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Published online by Cambridge University Press: 03 June 2009
At the beginning of the period 1870–1913 the United Kingdom was the acknowledged leader in the iron and steel industry; at its end she was in some sense or other a third-rate iron and steel producer, surpassed by the United States and Germany. The first section of this paper will formulate definitions of “loss of leadership” which are statistically verifiable and economically significant, and will determine whether or not, for a given sense of the term, it is true that the United Kingdom fell behind the other countries. The second section considers some of the factors which led to the U. K.'s “loss of leadership”.
1 1890 and 1903 are the corresponding years in which the U. K. was bested in pig iron production by the U. S. and Germany.
2 Secular Movements in Production and Prices (New York, 1930)Google Scholar.
3 This refers to the Bessemer and open-hearth processes (both acid and basic types).
4 The output of the Bessemer converter and the open-hearth in the 1870's was highly variable and otherwise inferior by present-day standards; nevertheless, evidence clearly indicates that the new steels were, even then, superior to wrought iron. See, for example Fairbairn, William, An Experimental Inquiry into the Strength, Elasticity, Ductility and Other Properties of Steel Manufactured by the Barrow Haematite Steel Company (West minister, 1869), pp. 50–52Google Scholar.
It should be noted that crucible and cementation process steels are not included in this discussion. They were unquestionably superior to wrought iron, but were not a competitor because of their prohibitively high cost.
5 Ideally, the numerator of our ratio should include only the new steels; that is, our ratio would be Bessemer and open-heart steel output (both acid and basic types) relative to pig iron output. The ratios were computed for the U. K. and U. S. and were found to be practically identical to those in Table I. Fragmentary data for Germany revealed the same correspondence.
The ratio needs one other qualification. Since an increase in steel output (and therefore in the ratio of steel to pig iron) can arise through increased utilization of scrap metal, and since the conversion from Bessemer to open-hearth processes results in such an increase, that nation which more fully utilized the open-hearth process would, other things being equal, have the higher ratio. The U. K. is that nation; and Table I accordingly overstates slightly the degree of progress of her industry. However, no adjustment was deemed necessary.
6 The annual data, from which Table I was derived, indicate that the divergence became especially sharp after 1890.
7 The words of a contemporary observer, a student of the British steel industry, may enforce the argument: speaking in 1903 of the steady decline in the output of the finished iron industry in the United Kingdom between 1890 and 1900, he goes on to A say: “Indeed, it is probably one of the strongest evidences of our conservative habits and ideas that this branch of the trade should have held its own so long and so well. When we remember that a ton of bar iron costs three or four times the labour and fuel to produce that is expended on a ton of bar steel, and that, even when it has been produced, it is a fibrous and heterogeneous material, having its strength mainly in one direction, while steel is a crystalline and homogeneous structure, having its strength equally in all directions, and capable of taking the hardness of the diamond or the proverbial toughness of leather at will, it does seem remarkable that steel, which costs no more to produce, should not have displaced wrought iron entirely many years ago.”— Jeans, Stephen S., “The British Iron and Steel Industries: Their Condition and Outlook”, Ashley, W. J. (ed.), British Industries (London, 1903), pp. 15–16Google Scholar.
8 A reduction in the degree of monopoly power is another implication, but an unimportant one for this study.
9 Burnham, T. H. and Hoskins, G. O., Iron and Steel in Britain: 1870–1930 (London, 1943), Chapter VIGoogle Scholar; and Burn, D. L., The Economic History of Steel-Making (Cambridge, 1940), Chapter VIIGoogle Scholar.
10 Burnham and Hoskins (op. cit., pp. 77–78), seeing that British income increased less rapidly in our period, conclude that this was a retarding influence upon her iron and steel industry—and so it was in terms of raw aggregates. But this misses the important point: relative to income growth, Britain's growth in steel production was substantially less than that of her competitors.
While the expansiveness of home markets, in the aggregate, has been equalized by the ratios, there is still the possibility that one of the home markets may, by its nature, have possessed a greater expansion potential. Other things being equal, the greater geographic distances encompassed by the U. S. economy with its concomitant stimulation of rail production could have produced a differential such as we have observed in Table III. To test this is not difficult. Reduce steel production by the amount of rail production. The relationship of steel production—net of rail production—to income is given below:
The Ratio of Steel Production less Steel Rail Production to National Income for Selected Periods for the United Kingdom, the United States, and Germany (incl. Luxembourg)
Sources: Same as Table III.
Although the different time periods used prohibit careful comparisons of the ratios, the order of magnitude of their differences is significant. The lack of a large internal market for rails can not explain away the U. K.'s unfavorable development.
11 There is one possible flaw in the above findings. The market for steel has been taken to be a domestic market, yet it is properly an international one. The true estimate of demand must count the growth of income of large overlapping areas of the globe, and would have to include such variables as tariffs and costs of production. But, since the scope and complexity of the problem would confound a superficial analysis, the international aspects of the problem must be ignored in this paper.
12 It is important to notice that the definitions are quite special. For another industry, other definitions would be required to suit its special economics.
13 Actual prices were converted to relatives to facilitate comparison of the price movements; and in the first two columns one finds the U. K. and the U. S. data. In the next two columns are found the same prices, deflated by their respective wholesale price indexes, and reduced to relatives. The German data stand somewhat apart due to the different time intervals employed, and also because the price series involved is that for English bar iron sold in the German home market. Ordinary market behavior fairly assures us that general iron bar prices within Germany will conform at least approximately to the price data shown here, and this is all that we require.
14 For convenience, subsequent references will run as follows: (B. 249) means Burn, op. cit., p. 249; (B. & H. 265), Burnham and Hoskins, op cit., p. 265.
15 See also Frankel, Marvin, British and American Manufacturing Productivity (Urbana, 111., 1957), p. 95Google Scholar.
16 The “direct process” was also retarded by an inability to produce a uniform, highquality pig iron. Here, too, trained engineers were needed.
17 A contributory source of inefficiency arose from the lack of standardization of steel sections in the U. K. In Germany and the U. S. in the year 1900 there were, respectively, 34 and 33 standard sections rolled; in the U. K. the number was 122. Moreover, there may have been an increase in the ’nineties (B. 198–99).
