1. (aA[alpha]), (bB[beta]) 2. (a), (A), ([alpha]b), (B), ([beta]),
where the brackets signify independent businesses. In case 1 each spinning business would be engaged with three problems, namely, (i.) buying material at the most favourable time, (ii.) producing at the lowest cost, and (iii.) finding buyers and selling at the highest price, including the arranging for the performance of the most remunerative work. But in case 2 the spinner would confine his attention to purely industrial matters, while the problem of finding cotton and arranging for the bearing of the risks as to future prices would rest with other persons, and the business of bringing spinner and manufacturer together and taking such risks as may be involved in ordering or disposing of yarn would be the function of yet others. In case 2 the commercial functions may be said to have differentiated completely from the main body of the industry. We need hardly give illustrations of the intermediate arrangements that formally lie between cases 1 and 2. A may retain commercial risks but find customers through intermediaries; in such an event there would be only partial differentiation of the commercial functions. The reader must be reminded also that for the sake of simplicity in the formulae we have overlooked different classes of A and of B, omitted bleaching, dyeing, printing and finishing, and drawn no distinction between the various classes of commercial work covered by one letter, for instance, selling in the home market and selling abroad.
It may help the reader to appreciate the organic growth of the cotton industry if we now run over the main lines of its evolution. Originally the industrial units were held together in one homogeneous commercial setting. The Manchester merchants bought cotton and warps, put them out to the weavers, and arranged for the finishing of the cloth and then for its sale, so far as they had not been acting on orders already received. There were variations of this system--for instance, in early years weavers sometimes bought their own yarns and cotton and sold their cloth--but just before the industrial revolution the arrangement sketched above was the most usual. Adverting to our formula, the Manchester merchants, we observe, performed functions a (in conjunction with importers), b (as regarded warps), and [beta]. Weft the weaver had to get spun by his family or outsiders. So, broadly speaking, there was one single commercial setting. After the appearance of the factory, the commercial work as between the water-twist mills, the mule-spinning businesses and the manufacturers, so far as the businesses were distinct, appears to have been done by the several producing firms concerned. It was not at once that ([alpha]b) began to differentiate, [beta] was already a separate business in the hands of Manchester merchants and the foreign houses who had established themselves in Manchester to direct the export trade. At the present time an advanced stage of commercial specialism has been reached. From the risks connected with the buying of cotton the spinner may if he please escape entirely.[41] Selling work is now done usually through intermediaries, but there is no one uniform rule as to the carrying of the commercial risks involved. This appears to be now to some extent a matter of arrangement between the persons concerned, but ultimately no doubt the risks will have to be borne by those most qualified by experience to bear them, namely, the commercial specialists. In no other trade in England, and in no other cotton industry abroad, has commercial specialism been carried so far as in the cotton trade of Lancashire. It is partly in consequence of the difference in this respect between the cotton industry in Lancashire and abroad that the separation of spinning from weaving is far more common in England than elsewhere. Elsewhere producers are deterred from specializing processes further in distinct businesses by the fear of the worries of buying and selling as between them.