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Accounting for Nonconvergence in Global Wool Marketing before 1939

Published online by Cambridge University Press:  05 June 2015

Abstract

From the mid-nineteenth century, raw wool became a global commodity as new producing countries in the Southern Hemisphere supplied the world's growing textile industries in the North. The selling practices of these big-five exporters—Australia, New Zealand, South Africa, Argentina, and Uruguay—ranged from auction through a hybrid of auction and private sale to exclusively private sale. We explore why these countries persisted with different marketing arrangements, contradicting two streams of literature on institutions: isomorphism and the new institutional economics. The article makes several important contributions through blending distinct branches of theory and by focusing on the international constraints to convergence in an earlier period of globalization.

Type
Research Article
Copyright
Copyright © The President and Fellows of Harvard College 2015 

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References

1 For an account of the growth of the woolen textile industry in the nineteenth and twentieth centuries, see Jenkins, David, “The Western Wool Textile Industry in the Nineteenth Century” and “Wool Textiles in the Twentieth Century,” in The Cambridge History of Western Textiles, vol. 2, ed. Jenkins, David (Cambridge, U.K., 2003), 761–89Google Scholar, 993–1022.

2 Stephen C. Brearley, “The International Wool Market, 1840–1913” (PhD diss., University of Leicester, 2004), chap. 3.

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26 For New Zealand's auctions, see Ville, Simon, “Rent Seeking or Market Strengthening? Industry Associations in New Zealand Wool Broking,Business History Review 81 (Summer 2007): 304–5CrossRefGoogle Scholar; for South Africa, see Abbott, Malcolm, “South African Wool Marketing,” South African Journal of Economic History 12/13 (1997/1998): 23CrossRefGoogle Scholar; Wickens, Peter, “State and Private Enterprise in the Development of the Cape Wool-Growing Industry,” South African Journal of Economic History 1, no. 1 (1986): 47Google Scholar; and Du Plessis, Marketing of Wool, 184–85.

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29 Goodfellow, David Martin, An Economic History of South Africa (London, 1931), 118–19Google Scholar, 128, 136. On an overseas visit in 1931, Walter Devereux, a representative of the Australian Wool Growers Council, confirmed the continuation of private sales arrangements in both South America and South Africa (Walter Devereux to Australian Wool Growers Council, 30 Mar. 1931, and Walter Devereux to Sir Charles Waddell, 23 Apr. 1930, E246/1–5, Australian Wool Growers Council, Noel Butlin Archives Centre, Australian National University, Canberra).

30 Brearley, “International Wool Market,” 136. After 1900, growers not selling direct from the farm used commission agents to consign their wool, which would be offered to the fifty or sixty firms operating in the main markets, Buenos Aires and Bahia Blanca (Australia, Statistical Handbook of the Sheep and Wool Industry, 77). See also Brown, Jonathon C., “Dynamics and Autonomy of a Traditional Marketing System: Buenos Aires, 1810–1860,” Hispanic American Historical Review 56, no. 4 (1976)CrossRefGoogle Scholar; Sabato, Hilda, “Wool Trade and Commercial Networks in Buenos Aires, 1840s to 1880s,” Journal of Latin American Studies 15, no. 1 (1983)CrossRefGoogle Scholar; and Sabato, Hilda, Agrarian Capitalism and the World Economy: Buenos Aires in the Pastoral Age, 1840–1890 (Albuquerque, 1990), chap. 6Google Scholar.

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36 DiMaggio and Powell, “Iron Cage Revisited,” 150.

37 Merrett and Ville, “Institution Building and Variation,” 148–50.

38 DiMaggio and Powell, “Iron Cage Revisited,” 148.

39 Ibid., 150–54.

40 North, Institutions, chaps. 5 and 6.

41 Magee, Gary B. and Thompson, Andrew S., Empire and Globalisation: Networks of People, Goods and Capital in the British World, c. 1850–1914 (Cambridge, U.K., 2010), 69CrossRefGoogle Scholar.

42 For a careful discussion of the nature of the connections between Britain and its empire, see Magee and Thompson, Empire and Globalisation. Institution building in Latin America is explored by Coatsworth, John H., “Structure, Endowments, and Institutions in the Economic History of Latin America,” Latin American Research Review 40, no. 3 (2005): 126–44CrossRefGoogle Scholar, and Coatsworth, John H., “Political Economy and Economic Organizations,” in Cambridge Economic History of Latin America, ed. Bulmer-Thomas, Victor, Coatsworth, John, and Cortes-Conde, Roberto (New York, 2006), 235–74Google Scholar.

43 See, for instance, Acemoglu, Daron, Johnson, Simon, and Robinson, James A., “The Colonial Origins of Comparative Development: An Empirical Investigation,” American Economic Review 91, no. 5 (2001): 13691401CrossRefGoogle Scholar; Acemoglu, Daron and Robinson, James A., Why Nations Fail: The Origins of Power, Prosperity, and Poverty (London, 2012)Google Scholar; Diamond, Jared, Guns, Germs, and Steel: The Fates of Human Societies (New York, 1997)Google Scholar; Engerman, Stanley L. and Sokoloff, Kenneth L., “Five Hundred Years of European Colonization: Inequality and Paths of Development,” in Settler Economies in World History, ed. Lloyd, Christopher, Meltzer, Jacob, and Sutch, Richard (Leiden, Netherlands, 2013)Google Scholar; and Sachs, Jeffrey D., “Notes on a New Sociology of Economic Development,” in Culture Matters: How Values Shape Human Progress, ed. Harrison, Lawrence E. and Huntington, Samuel P. (New York, 2000), 2943Google Scholar.

44 Acemoglu and Robinson, Why Nations Fail, 279–80, 282, 299, 329, 341, 372, 385, 387, 398, 401–2, 445.

45 Clapham, Woollen and Worsted Industries, 98.

46 Textile Mercury, The Wool Year Book and Diary, 1915 (Manchester, 1915)Google Scholar, 40, 50; Statistical Handbook of the Sheep and Wool Industry, 19, table 21.

47 Roberts, Stephen, History of Australian Land Settlement (South Melbourne, 1924, reprinted 1968)Google Scholar, parts 3–5.

48 Coatsworth, “Structure, Endowments,” 131; Coatsworth, “Political Economy,” 259–61; Amaral, Samuel, The Rise of Capitalism on the Pampas: The Estancias of Buenos Aires (Cambridge, U.K., 1998)CrossRefGoogle Scholar; Acemoglu and Robinson, Why Nations Fail, 258–71. For a comparison of Australian and Argentinian experiences, see McLean, Ian W., Why Australia Prospered: The Shifting Sources of Economic Growth (Princeton, 2013)Google Scholar, chaps. 4 and 5.

49 We owe this point to Malcolm Abbott.

50 Ville, Rural Entrepreneurs; Butlin, Investment, 57–166.

51 The wool trade was both a result of and a contributor to a “network” resulting from the movement of people, goods, and capital within the British world, as described by Magee and Thompson, Empire and Globalisation.

52 Skinner, Skinner's Wool Trade Directory, 1948, lxxv–lxxxiii; Abbott, Malcolm, “Promoting Wool Internationally: The Formation of the International Wool Secretariat,Australian Economic History Review 38, no. 3 (1998): 258–79.CrossRefGoogle Scholar

53 Tenny, Lloyd S., “Standardization of Farm Products,” Annals of the American Academy of Political and Social Science 137 (1928): 208CrossRefGoogle Scholar, 210.

54 Skinner, Skinner's Wool Trade Directory, 1948, xxviii.

55 Garside, Wool and the Wool Trade, chaps. 8–9; Du Plessis, Marketing of Wool, chap. 11.

56 Beckert, Sven, Empire of Cotton: A New History of Global Capitalism (London, 2014), 320–21Google Scholar.

57 Rees, Britain's Commodity Markets, 332.

58 Du Plessis, Marketing of Wool, 120, 135; Blau, “Wool in the World Economy,” 216–17.

59 Brisbane Wool Selling Brokers’ Association, Cuttings books, OM.A/7/1, John Oxley Library, State Library of Queensland, Brisbane.

60 David Merrett and Ville, Simon, “Industry Associations and Non-Competitive Behaviour in Australian Wool Marketing: Evidence from the Melbourne Woolbrokers’ Association, 1890–1939,Business History 54, no. 4(2012): 510–28Google Scholar.

61 The Australian Mercantile Land and Finance Company estimated that it would need to sell at least 25,000 bales to be profitable in the Brisbane market prior to World War I. We have raised the minimum efficient scale figure to 30,000 as brokers’ costs would have risen. Moreover, the crossbred wool dealt with by New Zealand brokers both reduced selling commissions and increased handling charges (Bailey, John D., A Hundred Years of Pastoral Banking: A History of the Australian Mercantile Land and Finance Company [Oxford, 1966], 196Google Scholar).

62 Australasian Insurance and Banking Record, 19 Oct. 1899, 699.

63 Merrett, Morgan, and Ville, “Industry Associations as Facilitators”; Merrett and Ville, “Industry Associations”; Merrett and Ville, “Institution Building and Variation.”

64 “For two generations those sales [at the Wool Exchange in Coleman Street] have been the centre of the international wool trade,” Clapham, Woollen and Worsted Industries, 91.

65 Blau, “Wool in the World Economy,” 184–85, table 4.

66 Garside, Wool and Wool Trade, 7–8; Ministry of Agriculture and Fisheries, Report of Wool Marketing in England and Wales (London, 1926), 2730Google Scholar.

67 Neller, Shelley, Wool in the Australian Imagination (Glebe, New South Wales, 1994)Google Scholar; Wadham, Samuel M. and Wood, Gordon L., Land Utilization in Australia (Melbourne, 1950), 118Google Scholar.

68 Critchell and Raymond, Frozen Meat Trade.

69 Jenkins, “Wool Textiles in the Twentieth Century,” 1007.

70 Blau, “Wool in the World Economy,” 181.

71 Textile Mercury, Wool Year Book, 1915, 422–23; Textile Mercury, Wool Year Book, 1930 (Manchester, 1930), 82Google Scholar; Barker and Priestley, Wool Carding and Combing, 233–34.

72 Textile Mercury, Wool Year Book, 1915, 465.

73 Ibid., 62–63.

74 “The success of grading depended entirely on the extent to which each bale contained wool of one quality only and each lot contained bales of even quality,” Barnard, The Australian Wool Market, 81.

75 Du Plessis, Marketing of Wool, 58–59; Barker and Priestley, Wool Carding and Combing, 69, 105.

76 Barker and Priestley, Wool Carding and Combing, 97, 129–39, 144–87.

77 Classing prior to auction cost British top makers 15 to 18 pence per 240 pounds (weight) of wool; see Textile Mercury, Wool Year Book, 1915, 93. For classing costs in Australia, see Jeffrey, Geoffrey, The Principles and Practice of Australasian Woolclassing (Adelaide, 1899), 45Google Scholar; and Smith, Henry B., The Sheep and Wool Industry of Australasia (Melbourne, 1917), 89Google Scholar.

78 Blau, “Wool in the World Economy,” 191.

79 Sabato, Agrarian Capitalism, 229.

80 We ignore differences in interest rates and currency fluctuations.

81 Price categories at London auctions were “super,” “average to good,” and “inferior to average.” Textile Mercury, Wool Year Book, 1930, 51.

82 Sabato, Agrarian Capitalism, 229–30.

83 Sabato, “Wool Trade and Commercial Networks,” 60.

84 Du Plessis, Marketing of Wool, 102.

85 Fibers comprised around 16 percent of all primary products exports in 1913 and 1928, and about 10 percent of all merchandise exports in those years. See Yates, P. Lamartine, Forty Years of Foreign Trade (London, 1959), 222–23Google Scholar, table A.16.

86 Collis, Brad, Fields of Discovery: Australia's CSIRO (Crows Nest, New South Wales, 2002), 176–82Google Scholar.

87 Cox, A. B., Cotton: Demand, Supply, Merchandising (Austin, 1953), 131–47Google Scholar; Beckert, Empire of Cotton.

88 Donald Coleman, “Man-Made Fibres before 1945,” in Cambridge History of Western Textiles, ed., Jenkins, 994.

89 Scott, Institutions and Organizations.

90 See Merrett and Ville, “Institution Building and Variation,” for an account of interselling center differences within Australia.

91 Acemoglu and Robinson, Why Nations Fail.

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