This paper is about the character and consequence of the response forged by a predominantly rural industry, the handlooms, in Bangladesh, a country with massive poverty and considerable underdevelopment of public initiative, to the forces of economic liberalisation and a certain degree of investment reprioritisation favouring rural development and infrastructure. The period of special interest is the decade following 1976/77—a period, among other things, of steady economic liberalisation, exchange rate depreciation, growth of foodgrain production in excess of population growth, considerable infrastructural development. Against a background of near-total absence of public initiative, the creative response forged by the industry against the forces of competition represents a balance of the interaction between peoples’ own initiative and evolving profit opportunities. The effectiveness of the response as a whole runs substantively counter to the conventional wisdom about the situation of the handloom industry. Handloom yardage grew at a trend of 3.90% annually between 1972/73 through 1986/87—significantly in excess of the population growth. Weaving of polyester fabrics has been assimilated into the capability of the handlooms. Industry-wide loomage has grown at 2.3% during this period; loom-mix has been increasingly weighted towards the “best-practice” handlooms. Producers’ regime, as also to widespread availment of yarn trade credit that is mutually advantageous to both traders and weavers, but highly beneficial to the weavers, even small weavers. Consequently, the ratio of income retention in value added in the handloom industry has risen more recently relative to late 1970s as a result of improvement of the economic environment. The profitability of handlooms also has risen over the same period because the labour productivity has gone up. Growth of establishment has been extensively in evidence on a large sample of handloom units. Handloom industry has coped well with the competition of the imports, frequently illicit, of cotton fabrics from India. Many handloom weavers have left hand-weaving behind and graduated into capitalist rural powerloom weaving. For all its demonstrated capacity for growth and structural adjustment amid increasing economic liberalisation, the handloom industry has had its share of those bypassed. The poverty ratio on BIDS sample of handloom weaver was more than one half. The pattern of growth and structural change has therefore been dualistic. This however is not surprising due to near-total absence of public interventions. The exclusion of the smallest units from favourable change is a frustrated potential that clearly existed.