Bengal silk industry and laisser-faire policies in the nineteenth century: Deindustrialisation revisited

"In the late eighteenth and early nineteenth centuries Bengal was, with over 40% share on total imports, quantitatively the most important exporter of raw silk into Britain. The English East India Company (EEIC) played an important role in Bengal’s dominance. During the period of 1760s-1830s the Company developed a value chain in raw silk manufacturing and integrated cocoon procurement, reeling, warehousing, transport, advertising and the organisation of sale among its business activities. The EEIC relied on economies of scale which gave it an advantage. Moreover, thanks to learning-by-doing the Company also developed an expertise in silk manufacturing. This expertise built on the adoption of ‘best practices’, on acquiring new knowledge through sending silk experts to Bengal, and on granting patents for innovations of silk technologies. The Company offered its knowledge and services such as warehousing, transportation, marketing, sales and guidance about new technologies, innovations and best practices also to private entrepreneurs. When the 1833 EEIC Charter forced the Company to withdraw from raw silk manufacturing, the sector lost entrepreneurial guidance. In comparison to the EEIC, private entrepreneurs had little access to specialised knowledge and skills, and could not take advantage of economies of scale. In the post-1833 period innovative activities were not successful, no major innovation was adopted and the share of Bengal raw silk on the total imports of raw silk to Britain decreased to around 13%. "