Sunday, 17 July 2011

How far were entrepreneurs agents of change in the nineteenth century?

During the economic transformation between 1780 and 1830, entrepreneurs were regarded as the main instruments of change because of their enterprise and innovation, organisational skill and their ability to exploit commercial opportunities.[1] Many industrial pioneers operated in a uniquely favourable economic environment. They faced an expanding domestic market buttressed, especially in cotton, by a flourishing overseas demand. This allowed entrepreneurs such as Robert Owen[2], Benjamin Gott[3] and his partners, George Newton and Thomas Chambers to exploit profit potentials. In these largely favourable economic conditions, substantial profits could be achieved without effective use of power supplies or optimal factory layouts. However, successful entrepreneurs such as Arkwright, Strutt and Peel were perhaps not typical of contemporary businessmen. More representative were individuals such as the Wilsons of Wilsontown Ironworks[4] or the Needhams of Litton[5] whose concerns suffered from serious entrepreneurial shortcomings coupled with gross mismanagement. Such was the strength of the home and overseas markets, the former benefiting from the coming of railways and gradually rising living standards that entrepreneurs 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, meant that the nature of entrepreneurship and the structure of the firm changed little in the middle decades of the century. However, some firms that traced their origins to the Industrial Revolution were declining in relative importance and some were disappearing altogether. 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 continuing demand for the products of its foundry.[6]

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 that can be seen to lack firm foundations. [7] How competent were entrepreneurs in late-Victorian and Edwardian Britain?[8] Growth in industrial production declined; there was a relative deterioration in Britain’s international economic status and a sluggish rise in productivity that have, to some degree, been blamed on declining entrepreneurial spirit.[9] David Landes, for example, supported this position suggesting that British enterprise reflected a

...combination of 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.[10]

This view of British entrepreneurial failure implied an unfavourable comparison with performance elsewhere, usually in Germany and America. However, McCloskey [11] 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.[12] 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.[13] On the basis of these and other studies, McCloskey argued that there was ‘little left of the dismal picture of British failure painted by historians’.[14] But doubts still remained. British entrepreneurs were criticised for failing to confront organisational weakness especially their labour-intensive nature that was progressively strangling the staple industries and for failing to enter more vigorously new manufacturing industries. Conversely, entrepreneurs did move into the service sector, whose relatively rapid rate of growth and high productivity between 1870 and 1914 was superior to the old staples and provided what little buoyancy there was in Britain’s aggregate economic growth. British entrepreneurial errors and hesitation were always present, even during the Industrial Revolution. They simply became more apparent after 1870.[15]

There is a deep-seated and enduring conviction that British culture was the root cause of Britain’s industrial decline. Central to this tradition is the belief that the British people, especially 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. 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. [16] 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. In reality, however, the middle-classes were not as hostile to manufacturing as some historians believe. The upper middle-classes sent 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 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% of the men listed in the Dictionary of Business Biography born between 1840 and 1869 had been to a public school, and only 18% of the entrepreneurs who were active in Birmingham, Bristol and Manchester between 1870 and 1914 were so educated. The tendency for successful businessmen and merchants to become landowners in the late-nineteenth century did not represent a new departure. 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 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 shop-floors 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] See this issue from a literary perspective, McKinstry, Sam, ‘The positive depiction of entrepreneurs and entrepreneurship in the novels of Sir Walter Scott’, Journal of Scottish Historical Studies, Vol. 26, (2006), pp. 83-99.

[2] Donnachie, Ian L., Robert Owen: Owen of New Lanark and New Harmony, (Tuckwell), 2000 and Butt, John, (ed.), Robert Owen, prince of cotton spinners: a symposium, (David & Charles), 1971.

[3] See, Heaton, Herbert, ‘Benjamin Gott and the industrial revolution in Yorkshire’, Economic History Review, Vol. 3, (1931-2), pp. 45-66.

[4] Donnachie, Ian L. and Butt, John, ‘The Wilsons of Wilsontown ironworks, 1779-1813: a study in entrepreneurial failure’, Explorations in Entrepreneurial History, 2nd ser., Vol. 4, (1967), pp. 150-168.

[5] MacKenzie, M.H., ‘Cressbrook and Litton mills, 1779-1835’, Derbyshire Archaeological Journal, Vol. 88, (1969 for 1968), pp. 1-25, Chapman, Stanley D., ‘Cressbrook and Litton mills: an alternative view’, Derbyshire Archaeological Journal, Vol. 89, (1970 for 1969), pp. 86-90 and MacKenzie, M.H., ‘Cressbrook and Litton Mills: a reply’, Derbyshire Archaeological Journal, Vol. 90, (1972 for 1970), pp. 56-59.

[6] Thomas, Emyr, Coalbrookdale and the Darby family: the story of the world’s first industrial dynasty, (Sessions), 1999.

[7] Payne, P.L., British Entrepreneurship in the Nineteenth Century, (Macmillan), 2nd ed., 1988 is a brief analysis bibliographical study. Dintenfass, Michael, The Decline of Industrial Britain 1870-1980, (Routledge), 1992 and Dormois, Jean-Pierre and Dintenfass, Michael, (eds.), The British industrial decline, (Routledge), 1999 provide a challenging account of Britain’s long-term decline since the 1870s.

[8] Payne, Peter, ‘Entrepreneurship and British economic decline’, in Collins, Bruce and Robbins, Keith, (eds.), British culture and economic decline, 1990, pp. 25-58.

[9] Westall, O.M., ‘The competitive environment of British business 1850-1914’, in Kirby, M.W., and Rose Mary B., (eds.), Business enterprise in modern Britain: from the eighteenth to the twentieth century, (Routledge), 1994, pp. 207-235 and Kirby, M.W., The Decline of British Economic Power Since 1870, (Taylor & Francis), 1981, pp. 1-24 provides a valuable context.

[10] Landes, D., The Unbound Prometheus, (Cambridge University Press), 1969, p. 564.

[11] McCloskey, D.N., Economic maturity and entrepreneurial decline: British iron and steel, 1870-1913, (Harvard University Press), 1973, pp. 1-21, 56-72, 125-130.

[12] McCloskey, D.N., Enterprise and Trade in Victorian Britain, (Allen & Unwin), 1981, pp. 74-93.

[13] Chapman, S.D., ‘The Textile Industries’, in Roderick, G.W., and Stephens, M.D., (eds.), Where did we go wrong? Industrial performance, education and the economy in Victorian Britain, (Taylor & Francis), 1981, pp.125-138.

[14] Ibid, McCloskey, D.N., Enterprise and Trade in Victorian Britain, p. 106.

[15] See, for example, Brown, K.D., ‘Entrepreneurial Failure and Retailing: a case-study’, Journal of Industrial History, Vol. 5, (2002), pp. 71-88, Toms, Steven, ‘Windows of opportunity in the textile industry: the business strategies of Lancashire entrepreneurs, 1880-1914’, Business History, Vol. 40, (1998), pp. 1-25.

[16] The classic modern exposition of this view can be found in Wiener, Martin, English Culture and the Decline of the Industrial Spirit 1850-1980, (Cambridge University Press), 1981. See also, Trainor, Richard, ‘The gentrification of Victorian and Edwardian industrialists’, in Stone, Lawrence, Beier, A.L., Cannadine, David and Rosenheim, James M., (eds.), The First modern society: essays in English history in honour of Lawrence Stone, (Cambridge University Press), 1989, pp. 167-197 and Thomson, F.M.L., Gentrification and the Enterprise Culture: Britain 1780-1980, (Oxford University Press), 2003, pp. 19-142 and Robbins, Keith, Politicians, diplomacy, and war in modern British history, (Hambledon), 1994, pp. 67-84 on British culture versus British industry.

1 comment:

Sean Goldsmith said...

What an interesting article. Would love to know what comparisons you draw to modern Britain!