Читать книгу From Empire to Europe: The Decline and Revival of British Industry Since the Second World War - Geoffrey Owen - Страница 35

The early history of the iron and steel industry has some parallels with that of textiles and shipbuilding. But whereas in those two industries British entrepreneurs retained their dominant position in world trade up to the First World War, the steel-makers were overtaken after 1870 by fast-growing competitors in the US and Germany. This is sometimes seen as a classic instance of British industrial failure, attributable to weaknesses which persisted into the inter-war years and beyond.²

The story begins with iron-making. Until the invention of the Bessemer converter in 1856, steel was an expensive material which could only be made in small quantities. British inventors led the way in iron-making technology, and in the middle of the nineteenth century Britain was overwhelmingly the largest producer and exporter of iron. But steel was a more resilient, more tenacious and more elastic material, and once the Bessemer converter was fully operational, it began to displace iron in rails, construction and machinery of all kinds. Two other innovations followed: the Siemens-Martin or open-hearth furnace (1867), which was more suitable than the Bessemer converter for making high-quality steel such as shipbuilding plate, and the Thomas or basic process (1879), which eliminated one of the drawbacks of the other two methods, that they could only be used with non-phosphoric iron ore. There were large deposits of phosphoric ore in Continental Europe, notably in Lorraine, and the Thomas process made it possible to exploit this resource.³

The arrival of cheap steel came at a time when industrialisation in the US and Germany was gathering pace. Entrepreneurs in these countries, having already mastered the technology of iron-making, had the necessary skills to take up the new steel-making processes. They were also at least as well placed as their British counterparts for raw materials. Germany’s Ruhr valley, in Westphalia, contained the richest concentration of coking coal in Continental Europe, and there were other substantial deposits in Upper Silesia and the Saar. After Germany’s annexation of part of Lorraine in 1871, following the war with France, German steel-makers also controlled large iron ore reserves. Since these raw materials were even more plentiful in the US, the conditions were ripe in both countries for a rapid increase in steel production.

Domestic demand for steel in Britain was growing more slowly during this period; the British railway network, for example, was largely complete by 1870. The US and Germany were bigger countries and industrialising fast, so it was not surprising that their steel production soon exceeded that of Britain (TABLE 6.1). The only way in which British steel-makers might have retained their lead was by increasing their exports. But access to the two largest and most dynamic markets, those of Germany and the US, was restricted by tariffs, and demand in the rest of the world was too small to compensate.

The German steel industry adopted an aggressive export policy, based on a combination of tariffs and cartels, which British producers were unable to counter. Some regional cartels had been formed in the German iron industry in the 1860s, but as long as imports were allowed in freely it was difficult to maintain pricing discipline among cartel participants. The introduction of tariffs in 1879 partially insulated German steel-makers from import competition, and allowed them to establish stronger cartels. The purpose was to keep domestic prices high and stable, so that profits made in the home market could subsidise exports at lower prices.⁴ These tactics were greatly resented by British steel-makers, who found themselves losing business to cheap German steel in their home market as well as overseas. But Britain was a free-trading country, and the complaints of the steel-makers did not carry sufficient weight to persuade the government to change course. An increase in steel imports was a small price to pay for preserving the liberal trading order on which the British economy as a whole depended.

TABLE 6.1 Steel production 1880–1913

In these circumstances a decline in Britain’s share of world steel production and exports was unavoidable.⁵ Was the decline steeper than it needed to have been because of managerial mistakes? A leading historian of the industry, Duncan Burn, argued that British steel-makers should have followed the German example in making more use of the Thomas process, and that their failure to do so was indicative of the industry’s technical incompetence. Burn believed that the reserves of phosphoric ore in the East Midlands were sufficient to support a large steelworks comparable to those being erected by German firms in Lorraine and the Ruhr. If such a works had been built, he claimed, production costs would have been lower, and the industry would have been better equipped to withstand German competition.⁶ Subsequent research, however, has shown that metallurgical problems associated with this ore would have made any such project unviable.⁷ It was only when these problems had been solved, during and after the First World War, that steel-making on the East Midlands ore field became economic.

The charge of technical backwardness is hard to sustain in view of the British steel industry’s continuing prowess in high-quality steels. German shipbuilders preferred to buy British steel plate, despite the tariff, because of its superior quality.⁸ In the production of alloy steels, British manufacturers had a technical lead over the US and Germany which persisted until well after the First World War. Robert Hadfield, who invented manganese steel in 1882, was one of several entrepreneurs who helped to give Sheffield an unrivalled reputation in this field.⁹ Technical progress was helped by close co-operation with the metallurgy department of Sheffield University, one of the new civic universities which were set up in the closing decades of the nineteenth century to serve the needs of local industry.¹⁰

The German and American steel industries were younger and growing faster, and more of their investment took place on ‘greenfield’ sites, whereas expansion in Britain usually took the form of piecemeal additions to existing plants. They were also more likely to integrate the three main manufacturing operations – iron-making, steel-making and steel-rolling – on the same site. Partly for this reason, the leading companies such as Krupp and Thyssen in Germany and Carnegie in the US were bigger than their British counterparts. In the US, though not in Germany, competition law had the paradoxical effect of encouraging the creation of larger companies. The Sherman Antitrust Act of 1890, by making cartels illegal, stimulated a wave of mergers which transformed the structure of several major industries. In steel Carnegie and several other companies came together in 1901 to form United States Steel Corporation, accounting for two-thirds of the industry’s capacity. Most British steel-makers during this period were small and family-owned, and the few mergers which took place generally left the founding families in control. But, as the Sheffield example shows, small size and family ownership did not imply technical or managerial backwardness. Moreover, the nature of the British market, with its requirement for a variety of different sizes and shapes of steel, did not lend itself to giant plants and companies on the US model.

Another aspect of management which some historians see as a source of weakness was the way in which production was organised within the works. Like the textile manufacturers and the shipbuilders, the early British ironmasters delegated to experienced workers responsibility for part of the production process in return for a lump sum based on output. The contractors were the first to organise a strong trade union – the Ironworkers Union, formed in 1868.¹¹ The contract system was dying out by the end of the nineteenth century, partly because of opposition from a rival union, the Smelters, which represented the underhands (the two unions came together in 1917 to form the Iron and Steel Trades Confederation). But the management of production through self-supervising teams remained a characteristic feature of British steel-making. A two-tier wage structure was negotiated, consisting of a basic wage, linked by a sliding scale to average steel prices, and a tonnage bonus related to the output of individual plants. The bonus enabled the production workers to benefit directly from improvements in productivity, and they became one of the highest paid groups in the country.¹² These arrangements did not include craftsmen engaged on maintenance duties, or unskilled workers, who were paid a fixed daily wage.

Employers liked the sliding scale because it enabled them to reduce wages during business downturns, while the tonnage bonus varied according to each company’s ability to pay. The outcome was a stable relationship which helped to make steel an unusually strike-free industry; both sides had a strong interest in maintaining continuity of production. On the other hand, the tonnage bonus, which varied according to the efficiency of each plant, may have made it easier for high-cost producers to survive; if the union had pressed for the equalisation of wages across the industry, obsolete plant might have been closed down more quickly.¹³ A more important consequence in the long run was the weak control which employers exercised over the deployment of labour. The seniority system for the process workers was administered by the trade unions, and when new equipment was introduced it was customary to seek the union’s prior agreement to manning levels and pay rates.¹⁴

These practices may have been storing up trouble for the future, but they were not unreformable, and the labour relations system which took shape in iron and steel between 1850 and 1914 was not a block on technical progress. A German historian has concluded that if British steel-makers are to be criticised during this period, it is not for managerial shortcomings, but for their failure to press the government for a firmer response to the protectionist policies of their competitors.¹⁵