CHAPTER 1 INTRODUCTION:
BRITISH INDUSTRY AND FOREIGN COMPETITION, 1875-1914
IIN the last few years the period 1870-1914 has become as popular as the classical industrial revolution as a field for scholarly study. This has resulted in a flood of literature, more especially in article and monograph form, on various aspects of the late nineteenth century economy of Britain. Much of the new work is quantitative and analytical rather than descriptive in character and it is devoted largely to examining movements in, and the interaction of, key economic variables. In effect it provides a new or more dynamic approach to the study of economic history and to a large extent it has developed logically from the increasing attention devoted to problems of long-term growth in the past few years. 1 Yet although it has provided a much clearer picture, in aggregate terms, of the pattern or course of development of the British economy in these years, the studies themselves have thrown up many new problems as to the particular causes or factors which determined the pattern of development which took place.
In fact, most scholars would agree that we are now much better acquainted with the dimensions of Britain's growth in the later nineteenth and early twentieth centuries than we are with the factors which determined it. 2 There is no question that in absolute terms Britain's economic growth was quite substantial throughout this period. Even during the so-called Great Depression most of the major economic indices moved upwards. 8 Moreover, in the service
1 The literature is too extensive to list here and in any case many items will be cited later on in the text.
1 Though even in this respect there is still room for disagreement. See D. J. Coppock, 'British Industrial Growth during the "Great Depression" (1873-96): a Pessimist's View', Economic History Review, December 1964, and ••.• a Balanced View' by A. E. Musson in the same issue.
• A. E. Musson, 'The Great Depression in Britain, 1873-1896: A Reappraisal', Journal of Economic History, June 1959, p. 199.
THE DEVELOPMENT OF BRITISH INDUSTRY
sector, particularly in banking, insurance, shipping and distribution, developments were probably more spectacular than they had ever been.1 On the other hand, recent writers have drawn attention to the fact that rates of growth of the major economic variables were declining in this period and that in comparison with those of other industrial countries (more especially Germany and America) our performance appears somewhat unsatisfactory. Certainly growth rates were probably lower than in the first half or so of the nineteenth century but it would be difficult to make out a case for continuous deceleration in economic growth during this period. 2 Rates of growth do fall off as Table I shows but the retardation or deceleration is by no means continuous or identical for all the main variables. For example, between the 1870s and 1880s rates of growth of industrial production and productivity turned down whereas total output per man-hour and real income per head rose quite sharply. Even in the early twentieth century (1900-13), when most of the growth rates show a decline compared with the 1890s, exports staged a remarkable recovery. It has also been suggested that Britain's rates of growth were lower than those of her chief competitors, namely the United States and Germany. International comparisons are difficult in this respect because of the obvious limitations of the data, but the evidence available does tend to lend support to this conclusion. From Table II it can be seen that in every case Britain's long-term rates of growth were lower than those of either America or Germany, and in some cases below those of France.
It is incorrect therefore to speak of a continuous or steady decline in the rate of economic growth during this period though it is clear that there was a break in trend or climacteric in Britain's growth rates during the later nineteenth century. The exact timing of the break is somewhat debatable though most commentators would probably agree that it occurred either in the 1870s or in the 1890s. This point is, however, the subject of far less dispute than are the actual causes of the climacteric or retardation in growth. In recent explanations of the climacteric considerable attention has been paid to British industry and exports since these appear to have
1 The retail trade in particular was subject to vast changes in this period comparable to those which had taken place in manufacturing production during the industrial revolution. See W. Ashworth, An Economic History of England, 1870-'1939 (1960), p. 137.
1 Cf. H. W. Richardson, 'Retardation in Britain's Industrial Growth, 18701913', Scottish Journal of Political Economy, June 1965, p. 128.
INTRODUCTION
TABLE I: Average Annual Rates of Growth of Selected Economic Indices (UK)
*1870-1913.
Sources: A. Maddison, Economic Growth in the West (1964), p. 232; B. R. Mitchell and P. Deane, Abstract of British Historical Statistics (1962), pp. 367-8; K. S. Lomax, 'Growth and Productivity in the United Kingdom', Productivity Measurement Review, August 1964, p. 6; E. H. Phelps Brown and S. J. HandfieldJones, 'The Climacteric of the 1890s: A Study in the Expanding Economy', Oxford Economic Papers, October 1952, pp. 294-5; A. H. Imlah, Economic Elements in the Pax Britannica (1958), pp. 96-8.
TABLE II: Long-term Rates of Growth, 1870/71-1913 (per cent per annum)
UK us Germany France
• 1880--1913. t Rough estimate only.
Sources: Output and export data based on A. Maddison, Economic Growth in the West (1964), pp. 201, 232, and 'Growth and Fluctuation in the World Economy, 1870--1960', Banca Nazionale de/ Lavoro, June 1962, p. 185. Industrial production and productivity data calculated from: (for UK} K. S. Lomax, 'Growth and Productivity in the United Kingdom', Productivity Measurement Review, August 1964, p. 6, and E. H. Phelps Brown and S. J. Handfield-Jones, 'The Climacteric of the 1890s: A Study in the Expanding Economy', Oxford Economic Papers, October 1952, pp. 294-5; (for us) J. W. Kendrick, Productivity Trends in the United States (1961), p. 465; (for Germany) P. Jostock, 'The Longterm Growth of National Income in Germany', Income and Wealth, ed. S. Kuznets, V (1955), p. 103, and D. J. Coppock, 'The Climacteric of the 1890s: A Critical Note', The Manchester School, January 1956, p. 24; (for France) S. J. Patel, 'Rates of Industrial Growth in the Last Century, 1860--1958', Economic Development and Cultural Change, April 1961, p. 319.
THE DEVELOPMENT OF BRITISH INDUSTRY
been the weakest components of the economic structure, though it may be that this merely reflects the fact that more is known about these particular sectors of the economy. Phelps Brown and Handfield-Jones, for example, in their pioneering article in 19521 attributed the check to real income to the falling off in the rate of growth of industrial productivity, which in tum they argued was due to the ending of the massive application of one or two major innovations, notably steam and steel. A similar line has been taken by Richardson, who argues that a 'discontinuity in the flow of major innovations' was the chief causal factor in the retardation in industrial growth. 2 Meyer and Coppock on the other hand focus their attention on the export trade. Meyer has argued that the decline in British export growth in the last quarter of the nineteenth century was more than sufficient to account for the slower rate of growth in these years. 3 Coppock's argument is basically similar though slightly more complex. The sequence runs as follows: if exports are regarded as an autonomous variable then the decline in the rate of growth of exports explains a decline in the rate of production and in the required rate of investment. And given a reduction in the rate of investment, a decline in the rate of growth will follow. In short he says the decline in productivity in the UK after the 1870s and its low level compared with the United States and Germany is to be found in the low rate of capital accumulation in industry brought about by a check to the growth in exports. 4 Not all would agree, however, with the causal sequence of this argument. Kindleberger, for instance, maintains that the hypothesis is incorrect since it assumes that the pattern of exports would remain unchanged, and concludes that the line of causation runs from the economy to exports rather than the other way round. 6 Yet other writers have stressed the slowing down of technical progress.in industry and the shortcomings of British entrepreneurs}'
1 E. H. Phelps Brown and S. J. Handfield-Jones, 'The Climacteric of the 1890's: A Study in the Expanding Economy', Oxford Economic Papers, October 1952.
2 Richardson, foe. cit., p. 148.
1 See 'An Input-Output Approach to Evaluating British Industrial Production in the Late Nineteenth Century' in A.H. Conrad and J. R. Meyer, Studies in Econometric History (1965).
'D. J. Coppock, 'The Climacteric of the 1890's: A Critical Note', The Manchester School, January 1956.
5 C. P. Kindleberger, 'Foreign Trade and Economic Growth: Lessons from Britain and France, 1850-1913', Economic History Review, 1961, pp. 293-8.
• See D. H. Aldcroft, 'The Entrepreneur and the British Economy, 1870-1914', Economic History Review, August 1964, and 'Technical Progress and British Enterprise, 1875-1914', Business History, July 1966. See also D. S. Landes,
INTRODUCTION
The above by no means exhausts the list of possibilities and, of course, the debate still continues. 1 It would be inappropriate, however, to try and resolve the arguments here. But it is important to draw attention to them since they cover problems or aspects of the British economy which were not unfamiliar to informed contemporary observers. After all, the Victorians themselves began the debate about the late nineteenth century economy; and although contemporary spokesmen were never in a position to make the sophisticated statistical analysis performed by economists and economic historians of today, they were nevertheless acutely aware of the fact that the British economy was not functioning as smoothly or dynamically as it had done in earlier decades and that economic progress appeared to be somewhat slower than in either Germany or America. Again, however, it was British industry and the export trade in particular which provided the chief centre of attention.
In fact, contemporaries saw the shortcomings of the British economy largely in terms of industry and trade, and as a result British businessmen and traders bore the brunt of the critical attacks made by writers in the national press, in the trade journals and in the flood of books and articles devoted to matters of trade and industry. Even industrialists who sat on official government committees or commissions signed reports which made derogatory remarks about their business colleagues. The backsliding of the economy, it was argued, could be ascribed largely to the fact that British industrialists lacked the drive and energy of their forefathers, and as a result, foreign rivals were stealing a march over them. 2 Particular attention was paid to the way in which the Germans and Americans were encroaching upon Britain's overseas markets and even, for that matter, upon the domestic market. It was realized, of course, that as new industrial powers matured Britain's former commercial monopoly was bound to come under 'Technological Change and Development in Western Europe, 1750---1914', esp. p. 458 et seq. in Vol. VI of The Cambridge Economic History of Europe, ed. H.J. Habakkuk and M. M. Postan.
1 There is a useful summary of the current debate in C. Wilson, 'Economy and Society in Late Victorian Britain', Economic History Review, August 1965.
1 One example will suffice. Shadwell, concluding his two-volume survey on Industrial Efficiency, wrote: 'England is like a composite photograph, in which two likenesses are blurred into one. It shows traces of American enterprise and of German order, but the enterprise is faded and the order muddled. They combine to a curious travesty in which activity and perseverence assume the expression of ease and indolence. The once enterprising manufacturer has grown slack, he has let the business take care of itself, while he is shooting grouse or yachting in the Mediterranean.' A. Shadwell, Industrial Efficiency, Vol. II (1906), p. 453.
THE DEVELOPMENT OF BRITISH INDUSTRY
attack; nor were contemporary observers wholly uncritical of the so-called sharp practices of the foreigner. Such captions as the 'German Peril', the 'German Menace' or the 'American Invaders' were hardly meant to be laudatory. Yet at the same time there was in this country a sneaking admiration for the apparent ability and dynamic qualities of the foreign businessman and a general feeling that our industrialists fell short of his standards of performance and achievement.1
If foreign industrialists were admired they were not, however, liked by the British public who sought in an indirect way to avenge their animosity by attacking the British industrialist for not matching up to his rivals across the water. In other words, the literature which was written was basically self-critical and was meant to act as a warning to the industrialist that if he did not wake up Britain would soon become a second rate economic power. Stinging attacks were launched in books such as E. E. Williams's Made in Germany (1896), McKenzie's American Invaders (1902) and Shadwell's Industrial Efficiency (1906) and in numerous articles in the national press and journals, the most famous of which was the 'Crisis in British Industry' published in The Times in 1902. Even foreign writers joined in the campaign, the most notable being the economist Thorstein Veblen, whose book Imperial Germany and the Industrial Revolution (1915) contained a section devoted to examining the deficiencies of British businessmen. Much of the writing was journalistic in style and not without a certain amount of prejudice since many of the authors were bent on pressing home their particular points of view. Yet their judgments were by no means entirely inaccurate since even the more scholarly and analytical accounts contained similar conclusions. For example, Alfred Marshall in his Industry and Trade (1919) expressed disquiet about certain features of British industry and issued judgment against the British businessman.
There could hardly fail to have been an element of truth in what was said at the time since informed opinion was almost unanimous on the question. Wherever one looks-be it in the national press, the trade journals, consular reports or government committee reports-the same comments can be found. Industrialists sought to defend themselves from these attacks though not always very successfully. In some respects, however, it was perhaps a little unfair
1 See D. E. Novak and M. Simon, 'Commercial Responses to the American Export Invasion, 1871-1914: An Essay in Attitudinal History', Explorations in Entrepreneurial History, Winter 1966.
INTRODUCTION
that the burden of responsibility for the apparent shortcomings of the British economy should have been placed entirely on the industrialists' shoulders since it was not always clear exactly what they were being blamed for. Critics confined their attention largely to trade issues since they were alarmed at the way in which Britain appeared to be losing customers and markets to foreign rivals. But at the same time no one could say precisely what our overall losses were in relation to the gains of other countries. Nor was it possible to state in aggregate quantitative terms how the British economy was making out in comparison with the performance of other industrial economies. Even contemporary economists, whose attention was focused on marginal analysis and value theory, which, with its assumptions of static technology, tastes and resources, did not depend on economic time series for its content, found, as Kendrick has observed, that they were sometimes handicapped or misled by the lack of precise quantitative data in an aggregative form. 1 Yet though much of the raw material for making the necessary calculations was available, economists made little attempt to fill the statistical gap. It is not surprising, therefore, that in the absence of such numerical data judgments made about the working of the economy tended very often to be impressionistic rather than analytical, and statistical data, what there was of it, was smothered by a welter of literary verbiage.
II
Was foreign competition in industrial and manufactured products as severe or as extensive as contemporaries often alleged? It is difficult to obtain a balanced view of the situation from the rather impressionistic accounts of the Victorians, though in some respects their assessment of the position was not very wide of the mark. They were correct, for example, in assuming that competition prevailed in most markets, including the domestic market, and that America and Germany were Britain's most powerful and successful rivals in the commercial field. The following comments are intended to give some idea of the dimensions involved.
As far as British exports were concerned there was little ground for undue complacency. Although the export component of the British economy still remained substantial in these years, the growth of manufactured exports was less rapid than that of either Germany or America or the average for the world as a whole. These two
1 J. W. Kendrick, Productivity Trends in the United States (1961), p. 4.
TABLE 111: Exports from UK and Other Industrial Countries, 1899-1913 (million
at 1913 prices)
• Includes UK, us, Canada, Japan, India and the major West European countries. t Includes Russia.
Source: A. Maizels, Industrial Growth and World Trade (1963), pp. 428-9, 432-3.
INTRODUCTION
countries accounted for a large proportion of the increase in world trade in manufactured products. Between 1899 and 1913, for example, America and Germany accounted for nearly one-half of the increase in exports of manufactured products from the major industrial countries (see Table III). It is true that the absolute increase in the volume of British exports of manufactured goods was quite substantial, but as Table III shows, the percentage increase in Britain's exports to the three main groups of markets was far less than either the American or German. Britain's performance in the markets of industrial countries was particularly disappointing, especially in comparison with Germany. The latter more than doubled her exports of manufactured products to this group of countries (as against an increase of less than one-third for Britain) and by 1913 her total exports to these markets exceeded those of Britain by nearly one-third. The comparison is even more invidious to Britain if all exports are taken as the basis of measurement.
Clearly Britain was finding it difficult to penetrate the rich and rapidly expanding markets of industrial Europe and America. In part this could be explained by the spread of tariff protection in these countries, but the chief factor was undoubtedly the increasing competition British goods faced from both domestic and foreign producers. In the American market, for example, Britain's competitive losses were substantial especially between the 1870s and 1890s when exports in almost every major category of manufactured goods fell substantially. Only part of this loss can be attributed to competition from American producers since over the period 1872-74 to 1911-14 exports from industrial Europe to America rose by over 80 per cent. 1 Moreover, the fact that other industrial countries were able to increase their share of the American market suggests that it was competition rather than tariff protection that was the major cause of Britain's trade losses in these markets.
Britain's trade setbacks were by no means confined to the richer markets. In the more underdeveloped areas of the world Britain's export performance was weakening under the impact of foreign competition. Some of Britain's traditional customers were beginning to produce the goods they had once bought from Britain; the most notable example was the growth of cotton textile mills in many primary producing countries. But to a large extent it was the sale
1 S. B. Saul, 'The Export Economy, 1870--1914', Yorkshire Bulletin of Economic and Social Research, May 1965, p. 6.
THE DEVELOPMENT OF BRITISH INDUSTRY
of German and American products rather than the growth of domestic production which presented the major competitive challenge in these markets. Germany, in particular, was extremely successful and by 1913 she was exporting more than Britain to the primary producing countries (Rest of World, see Table III). Only in the markets of the semi-industrial countries did Britain continue to maintain a substantial lead and even this was being challenged by the early twentieth century. The Germans and to a lesser extent the Americans were, it would appear, just as adept at gaining entry to the more underdeveloped countries where traditional goods were most in demand as they were in exploiting the protected markets of Industrial Europe and America.1 Thus in a group of fifteen manufactures, British exports to protected foreign markets increased by 44 per cent between 1895 and 1907 whilst those of Germany and America rose by 125 and 500 per cent respectively. The same exports to identical markets in the British Empire registered an increase of 91 per cent for Britain as against 129 and 359 per cent for Germany and the United States. During this period American manufactured exports secured a firm foothold in some of the Empire countries, and by 1913 America was slightly ahead of Britain in the West Indian market whilst her exports to British North America were nearly three times greater than those of this country. 2 Similarly, whilst German exports to Europe rose faster than those of Britain from the early 1890s onwards, and by 1913 Germany was selling more to nearly every European country and to America than Britain, she was also expanding her trade more rapidly with many underdeveloped countries, e.g. Russia, Roumania, Serbia, Greece, Spain, Portugal, Turkey and Latin America. 3 Here Britain found it increasingly difficult to compete not only with Germany's liberal credit-loan arrangements but also with the latter's ability to introduce inexpensive merchandise to meet local demands.
The penetration of foreign competitors into the markets of the British colonies or Empire countries is significant since it was here that British goods were accorded some degree of preference. The extent of foreign competition should not be exaggerated, however.
1 A pioneering work by Hoffman in the early 1930s showed how extensive German competition was in some of the underdeveloped countries. See R. J. S. Hoffman, Great Britain and the German Trade Rivalry, 1875-1914 (1933).
• R. H. Heindel, The American Impact on Great Britain (1940), pp. 143, 164, 167.
1 Hoffman, op. cit., p. 130 et seq.
INTRODUCTION
True, the colonial territories were steadily increasing the proportion of their imports which came strictly from foreign markets during this period. Even as early as 1894 one-third of the total colonial imports were said to be of non-British origin as against one-quarter ten years earlier. Moreover, by the end of the nineteenth century 38 per cent of all colonial imports were affected by foreign competition to some degree.1 But in actual fact, apart from one or two exceptions such as America's domination of the Canadian market, the share of colonial imports derived from any one of Britain's chief commercial rivals was generally fairly small. Even Germany, reckoned to be the most serious rival in these markets, contributed only a very modest proportion, the value of her export trade to the British Colonial and Dominion countries being less than 5 per cent of the UK's at the end of the nineteenth century. In many colonial areas German competition was very slight indeed, and even in those areas where it was important, such as Australia and the Cape Colony, the volume of trade was still well below that of the British. Of course, foreign participation was increasing all the time, but even by 1914 it could hardly be said that Britain had lost a great deal of her Empire trade to foreign competitors.
It is clear then that British exporters found trade conditions much less favourable in the later nineteenth and early twentieth century than they had been earlier. The degree of competition in manufactured exports varied a great deal between products and regions but the overall effect was to reduce Britain's share of world trade substantially. By 1913 her share of world exports in manufactured goods had fallen to 29·9 per cent as against 41 ·4 per cent in 1880. Over the same period the German share had risen from 19·3 to 26·5 per cent and the American from 2·8 to 12·6 per cent. Moreover, in nearly every major commodity group except drink and tobacco and other :finished goods Britain's share of exports fell, in some cases substantially, over the period 1880-1913. 2 One should be careful not to exaggerate the position, however. In 1913 Britain was still the largest exporter in the world, though only by a small margin, whilst her share of total world exports fell much less dramatically in this period than that for manufactured commodities. 3
1 Ibid., p. 198.
2 For details see Saul, Toe. cit., pp. 12-13.
• From 16.7 to 13.9 per cent, 1885-1913. See A. Maddison, 'Growth and Fluctuation in the World Economy, 1870--1960', Banca Nazionale de! Lavoro Quarterly Review, June 1962, p. 161.
THE DEVELOPMENT OF BRITISH INDUSTRY
The evidence suggests that Britain's relative trade losses were largely due to competitive factors rather than to shifts in the commodity and area composition of trade. According to Maizels's calculations Britain lost $380 million worth of trade in manufactures between 1899 and 1913 nearly all of which could be attributed to changes in market shares. On the other hand, most other industrial countries increased their market shares in this period. Germany in particular gained $330 million of trade through an improvement in her competitive position.1 Given the industrialization of new nations and strengthening of tariff barriers especially in the richest markets, it was partly inevitable that Britain should lose the predominant position she had held as a trader in the 1860s and 1870s. But the inevitability argument can be stretched too far. It is highly improbable, for example, that tariffs were a major factor in Britain's trade losses. Certainly they created less favourable trading opportunities and at times, as with the McKinley tariff in America in the early 1890s, they caused a sharp drop in the exports of certain commodities. But overall tariffs had only a marginal effect on the volume of British trade since they were rarely raised to prohibitive levels. In any case the restrictive effect of tariffs was considerably modified by virtue of the fact that Britain concluded a whole series of trade agreements with foreign countries, nearly all of which contain the most favoured nation clause. 2 Moreover, the fact that other industrial nations, particularly Germany and America, were able to cope more successfully with tariff barriers suggests that there is more to the argument than this. It is true, of course, that tariff protection provided some countries with a useful bargaining weapon and allowed them to discriminate in their pricing policies in favour of exports. But the evidence on this matter is far too slight and fragmentary for it to have been anything other than a minor factor in Britain's trade losses. 8
On the other hand, ignoring the question of tariffs for the moment, it might be questioned whether all Britain's trade losses can be attributed simply to the emergence of new industrial competitors. Obviously this was a powerful factor, but this is no reason
1 A. Maizels, Industrial Growth and World Trade (1963), p. 200, Table 8.5.
1 By 1914 eighty British trade treaties were in force, all of which contained an unconditional most favoured nation clause. F. Benham, Great Britain under Protection (1941), p. 5.
1 Price discrimination between products sold in the home and export markets was used most extensively in Germany but even here the proportion of exports affected was quite small, and only in a few cases were high tariffs necessary to prevent reimportation of very low-priced exports.
INTRODUCTION
to ignore completely any possible alternative explanations. There is much to commend the suggestion that in part Britain's trade difficulties were self-generated, that is they stemmed from internal deficiencies within her own industrial structure. A country whose industrial structure is narrowly based on a few traditional industries is obviously going to be more restricted as regards trading opportunities, especially if the pattern of demand changes, than a country whose structure is diversified over a wide range of industries. There is no question that Britain falls into the first category. In 1907 three industries, coal mining, iron and steel and textiles, accounted for 46 per cent of the net industrial output and supplied 70 per cent of all exports. Moreover, initially at least the exports of these industries had accounted for a very high proportion of the world market in these products. Given such conditions, Britain's rate of export growth was almost bound to decline, for as Kindleberger has pointed out 'an exporter with 75 per cent of the world market in a commodity, as the British had at various times in cotton textiles, iron rails, galvanized iron, tinplate, locomotives, ships, coal, can have no expectation of maintaining it'. 1 Even within individual industries the export base was sometimes extremely narrow. In the iron and steel industry, for example, galvanized and tinplate sheets accounted for 40 per cent of the growth of iron and steel exports in the decade prior to the first world war. 2 This structural overcommitment might not have been so bad had it not been centred on industries whose export growth potentialities were beginning to wane or had there been a more vigorous growth of newer industries with promising export prospects. The result was that in comparison with Germany and the United States, a higher proportion of Britain's trade in manufactures was concentrated in declining export sectors with a correspondingly lower proportion in the most rapidly expanding groups. 3 This imbalance was paralleled in the market structure of Britain's exports. In 1913 roughly twothirds of Britain's total exports went to what were essential primary producing countries. This market concentrrtion might, of course, be attributed to the fact that Britain was seeking salvation in Empire countries where tariffs favoured British goods. But the fact that the share of Britain's exports to Empire countries remained
1 Kindleberger, loc. cit., p. 295.
• Saul, foe. cit., p. 15.
• I. Svennilson, Growth and Stagnation in the European Economy (1954), pp. 294-5. Also H. Tyszynski, 'World Trade in Manufactured Commodities, 18991950', The Manchester School, September 1951.
THE DEVELOPMENT OF BRITISH INDUSTRY
fairly stable in this period, apart from the 1870s, and was the same in 1913 as it had been in the 1850s when foreign competition was far less acute, would seem to negate this hypothesis. Nor were structural defects the only internal factor affecting Britain's weakening export situation. It can be argued that the export position could have been strengthened had some of the traditional export-orientated industries improved their efficiency. This is not to suggest that the latter industries could in any way have compensated fully for the lack of a more diversified industrial structure for, as we have already pointed out, there was clearly a limit to the volume of exports which could be squeezed out of any one industry. Nevertheless, there were cases where an improvement in efficiency and a concomitant reduction in costs might well have brought about an expansion of the market. The steel industry provides a good illustration of this point. Temin has argued that had costs of production in the British steel industry been lower (that is lower than the German)-and this is certainly a feasible proposition given the technical backwardness of the steel industry at this time1-it would probably have increased the production of steel in Britain by roughly 20 per cent of the world trade in steel, or about 2·4 million tons. One half of this amount would have been derived from an increase in Britain's share in exports to markets in which Britain and Germany competed and the remainder from a reduction in British imports. 2 This, of course, makes no allowance for that part of the American steel trade Britain might have captured had costs been lower. Even with this improvement the steel industry's growth would have been less rapid than that of the German and American; nevertheless it does suggest that export growth was not conditioned solely by external factors. Whether there was the same scope for other industries to raise their exports by lowering costs is difficult to say, but the example of steel does lead one to suspect that there were possibilities for improvement in this direction. 3
Whilst not wishing to deny that the growth of foreign competition
1 A useful international comparison of costs, prices and techniques in steel is given in T. Orsagh, 'Progress in Iron and Steel, 1870-1913', Comparative Studies in Society and History, January 1961.
1 P. Temin, 'The Relative Decline of the British Steel Industry, 1880-1913', p. 148, in H. Rosovsky, Industrialization in Two Systems (1966, New York).
1 Or alternatively export selling methods could possibly have been improved. There is certainly much contemporary evidence to suggest that British industrialists and traders were deficient in this respect, though exactly what effect this had on our ability to compete is anybody's guess.
INTRODUCTION
was the chief factor responsible for Britain's trading difficulties it would be pointless to ignore the fact that internal weaknesses in the industrial structure were also partly to blame. Whatever their relative importance there is no doubt structural overcommitment together with a delay in some cases in introducing cost reducing innovations were factors which affected British industry's ability to compete. There is a third relevant possibility, namely the slow growth of the domestic market. Saul has recently questioned the independent role often ascribed to exports and suggests that more emphasis ought to be placed on the impact of growth upon exports on the grounds that a buoyant home market provides the basis for a flourishing export trade.1 Not all theorists will agree with this line of reasoning and in practice conditions do vary a great deal. In the short term at least it is more than probable that a vigorous demand at home will retard the growth of exports. But it is certainly feasible to suggest that in some cases, particularly where the development of new products is concerned, a slowly growing home market may retard the development of the export sector. It is quite possible, for example, that the domestic market for electrical products was insufficient to provide the industry with an adequate basis for exports in this period. A much more debatable proposition is the question whether the home market as a whole was in any way responsible for the slow export growth. In effect this brings us back to the causal relationship between growth and exports discussed earlier and we make no claim to be in a position to provide a definite answer to this problem.
A brief glance at the growth of foreign competition in the home market does, however, provide some clues as to the relative strength or weakness of British industry as a whole. Between 1870-74 and the early years of the twentieth century the share of imports of :finished consumer goods in the total consumption of finished goods rose from 9·5 to 20 per cent whilst manufactured imports accounted for an increasing proportion of the total import bill.2 The most intense phase of competition occurred in the 1890s and early 1900s during which time Britain probably received a greater increase in foreign manufactures than any other industrial nation. To contemporaries these were the years of the real American and German commercial invasions when increasing quantities of iron and steel
1 Saul, Joe. cit., pp. 11-12.
1 Based on data in J.B. Jefferys and D. Walters, 'National Income and Expenditure of the UK, 1870-1952', in Income and Wealth edited by S. Kuznets, Vol. V (1955), p. 27.
THE DEVELOPMENT OF BRITISH INDUSTRY
goods, sugar, chemicals, textiles, paper, shoes, glass, china and earthenware and cereals to name only a few, flooded into the British market. If contemporary emotions led to an exaggerated view of the extent of foreign competition, there was no question as to its existence.
Admittedly the British market was a relatively easy one to conquer given the free trade policy, whilst some foreign suppliers no doubt employed discriminatory pricing policies and other unfair commercial devices to boost their sales abroad. Moreover, not all imports were pure substitutes for goods manufactured in Britain. Some goods were imported, e.g. certain classes of machine tools and electrical products, simply because, for one reason or another, they were not made in this country. But it is unlikely that these factors alone can account for the rapid expansion in the volume of imported manufactures. By far the larger part consisted of basic goods such as textiles, iron and steel, chemicals and engineering products all of which were or could have been produced at home. Under certain circumstances imports of manufactures may serve a useful function insofar as they indicate the scope or extent of the market which remains untapped by domestic manufacturers. But in an advanced economy such as Britain's they served little useful purpose except that of satisfying consumer demand and in essence they merely reflected the weakening position of home producers vis a vis their foreign rivals.
It does not follow, of course, from what has just been said that Britain's trade losses can be attributed simply to the deficiencies of British businessmen. This may well have been an additional factor aggravating the situation, but undoubtedly the major cause was the emergence of new and powerful industrial nations with an increasing propensity to export. In addition, many smaller less industrialized countries, e.g. Japan, were becoming self-sufficient in certain fields of economic activity and thereby ousting British goods from their markets. But it is important to realize there is more than one side to the problem and that undue reliance on the forces of inevitability may be at times somewhat misleading.
III
The above comments have only provided a very general picture of the main economic trends in the period from the early 1870s to the outbreak of the First World War and to a large extent attention has been focused on the question of competition. Naturally any
INTRODUCTION
overall view of this nature is bound, at times, to be somewhat misleading or unrepresentative in terms of particular industries, products and regions, but its chief purpose has been to provide a brief sketch of the economic framework within which industrialists operated and to outline some of the issues which have been the subject of debate both among contemporaries and later observers. If we have raised certain questions without always providing the final answers, this is not altogether unintentional since it would be improper to prejudice the reader's mind before he has had a chance to consider carefully the individual studies in this volume. The remainder of this Introduction, therefore, will be devoted to making some general observations based on the findings of the contributors. No attempt will be made, however, to summarize the developments in each industry separately.
First, however, it would seem to be appropriate to say a few words about the scope and aims of the project as a whole. The range of industries covered in this volume is a fairly wide one and collectively the studies may be regarded as a reasonably representative sample of British industry as a whole. Obviously many industries have been excluded from the survey, not necessarily because they were of no importance but largely because it would have been impracticable to include every industry within one single volume whilst at the same time allowing contributors to discuss their particular subjects in any reasonable depth. The basis of selection was not entirely arbitrary however. Clearly the most obvious starters were the basic industries such as coal, cotton and iron and steel, together with the more important of the newer, potential growth industries as, for example, chemicals and electrical manufactures. Ultimately, however, it was the general theme of the volume which tended to determine which industries should be included. Thus it was those industries which were affected in some way by foreign competition or industrial developments abroad in the period 1875 to 1914 that provided the chief criterion for selection. Hence on these grounds alone such industries as building and the railways could easily be excluded whilst for the same reason the engineering, footwear, glass, woollen and shipping industries secured representation. The most significant omissions are the paper industry, timber products (especially furniture) and agriculture.
Each contributor has surveyed the main developments in his particular industry within the context of the general theme of foreign competition. In most cases reference has been made to a number of key issues; these include (a) the extent of foreign com-
THE DEVELOPMENT OF BRITISH INDUSTRY
petition in both home and overseas markets, (b) the effect of this competition on the industries in question and the reactions of British industrialists and (c) the wider question as to whether foreign competition revealed any weaknesses in the competitive ability of British industry, or in short whether British industrialists were as efficient as their foreign counterparts. Obviously it was impossible for all contributors to adhere rigidly to these particular aspects since in the first instance it was the particular characteristics of the industries and the availability of material relating to them which usually determined the way in which the subject matter was treated. Nevertheless, there is sufficient common ground in the way in which each industry has been approached to enable some general conclusions to be drawn on the issues listed above.
Generally speaking, foreign competition increased throughout this period in most industries, though it was probably most intense between the early 1890s and the turn of the century, whilst in the years prior to War I it tended to slacken off. They were, however, considerable variations in the degree to which each industry was affected. For the boot and shoe industry foreign competition was predominantly, though not entirely, a domestic problem associated with the American invasion of the home market in the late nineteenth and early twentieth centuries. On the other hand, as far as the coal, cotton and shipping industries were concerned, the domestic market was hardly affected by foreign competition and even abroad it was rarely very serious except in one or two markets. In contrast the iron and steel, glass and woollen industries faced severe competition from foreign producers both at home and abroad. Britain lost her former pre-eminence in iron and steel during this period. Her share of the world's output and trade in iron and steel manufactures declined sharply and by 1913 Britain had become the world's largest importer of these products. At that date imports of iron and steel were equivalent to 45 per cent of her exports compared with 8 per cent in 1875. Yet in comparison with the glass industry the iron and steel manufactures probably did not fare too badly. Even as early as the 1870s imports of glass exceeded exports by a substantial margin and by the early twentieth century the unfavourable balance had increased to over £1 million. The value of exports in 1907 amounted to roughly one half the works value of glass produced whilst the value of net imports was equivalent to nearly two-thirds of the home production.
Industry-wide generalizations are apt to be somewhat misleading however, since the impact of foreign competition often varied con-
INTRODUCTION
siderably between different sectors of the same industry. The flint branch of the glass industry, for example, was affected much more severely than either the fiat or bottle glass sections. Similarly in the woollen and worsted industry it was the latter sector which was particularly vulnerable to foreign competition both in the home and overseas markets. In fact, Britain's overall export performance in woollen products was better than that of her closest rivals and, to a large extent, this was because the setback in worsted exports was compensated for by an improvement in the woollen branch especially in the latter half of the period.
Sectoral differences were equally sharp in the chemical and engineering industries. Although for most of the period chemical exports grew more slowly than total exports and national income whilst chemical imports rose faster than total imports and national income, the chemical industry had its dynamic sectors and on balance it remained a net exporter. Britain's main strength lay in fertilizers, soap and heavy inorganic chemicals in which she was often an equal match for her main competitor Germany. But in most organic chemicals such as dyes, perfumes and photographic chemicals British producers were easily outclassed by German competition. The position is somewhat more complex with regard to the engineering industry on account of the fact that it consists of so many virtually independent branches. Electrical engineering was probably the weakest and most vulnerable sector though even here some branches, such as cable making, were fairly competitive. For most of the period Britain maintained a favourable balance of trade in electrical products though it should be emphasized that this was thanks largely to the efforts of the foreign firms located in Britain. Essentially the British electrical industry was an offshoot of the American and German industries with an important fringe of domestic manufacturers producing the less sophisticated types of equipment for the home market and for export to the underdeveloped countries. It is much more hazardous to generalize about non-electrical engineering. Most sectors of engineering were certainly affected to some degree by foreign competition both at home and abroad though Britain continued to remain fairly competitive in the older branches such as textile machinery, railway locomotives and rolling stock. The main source of weakness lay in the newer branches of engineering though the dramatic success of Britain's bicycle industry again emphasizes how careful one must be when drawing general conclusions.
A discussion of the engineering trades raises in an acute form
THE DEVELOPMENT OF BRITISH INDUSTRY
not only the question of differentiating between particular branches of an industry but also the need to distinguish the forces of competition in particular markets. Britain's hold over Empire markets remained fairly strong in most engineering products except machine tools and sewing machines. But in certain European and South American markets her superiority was less marked owing to fierce competition from American and Germany though again there were particular fields, notably agricultural machinery, railway rolling stock (South America), textile machinery, boilers and bicycles in which British manufacturers continued to do well. For most of the other industries covered in this survey the strength of foreign competition varied a great deal from one market to another. The boot and shoe manufacturers, for example, faced their biggest challenge in the domestic market whilst in cotton, coal and shipping foreign competition occurred mainly abroad. In the latter cases serious competition was often confined to specific areas : in cotton mainly to the Far East, in coal to the markets of Belgium, the Netherlands and Austro-Hungaria and in shipping to North Atlantic and African waters. Finally the iron and steel and chemical industries faced acute competition in both home and overseas markets though in both cases competition tended to be more severe in the advanced industrial countries than in the markets of the Empire and underdeveloped territories.
The chief source of foreign competition undoubtedly came from America and Germany. It was these two countries which presented the biggest threat to the iron and steel, boot and shoe, engineering and chemical industries. Even in shipping and coal, where competition was much less serious, Germany was the chief potential threat. But Germany and America were by no means the only competitors. French competition was the main problem in the woollen industry whilst the glass manufacturers had Belgian producers to contend with in addition to competition from other continental countries. In the case of the cotton industry Japan and India were the major competitors. Most industrialists were, of course, faced with the growth of competition from domestic producers in their export markets though probably the Lancashire cotton industry was most seriously affected in this respect on account of the relative ease with which the industry's technology could be absorbed by the less developed countries.
The rise of tariff barriers especially in the major industrial countries certainly made trading conditions more difficult for many British industrialists. The German tariff of 1879 and the American
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