting a supply of raw Jute out of Bengal, so it was Empire that would cripple her by creating the competition. The potential profits from opening Jute Mills in Calcutta was obvious, closer to the raw material and with much cheaper labour they would be lucrative, and after some initial setbacks by the turn of the century the Calcutta mills were well established. In an ironic detail the workers of Dundee were crucial in to the process of killing their home town's main industry; the new Calcutta mills needed supervisors and engineers familiar with modern machinery and so the Jute Wallah was born - experienced Dundee men sent to Calcutta, inducted into the local Raj hierarchy and then given a mill to manage.
The Dundee Stock Exchange, formally established in 1879, was never a busy exchange in itself and was mainly a route for local investors to more easily access the wider British and Imperial stock markets. The busiest agents on the exchange were not those from local Jute firms or even those looking to set up mills in India, but the firms selling Empire and overseas focused investment trusts, particularly those targeting the Americas. That the local mill owners and investors were looking for investment options elsewhere should have been seen as warning sign about the future fate of the industry.
A handful of Dundee based firms succeeded in making themselves into full on Raj conglomerates, owning not only the Jute mills but also the coal mines that provided the fuel, the docks where the finished product was shipped from and even the housing the workers lived in. This was however unusual, for most investors direct investment in Indian Jute mills soon gave way to the less risky, and even more lucrative, 'managing agent' scheme. A typical scheme would see the managing agent firm identify a site, build the mill and then float the resulting company on the local Indian stock exchange, not to raise capital (the mill had already been built) but to cash-out the original investors at a handsome profit while retaining a large, essentially free, stake. The managing agent firm would have a string of long term contracts with the newly floated mill company, covering the entire process from supplying raw materials through to selling the resulting product, collecting a handsome fee every step of the way at little to no risk. Crucially, and in stark contrast to the Cotton industry in the Raj, this combination of managing contracts and a large shareholding meant the Jute industry was still very much British controlled, even if it was on paper majority owned by expat and 'native' Indian shareholders. An example of the difference this made can be found in labour costs, in the west coast Cotton industry wages skyrocketed almost 300% between 1920 and the mid 1930s, with the result that the 'cheap' Indian cotton mills found themselves undercut by Japan, just as they had once threatened to undercut the Lancashire mills. In contrast wages in Bengal's Jute mills barely went up 20% as the Bengal government allowed/encouraged massive migration from neighbouring states to keep the mills well stocked with fresh, cheap labour.
It is worth noting that this was not just a challenge to the Conservatives, both Labour and the Liberal Social Democrats (LSD) had to respond and their different reactions indicate the splits on the broader left around the issue. Traditionally Labour were anti-protectionism as they felt tariffs only increased prices of food and basic goods for the working class and entrenched domestic monopolies, increasing the bosses power over labour. But also felt the need to make clear they were anti-Free Trade as they knew that policy was also unpopular, particularly with the unions, so they had devised their own, unique solution. Diagnosing the problem as being the low wages of overseas workers their policy was for an international agreement, through the offices of the League of Nations, to agree minimum pay and conditions for factory work worldwide, on the understanding this would mean massive pay rises for Japan and India. With wages equalised UK industry would be able to compete and workers in all countries would be fairly recompensed, should any country failed to live up to it's agreement on wages then there would be a total embargo on their exports. The flaws are obvious, not least the unanswered question of why would, for instance, Japan sign a treaty that would destroy it's export trade, when Labour had made it clear they would not pre-emptively embargo any non-signatory? Roundly mocked at the time the newly 'reformed' Labour party gave in to TUC pressure, shouted down it's internationalist and idealist wings, and embraced a mild form of protectionism.
The Wellington Foundry in Leeds, owned by Fairbairn Lawson Combe Barbour Ltd (FLCB) the largest textile machinery manufacturing firm in the world in the mid-1930s. FLCB and their Scottish rivals ULRO (Urquhart, Lindsay and Robertson Orchar) were vigorous campaigners in Westminster against tariffs and quotas in the textile industry, on the reasonable basis that the inevitable counter-tariffs would affect their machinery exports. Given the machinery manufactures were profitable, could out-compete their international rivals, produced valuable export earnings and in general only wanted the status quo maintained, they tended to gain a warmer reception than the seemingly perpetually 'in crisis' textile firms. A similar split could be seen in the workforce, the textile unions being pro-tariff while the industrial unions supported Imperial Preference if not full on free trade.
In contrast the LSD had the free trade inheritance of the Liberal tradition and had made that stick in the new party, it's former Labour contingent agreeing that for most of the working class free trade was a benefit for the reasons Labour had previously espoused. This position on trade, along with their other industrial policies and the ongoing bad blood inside the union movement around the welding striker, was enough to tempt the Transport and General Worker's Union (TGWU) into backing the party. To be brutal they had basically no members in the textile industry, they could see free trade would benefit all their members and that tariffs would hurt their industrial members, and they worried about a loss of influence in the TUC and the direction of Labour policy. While TGWU was the first to jump ship, they would not be the last, particularly after the dramatic events of the autumn. This did leave the question of what to do with Dundee and the others industries that would be affected by this policy, to which the LSD answer was re-train the workers and build new industries for them to work in. The LSD were comfortable with massive state intervention, nationalisation and direct government investment/finance, they just believed it should be targeted on industries with a future not wasted in prolonging the agony of those that were doomed, though they were careful to express the sentiment more sympathetically in public.
The scale of the problem facing the British government should now be clear. Fundamentally the Calcutta Jute industry had access to cheaper labour which, while nowhere near as productive, was so much cheaper it could still undercut Dundee and, importantly, everyone else in the Jute trade. Due to the unique structure of the managing agent firms, and the involvement of the City of London in the trading, shipping and financing, the bulk of the actual profits flowed back to Britain, even if the factories were in India and notionally owned by Indian capital. Crippling the Jute industry by forcing up wages, as had inadvertently happened to the Cotton industry, was certainly possible and would to an extent aid Dundee, but on a net basis would cost Britain money as the Dundee mills would be far less profitable. Tariffs could in theory assist on the British-Indian jute trade and allow Dundee to regain the domestic market, but intra-Empire barriers to trade were unpopular, difficult to square with "Empire Free Trade" as agreed at Ottawa and fiercely opposed by the City and the many investors across Britain and the Empire who were profiting from the Jute trade. Widely believed to have no acceptable solution, or at least no solution that would be acceptable to all the parties, the issue would force itself onto the agenda of the Conference regardless. Even if Jute could be ignored, it was obvious the same pattern could repeat itself as the Dominions industrialised and British interests, however they were defined, could be found on both sides of the argument.
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Notes:
A slightly different style for this one, I've gone for the conceit of this being an Appendix to the main work just to try something new. I hoped it would result in the chapter being shorter and it is (a little bit), though it ended up growing when that political bit got dropped in the middle.
But onto the subject itself - Dundee and Jute! I'd ask you to name a more intoxicating and bewitching combination, but I don't think the server could cope with the mountain of responses. However it was a complex problem and in it's own way interesting, certainly I have sympathy with the government trying to solve it as it involved some fairly fundamental "What is the point of Empire?" and "City of London vs The Rest" type questions which I always find fascinating.
The Calcutta vs Bengal wage difference is entirely true, there is a quote from Halifax (when he was Viceroy of India) complaining that the Bengal Presidency had too much 'European influence" and wouldn't introduce the various factory acts and reforms everyone else in nida was. In contrast the Calcutta Cotton mills got 'reformed' and then got undercut by Japan which, for a time at least, helped save the Lancashire mills. I don't think the reforms were a deliberate attempt to cripple Indian industry by jacking up wages, I think it was a genuinely well intentioned reaction to the poor conditions, but Imperial politics is a murky place so I wouldn't rule out a degree of happy-side-effect in British policy.
On which note Labour trade policy in 1935 through to the war was that barking made/idealistic and everyone did mock them for it, yet they persisted. The unions were torn on the policy, the TUC tended towards the practical view that if the rest of the world had tariffs then their members might as well see the benefits, but there were large differences for reasons I hope are clear. LSD have kept Free Trade as that was always totemic for (most) of the proper Liberals and there is enough of a socialist tradition of the policy for the new Labour defectors to be happy with that, particularly given the wider changes in policy. The LSD policy for Dundee is actually pretty close to the OTL government policy (which was declare Dundee a Special Area, give it some tax/rate cuts and throw money at it) but done a great deal more enthusiastically and with some money for training thrown in as well.
