To what extent were entrepreneurs to blame

This essay will attempt to evaluate the claim by certain historians, that entrepreneurs were the main cause for Britain's lack of industrial competitiveness between 1870 and 1914. The essay will begin with a brief introduction, and then will outline in turn the main arguments that are damning of entrepreneurial actions. This will be followed with the counter arguments for this hypothesis, beginning with possible explanations as to why the entrepreneurs behaved in the way they did, and finishing on some points that in fact the world role of Britain was not so much in decline as originally believed.

The essay will conclude by analytically weighing up the evidence to make some brief conclusions. To what extent were entrepreneurs to blame for Britain's lack of industrial competitiveness between 1870 and 1914? It has been popularly argued that Britain's role as one of the world's strongest economies was in decline from 1870, particularly as Germany and the USA became strong players in the world market.Many arguments and hypotheses have been drafted by historians to explain why this was, but this essay will be concerned with assessing the extent to which the actions of entrepreneurs were to blame for Britain's lack of industrial competitiveness. Many areas of entrepreneur's actions have been criticised and different historians have suggested different failings, however, there are historians who are sceptical of placing the blame directly on the entrepreneurs and suggest not only explanations for their actions, but also arguments that they were not failing.

One of the key historians to condemn the actions of entrepreneurs was Derrick Aldcroft, whose 1969 thesis on the implications of industrialist's actions on the British economy caused controversy. Aldcroft analysed four aspects of entrepreneurial actions; technological progress, methods of production, scientific research and technological education, and commercial methods. Aldcroft argued that investment in technological progress was more beneficial to the British economy than the accumulation of capital (Aldcroft, 1981).British entrepreneurs were behind their German and American counterparts in this field, as both countries invested more of their profits in newer and more efficient machinery, which could ultimately improve productivity and thus profits.

Weiner, who agrees with this opinion stated that, 'insufficient long-term investment hobbled productivity growth, which in turn made such investment ever less attractive, and so on in a downward spiral. ' (Weiner, 1981: 129). There are many examples to illustrate this point, but the example to be used here is that of the steel and iron industry.In contrast to Germany, Britain was slow to adopt new processes for coking and steelmaking, and also to modernize her plants. By adopting the German method of 'direct' steelmaking, Britain could have utilised the by-products and waste gases, which would have resulted in more efficient use of resources and thus less money wasted.

However, in 1913, less than 28% of the iron to be used in steelmaking utilised the direct process, compared to 75% of German steel as early as 1900 (Aldcroft, 1981).This lack of technological investment had, according to Aldcroft and other accusers of entrepreneurs, an effect on Britain's role as a world competitor, as it caused the prices of our exports to be higher than American and European prices, which in turn made buyers reluctant to buy British. This leads to the argument that British entrepreneurs were slow to adopt new methods of production in industries, particularly in tool making and engineering, which resulted in Britain losing key markets to her international competitors (Aldcroft, 1981).Britain had traditionally been the key producer of machine tool, but was replaced by America in the 1880's, after which German tool manufacturers became prominent toolmakers.

Germany and America succeeded where Britain failed, due to their effective and resourceful methods of production. As opposed to producing a large variety of tools in small and inefficient firms, the German and American toolmakers concentrated on mass-producing only one or two types of tool (Aldcroft, 1981).By adopting the resourceful German and American styles of tool production, British toolmakers could have considerably reduced the costs of production and widened their potential markets. The third accusation placed upon the industrial businessmen by Aldcroft is that they failed to recognise the importance of a scientific or technological education, and thus prevented enough research in forwarding methods and products (Aldcroft, 1981).This was particularly true of scientific industries such as engineering and chemicals. Britain almost seemed proud of its traditional approach of practical tinkering and in carrying out little research, which certain historians argued had caused Britain to lag behind, particularly Germany.

The German success in science and research was due to an organised and systematic approach, in which many foremen and managers had benefited from at least two years of scientific education (Aldcroft, 1981).Had Britain adopted a system whereby more people were trained in scientific methods, research could have been conducted, thus allowing Britain to make considerable progress in both product designing, and methods of production. This could have created more efficient methods in which money could be saved, and potentially new products, which could create new markets. Aldcroft's final observation on the failings of entrepreneurs was that they failed to adopt new commercial methods, by which it is meant that they were reluctant to advertise, and go into foreign countries to expand their markets (Aldcroft, 1981).

Aldcroft notes that, 'industrialists and traders were not only finding it difficult to sell new goods in new markets but they were also finding increasing difficulty in selling traditional goods in established markets. ' (Aldcroft, 1981: 156). Some of the main accusations of British entrepreneurs was that they were disinclined to reduce prices, to conduct market research into what the clients wanted, to use metric weights and measures systems used on the continent, and to trade with people in their own native tongues. It was also rare that Britain sent traders into other countries at all (Aldcroft, 1981).In this way, the British trader was culturally inept, and not inclined to do what it took to open their potential markets (Pollard, 1999), which gave foreign traders, particularly German traders the upper hand in gaining new buyers. Aldcroft's controversial damnation of British entrepreneurs caused a backlash by other historians in defence of entrepreneurs, by outlining possible explanations as to why they may have acted as they did.

A comprehensive defence of entrepreneurs is outlined by McCloskey and Sandberg, whilst Sidney Pollard offers a good summary of the counter-arguments to Aldcroft's view.One of the main explanations that redeems the entrepreneurs is the early start thesis. This outlines that 'Britain was burdened with the equipment of an earlier generation of industrial technology, while foreign late-comers to industrialization had the advantage of a fresh start' (McCloskey, 1981: 58). One of the main problems of this is the interrelatedness of industry, for example, inefficient, small coal cars could not easily be replaced with more efficient larger cars, as the whole rail network would need to be updated as well.

An institutional variation of this hypothesis has also been argued, in that different industries owned different parts of the aggregate means that need to be replaced (McCloskey, 1981). The effects of this on the economy are that it is probably more cost effective to remain with the old technologies than face a huge upheaval in industry which would not only concede great costs, but would also lose businessmen profits whilst work was being undertaken (Pollard, 1999).A further criticism of Aldcroft's view is that it fails to take into account the relative differences in factor prices. Labour was cheap and readily available in Britain, whilst it was more scarce and expensive in the USA. This explains why America was more open to innovative new machinery and technology as it needed it to make up for lost labour.

For British industries to overhaul their systems to replace labour with machinery is not cost effective as labour was so cheap in Britain (Pollard, 1999).This is closely related to another of Pollard's arguments that population growth was slower in Britain compared to its competitors, and thus the possibilities for growth were more restricted. This lowering population lead to less demand, and this would have affected the speed of Britain's adoption of new technologies. The reluctance of British entrepreneurs to introduce new technologies has also been defended, by stating that British home markets had different demands to its competitor's markets.

It has been suggested that because Britain was a country with more social hierarchy than Germany or the USA, different social groups required a variety of different products. Therefore, small firms producing a multitude of products was more suited to the British needs than a mass production type of system, such as in the USA (Pollard, 1999). This could have meant that industrialists were making enough money from the domestic markets not to have been bothered that their production methods were not suited to international markets.The actions of the British government have also been put forward to defend entrepreneurial actions, in that policy was often unhelpful or restrictive to economic growth in the world market. This included inadequate provisions for education, particularly in science and technology which restricted the means for research; maintaining a system of free trade where other countries operated a protectionist tariffs system, and protective legislation on factories (Pollard, 1999).

These measures made it difficult for progress to be made, and thus could be an argument to defend the industrialists.There are also arguments put forward by doubters of the entrepreneurial hypothesis that cast doubt as to whether Britain was actually relatively in decline at all, and that the entrepreneurs may have in fact been doing a fine job. An example of this is that the entrepreneurial doubters have often ignored the fact that Britain was doing exceptionally well in both retail and agriculture (McCloskey, 1981). It has been argued that in fact the opposite of the entrepreneurial thesis is true, in that vigorous entrepreneurship prevailed, particularly in miscellaneous industries.An example of this is evident from the soap company Unilever, who demonstrated much success in marketing (McCloskey, 1981).

McCloskey has also been sceptical of Aldcroft's approach to entrepreneurial actions, was flawed as it based too much on hindsight. It is inappropriate to be shocked that a certain technology didn't come into play until a particular date if little light is shed on the relative appropriateness of adopting the process at an earlier date (McCloskey, 1981).This is related to another of McCloskey's counter-arguments, which questions the entrepreneurial analysis of Britain's lack of industrial competitiveness. Using the example of coke oven from the steel industry, counter-theorists can't establish why Britain was considered to be lagging behind Germany, as the first to utilise this by-product; yet America are not considered to be lagging behind Britain even though they didn't use it until later than Britain (McCloskey, 1981).

McCloskey also suggests that entrepreneurial quality should not be used as a ranking system for the three countries. Disagreements with Aldcroft have also been made in relation to his ideas that lack of technological research caused a decline in British industry. He demonstrates that 'the fruits of research are to some extent commonly consumed goods, for which investment by an individual firm would be irrational. ' (McCloskey, 1981: 68).

That is to say that Britain will benefit from the research conducted elsewhere, and they will save money, as they are not investing in the research. One final, yet by no means the least important argument, was demonstrated by Pollard, who said that the critiques of entrepreneurs often forgot that in fact, Britain was still maintaining a commanding lead during this period (Pollard, 1999). The United States only overtook Britain in terms of output and income in 1913, and Germany was a third behind Britain.Even in manufactured exports did a substantial British lead remain. In conclusion, it is impossible to argue the entire historiography of this debate in one short essay, and indeed, impossible to make any real conclusions from a longer essay.

There is much evidence to suggest that in fact entrepreneurs did have a significant effect on the decline of Britain as a world trader, yet there are many counter points that not only offer possible explanations for these arguments, but also question the assumptions of British trade itself.It is difficult to determine a ranking system, by which to assess rationally which points in the debate hold more serious weighting than the others, so an economic conclusion cannot be drawn up. The only real evaluation of this essay is to say that British decline is not merely due to the failings of entrepreneurs, but other factors come into play, such as foreign investment in the empire detracting money away from home markets. Therefore, the final conclusion of this essay is that it is inconclusive.