The development of british industry and foreign competition, 1875 1914 studies in industrial enterprise (reprint)

THE DEVELO PMENT OF BRITISH
INDUST RY AND FOREIG N COMPE TITION
1875-1914



THE DEVELOPMENT OF
BRITISH INDUSTRY
AND
FOREIGN COMPETITION
1875-1914

Studies in Industrial Enterprise

EDITED BY

DEREK H. ALDCROFT
University of Glasgow

TORONTO: UNIVERSITY OF TORONTO PRESS


FIR ST PUBLISHED IN

1968

This book is copyright under the Berne Convention.
Apart from any fair dealing for the purposes of private
study, research, criticism or review, as permitted under
the Copyright Act, 1956, no portion may be reproduced

by any process without written permission. Enquiries
should be addressed to the publisher.

© George Allen & Unwin Ltd 1968
First published in Canada 1968 by University of Toronto Press
Reprinted in 2018
ISBN 978-1-4875-7221-1 (paper)

PRINTED IN GREAT BRITAIN

in JO on 11 point Times Roman type
SIMSON SHAND LTD
LONDON, HERTFORD AND HARLOW


PREFACE
All the essays in this volume are original in the sense
that they have not been published before. I should like
to thank all the contributors for their kind co-operation
with this project. I would also like to express my gratitude
to Professor D. J. Robertson, the General Editor of the
series in which this volume appears, for his kind advice
and guidance during the course of preparing the book
for publication.
D.H.A.



CONTENTS
page 1

PREFACE

1. Introduction: British Industry and Foreign Competition,

1875-1914

11

by D. H. Aldcroft, Lecturer in Economic History, University of Glasgow

37

2. The Coal Industry
by A. J. Taylor, Professor of History, University ofLeeds

3. Iron and Steel Manufactures

71

by P. L. Payne, Senior Lecturer in Economic History, University of

4. The Cotton Industry

Glasgow

100

by R. E. Tyson, Lecturer in Economic History, University of Aberdeen

5. The Woollen and Worsted Industries

128

by E. M. Sigsworth, Reader in Economic History, University of York
and J. M. Blackman, Lecturer in Economic History, University of Hull

6. Boots and Shoes

158

by P. Head, Principal Planning Officer, Staffordshire County Council

7. The Engineering Industry

186

by S. B. Saul, Professor ofEconomic History, University ofEdinburgh

238

8. Electrical Products
by I. C. R. Byatt, Lecturer in Economics, London School ofEconomic

9. Chemicals

and Political Science

274

by H. W. Richardson, Senior Lecturer in Economics, University of

10. The Glass Industry

Aberdeen

307

by T. C. Barker, Professor ofEconomic History, University ofKent

11. The Mercantile Marine

326

by D. H. Aldcroft
BIBLIOGRAPHIES

364

INDEX

373



CHAPTER 1

INTRODUCTION:
BRITISH INDUSTRY AND FOREIGN
COMPETITION, 1875-1914

I

IN 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.

11


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.

12


INTRODUCTION

Average Annual Rates of Growth of Selected Economic Indices
(UK)
Total
Output
Real
Industrial
Per

Exports
Income
Industrial ProducMan-hour Per Head Production
tivity
1850-60
5·1
18~70
2·5
2·9
1-1
3·2
1870-80
0·9
0·8
2·3
1·2
2·8
1880-90
3·8
3·5
0·5
2·9
1·6
1890-1900
0·4
1-3
1·2
2·8
0·2
1900-13

0·6
0·4
1·6
0·2
5·4
18~1913
1·5*
1·6
2-1
0·7
2·8
TABLE I:

*1870-1913.
Sources: A. Maddison, Economic Growth in the West (1964), p. 232; B. R.
Mitchell and P. Deane, Abstract ofBritish 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)

Total
Output
UK

us

Germany

France

2·2
4·3
2·9
1·6

Output Per Industrial Industrial Exports
Man-hour Production Productivity (18801913)
2·2
0·6
1·5
2·1
3·2
4·7
1·5
2·3
4·3
2·1
4·1
2·6t
2·6
3·1*
n.a.
1·8

• 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.

13


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,

14


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.

15


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.

16


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.

17


Exports from UK and Other Industrial Countries, 1899-1913
(million dollars at 1913 prices)
Exports to:
Semi-Industrial
Industrial
Rest of Worldt
Countries
Countries
ManufacAll
ManufacAll
All

ManufacExports
tures
Exports
tures
Exports
tures

TABLE 111:

Exports from:

1899
1913
Per cent increase

479
624
30·3

912
969
6·3

477
810
69·8

544
927
70·4

371
526
41·8

522
660
26·4

Total
t,
ManufacAll
m
Exports <
tures
m
t"1,327
1,978
0
."ej
2,556
1,970
29·2 a::
47·7
m

1899
1913
Per cent increase

437
925
111-7

691
1,285
86-0

75
227
202·7

84
238
183·3

270
574
112·6

346
882
154·9

782
1,726
120·7

1,121
2,405

114·5

1899
1913
Per cent increase

272
535
96·7

1,366
1,850
35·4

83
137
65·1

113
246
117·7

68
174
155·9

182
388
113·2

423
846
100·0

1,661
2,484
49·6

1899
1913
Per cent increase

1,923
3,248
68·9

4,660
6,761
45-1

732
1,456
98·9

863
1,723
99·7

1,021
1,793

75·6

1,483
2,746
85·2

3,677
6,497
76·7

7,006
11,230
60·3

UK

00

-,J

:r:m

Germany

United States

Total•

• Includes UK, us, Canada, Japan, India and the major West European countries.
Source: A. Maizels, Industrial Growth and World Trade (1963), pp. 428-9, 432-3.

t Includes Russia.

z-,J

0

>!j

=
....
:.0:,

....-,J
:r:
....

V,

z

t,

c:::

V,

-,J
~

,<


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.

19


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.

20


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
Ibid., p. 198.
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.
1

2

21


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
A. Maizels, Industrial Growth and World Trade (1963), p. 200, Table 8.5.
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.
1

1

22

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
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.
1

23


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.

24

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
Saul, Joe. cit., pp. 11-12.
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.
1

1

25


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

26