Monday, 4 August 2008

The middle-classes: Entrepreneurs

The quality of British entrepreneurship in the nineteenth century is continually being reassessed. Historians suggested until the mid 1960s that from being the organisers of change in the first half of the nineteenth century, British entrepreneurs had, by its latter decades, come to be responsible for Britain’s failure to retain her role as workshop of the world.[1]

Entrepreneurs and the Industrial Revolution: the need for reassessment

The view of entrepreneurs in the late nineteenth century as having declining initiative and flagging drive rests on a view of the dynamism of their predecessors of the classical industrial revolution. But is this assumption fully justified? It is grounded in a view that an economic transformation did take place between 1780 and 1830 and that entrepreneurs were the chief instruments of change with their reputations for courage and adventurousness, progressive efficiency, organisational ability and grasp of commercial opportunities, combined with a capacity to exploit it. Historians have questioned the promethean basis for economic change and, as a result, have begun to look seriously at the role that entrepreneurs played. The problem is the nature of the sample used to justify the progressive nature of entrepreneurs. The evidence that survives is from those concerns that were sufficiently successful to have created conditions favourable for untypical longevity. Historians have few records of where entrepreneurship failed. On the basis of this biased sample, the temptation has been to construct a composite ‘complete businessman’ possessing all the virtues and to extrapolate from these qualities not only to the hundreds of concerns mentioned in local histories, but even to those whose names have never been recorded. This has confused the issue. In fact the ancestors of the much maligned later Victorian businessman may not have been superior entrepreneurs in every facet of business activity and many who succeeded in the early years may not have fared so well in later decades.

Many industrial pioneers operated in a uniquely favourable economic environment. They faced a buoyant domestic market buttressed, especially in cotton, by a flourishing overseas demand. This allowed entrepreneurs like Robert Owen, Benjamin Gott and his partners and George Newton and Thomas Chambers to exploit profit potentials. In these generally favourable demand situations the perpetration of the grossest errors often went unpunished by bankruptcy. Imbalances of power supply, mill capacity and potential demand for the product often resulted and optimal factory layouts were rarely achieved. The focus on the successful entrepreneurs during the industrial revolution creates a degree of entrepreneurship that was perhaps not typical. More representative than the Arkwrights, Strutts and Peels were the Wilsons of Wilsontown Ironworks or the Needhams of Litton whose concerns suffered from serious entrepreneurial shortcomings coupled with gross mismanagement.

The hidden decades: 1830-1870?

The overwhelming majority of business records for this period have either been destroyed or have not yet attracted much attention. Analysis is thus either impossible or insubstantial. This is a grave misfortune. Many of the problems of the pioneers had been overcome: relatively sophisticated managerial techniques evolved and the markets of the world long remained open to British exploitation. However, such was the strength of the home and overseas markets, the former benefiting from the coming of railways and gradually rising living standards that the entrepreneur had no great inducement to alter the basic economic structure that had evolved before 1830.

The absence of any dramatic change in the scale of operations, the relatively slow enlargement of the labour forces of individual enterprises and the close coincidence of firm and plant, coupled with the fact that the majority of large companies were but ‘private firms converted’ meant that the nature of entrepreneurship and the structure of the firm changed little in the middle decades of the century. However, the decline of hitherto leading firms can be traced to this period. Marshall’s of Leeds began to decline in the 1840s, though it was to linger on for another forty years by which time many of its leading competitors in flax spinning had already gone: Benyons in 1861, John Morfitt and John Wilkinson a few years later. The Ashworth cotton enterprises, built up between 1818 and 1834 by Henry and Edward Ashworth, began their relative decline in the 1840s. In iron Joshua Walker & Co. did not long survive the end of the Napoleonic Wars, its steel trade being formally wound up in 1829 and its iron trade finally wasted away in the 1830s. Other ironmasters fared little better: John Darwin, one of Sheffield’s leading industrialists, had gone bankrupt by 1828. The Coalbrookdale Company, bereft of managerial guidance when Abraham and Alfred Darby retired in 1849 and Francis Darby died in 1850, faltered and was sustained only by sheer momentum and a continuing demand for the products of its foundry. Though these examples could be multiplied, little can be proved from them. What they do illustrate is that many more firms would have gone down in this period had they been confronted by the degree of competition encountered after 1870.

Some firms that traced their origins to the Industrial Revolution were declining in relative importance; some were disappearing altogether; others were crowding in to take their chances in both old and new fields of enterprise. It would appear that the majority of British firms -- whether their products were sold directly to the customer or through intermediaries -- became increasingly specialised during the middle decades of the century. It was an ideal way to get started and, having become established, to survive.

1870-1914: The critical decades?

In the last two decades there has been a stimulating debate on the competence of entrepreneurs in late-Victorian and Edwardian Britain. There was a declining rate of growth of industrial production, a relative deterioration in the international position and a sluggish rise in productivity and all have, to some degree, been blamed on declining entrepreneurial spirit. David Landes, for example, in summarising the case for the prosecution, suggested that British enterprise reflected a ‘combination and complacency. Her merchants, who had once seized the markets of the world, took them for granted; the consular reports are full of the incompetence of British exporters, their refusal to suit their goods to the taste and pockets of the client, their unwillingness to try new products in new areas, their insistence that everyone in the world ought to read in English and count in pounds, shillings and pence. Similarly, the British manufacturer was notorious for his indifference to style, his conservatism in the face of new techniques, his reluctance to abandon the individuality of tradition for the conformity implicit in mass production.’ [2]

The hypothesis of entrepreneurial failure took quite a beating in the late 1960s. The factual basis was broadened away from the areas of iron production and cotton to the new industries where the factory was encroaching on old craft and the multiple on the village store, to the manufacture of soap, patent medicine, mass-produced foodstuffs and confectionery. In these areas, it was argued, the very real commercial and technological successes had been generally underestimated. British historians piled case study upon case study that, if anything, confused the issue of entrepreneurial failure even more.

Assertions of British entrepreneurial failure imply a comparison with performance elsewhere, usually in Germany and America. McCloskey studied the iron and steel industry and found that the British iron and steel masters exploited the potential of world technology before 1914 as well as, if not better, than their much lauded American competitors though he was less convinced by the potential of the British coal industry. Similar studies of the cotton industry found that failure to introduce newer technology and reliance on mule-spinning did not lead to a decline in productivity. On the basis of these and other studies, McCloskey expressed the belief that there was ‘little left of the dismal picture of British failure painted by historians’. But doubts still remained. If the British entrepreneur is to be criticised for failing constructively to confront the organisational constraints that were progressively strangling the staple industries, especially their labour-intensive nature, and if he is to be criticised for failing more vigorously to enter new manufacturing industries, then arguably the same entrepreneur deserves some praise for moving into the service sector, whose relatively rapid rate of output growth and high productivity between 1870 and 1914 was so much superior to the old staples that its expansion provided what little buoyancy there was in Britain’s aggregate economic growth. The four decades before the First World War were not, therefore, a critical period of entrepreneurship. British entrepreneurial errors and hesitation were always present, even in the period of the classic Industrial Revolution. They simply became more apparent after 1870.

A gentrification of British businessmen?

There is a deep-seated and enduring conviction that British culture was the root cause of Britain’s industrial decline. The central tenet of this tradition is the belief that the British people, and especially those of the middle-classes, have long been averse to industry. For them the real Britain has been the ‘green and pleasant land’ of the traditional British countryside.[3] Those businessmen who could forsake industry and trade for a life of gentility have eagerly done so. This ‘gentrification’ of the English middle-classes caused a dampening of industrial energies and led to a decline in Britain’s economic prowess.

The politicians and civil servants whose actions shaped the economic environment in which private enterprise functioned were drawn from the gentry or, if of humbler birth, educated to the ideals of style, leisure and service at a public school or one of the ancient universities. The financiers and traders of London to whom they looked for economic expertise were also imbued with the same anti-industrial spirit. However, what little evidence there is suggests that the biases of British life were not nearly as hostile to manufacturing as some historians would have us believe. The upper middle-classes did send a significant number of their sons into business and the flow of elite sons into manufacturing and commerce was neither limited to genteel pursuits like merchant banking. Sons of landowners and professional accounted for roughly a quarter of British steel manufacturers active in the period 1865-1914 and both groups were substantially over-represented in this heavy industry in comparison with their incidence in the population as a whole.

Given the willingness of the landed and professional classes to embrace industry as a source of jobs for their sons, it is perhaps not surprising that British businessmen failed to ape the allegedly anti-industrial disposition of their social superiors. Industrialists and merchants, for example, long displayed an unwillingness to educate their sons at the public schools that served as the gateways to elite status in Britain. Just 21 per cent of the men listed in the Dictionary of Business Biography who had been born between 1840 and 1869 had been to a public school, and only 18 per cent of the entrepreneurs active in Birmingham, Bristol and Manchester between 1870 and 1914 were so educated. It is questionable whether the propensity of successful businessmen and merchants to become landowners in the late nineteenth century represented a new departure. Land and the status that its possession entailed had figured in the definition and distribution of prestige in Britain long before 1870. Since the purchase of estates by businessmen did not damage the economy in the decades before 1870 and since there is little evidence that the sons of businessmen were increasingly deflected to the lifestyle of landed gentry after 1870, it is hard to see why this tendency should have significantly weakened Britain’s competitiveness.

The decline of industrial Britain after 1870 was a matter of the decisions about tools and techniques, education and training and advertising and sales that the men who remained in the offices and on the shopfloors made. There is as yet virtually no direct evidence linking the choices entrepreneurs and managers made about production and marketing with the anti-industrial values to which they supposedly succumbed. If there was a ‘gentry cast’ to their minds, that strongly influenced business decision-making, historians have found few traces of it in the records of British enterprises.

[1] P.L. Payne British Entrepreneurship in the Nineteenth Century, Macmillan, 2nd. ed., 1988 is a brief analysis of research. Michael Dintenfass The Decline of Industrial Britain 1870-1980, Routledge, 1992 is a challenging account of Britain's long-term decline since the 1870s and provides the most accessible, and briefest, discussion of this vexed question.

[2] D. Landes The Unbound Prometheus, CUP, 1969, page 564.

[3] The classic modern exposition of this view can be found in Martin Wiener English Culture and the Decline of the Industrial Spirit 1850-1980, CUP, 1981.

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