Feb. 1 (Bloomberg) -- Although typically glossed over in high-school textbooks, as a young and newly industrializing nation the U.S. aggressively engaged in the kind of intellectual-property theft it now insists other countries prohibit.
In other words, the U.S. government’s message to China and other nations today is “Do as I say, not as I did.”
In its adolescent years, the U.S. was a hotbed of intellectual piracy and technology smuggling, particularly in the textile industry, acquiring both machines and skilled machinists in violation of British export and emigration laws. Only after it had become a mature industrial power did the country vigorously campaign for intellectual-property protection.
The U.S. emerged from the Revolutionary War acutely aware of Europe’s technological superiority. It aspired to catch up and rapidly close the technology gap. The prevailing hope was that the acquisition of new industrial technologies from abroad would help solve the country’s chronic labor shortage and enhance its self-sufficiency and competitiveness.
As the Pennsylvania Gazette put it in 1788: “Machines appear to be objects of immense consequence to this country.” It was therefore appropriate to “borrow of Europe their inventions.” “Borrow,” of course, really meant “steal,” since there was certainly no intention of giving the inventions back.
The most candid mission statement in this regard was Alexander Hamilton’s “Report on Manufactures,” submitted to Congress in December 1791. “To procure all such machines as are known in any part of Europe can only require a proper provision and due pains,” Hamilton wrote. “The knowledge of several of the most important of them is already possessed. The preparation of them here is, in most cases, practicable on nearly equal terms.”
Notice that Hamilton wasn’t urging the development of indigenous inventions to compete with Europe but rather the direct procurement of European technologies through “proper provision and due pains” -- meaning, breaking the laws of other countries. As the report acknowledged, most manufacturing nations “prohibit, under severe penalties, the exportation of implements and machines, which they have either invented or improved.” At least part of the “Report on Manufactures” can therefore be read as a manifesto calling for state-sponsored theft and smuggling.
The first U.S. Patent Act encouraged this policy. Although the law safeguarded domestic inventors, it didn’t extend the same courtesy to foreign ones -- they couldn’t obtain a U.S. patent on an invention they had previously patented in Europe. In practice, this meant one could steal a foreign invention, smuggle it to the U.S., and develop it for domestic commercial applications without fear of legal reprisal.
The most important limitation to smuggling machines was that they were useless unless one knew how to use them. After all, they didn’t come with instructions. Thus, almost as important as the machines themselves were machinists from the British Isles who knew how to operate them. British emigration laws prohibited the departure of skilled machinists, but thousands still made the clandestine crossing to the U.S.
The most celebrated was Samuel Slater. Slater had worked his way up from a teenage apprentice to middle management at the Jedediah Strutt mills in Milford, England. Enticed by stories of opportunity and success in America, he pretended to be a non-skilled laborer and boarded a U.S.-bound ship in 1789. Leaving tools, machines, models and drawings behind, all he brought with him was his memory.
Meanwhile, in Rhode Island, the industrialist Moses Brown was looking for someone to figure out how to use the spinning machines he had illicitly imported. Slater took on the job and moved to Pawtucket. Brown’s smuggled machines proved inoperable, but Slater was able to cannibalize them for parts and build his own. Soon, Slater-style mills were proliferating, and New England cloth manufacturing increased 50-fold from 1805 to 1815.
But it was Boston businessman Francis Cabot Lowell who truly transformed New England textile manufacturing into an internationally competitive factory system. And he did so, in large part, by pulling off the most remarkable case of industrial espionage in American history.
Lowell traveled to Britain in 1810 for an extended stay, allegedly for “health reasons.” The wealthy merchant wasn’t considered a rival by local manufacturers and therefore wasn’t treated with suspicion as he toured the Glasgow factories in the spring of 1811. Soon after, he visited other factories to obtain “all possible information” on cotton manufacturing “with a view to the introduction of the improved manufacture in the United States,” as his business partner later recounted.
Lowell’s bags were searched before he returned to the U.S., but the British customs agents came up empty-handed. Lowell, who had majored in mathematics at Harvard University and had an exceptional memory, used his mind to smuggle out British industrial secrets.
With the assistance of mechanical expert Paul Moody, Lowell reproduced and even improved on the original models. Backed by his newly formed Boston Manufacturing Co., he opened his first cotton mill in Waltham, Massachusetts, in 1813. It was the first in the country to bring together all phases of the textile-production process -- from carding and spinning to weaving and dressing -- under one roof.
This all-in-one model was a transformative development in textile manufacturing, ultimately replacing the smaller family-run mill operations and making the American industry competitive with Britain for the first time. This new system also required much larger-scale investment -- exemplified by the development of an entire mill town, appropriately named Lowell.
England loosened its restrictions in phases from 1824 to 1843. The emigration bans, which cut against growing public support for freedom of movement, were lifted in 1824. While strict controls remained on the export of spinning and weaving machinery, a licensing system was implemented for other industrial equipment.
Licensing, in turn, created opportunities for new forms of smuggling: An exporter could receive a license to ship one machine and use it as a cover to ship a different one -- gambling that port inspectors would either not check beyond the paperwork or not be able to tell the difference. Apparently, this practice was sufficiently institutionalized that illicit exporters could even take out insurance to protect against the occasional seizure.
British export controls were finally repealed in 1843 with the spread of free-trade ideology. By that time, the U.S. had established itself as one of the leading industrial economies in the world -- thanks, in no small part, to the successful evasion of British emigration and export prohibitions.
(Peter Andreas is a professor of political science and the interim director of the Watson Institute for International Studies at Brown University. This essay is adapted from his new book, “Smuggler Nation: How Illicit Trade Made America.” The opinions expressed are his own.)
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