'There is a great deal of evidence to support the view that the relative decline of the British economy in the late Victorian period was due to the ineptitude of Britain's entrepreneurs'. Discuss.

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‘There is a great deal of evidence to support the view that the relative decline of the British economy in the late Victorian period was due to the ineptitude of Britain’s entrepreneurs’.  Discuss

Although there is yet no agreement on the nature and extent of Britain’s economic decline before World War 1, British entrepreneurs are often accused of failing to meet the challenges of the time.  Especially in comparison with their competitors, who were catching up and in some areas even overtaking between 1870 and 1914, British employers have been characterised by deficient competence and waning dedication to their businesses.  Writers stressing the shortcomings of businessmen have linked them to amateurism, the family ownership of firms, complacency based on past achievement, an underemphasis of technical education and a range of other factors.  Others, sceptical of explanations of retardation reliant on entrepreneurial failure, have provided alternative explanations focusing on international factor price differentials and the size of available markets.

In his article, ‘The Entrepreneur and the British Economy, 1870-1914’, D H Aldcroft put forward the hypothesis that Britain’s relatively poor economic performance can be attributed largely to the failure of the British entrepreneur to respond to the challenge of changed conditions.  Aldcroft argued that ‘there is ample evidence, both in contemporary and recent literature, to suggest that British businessmen were weighted down by complacency, conservatism and antiquated methods from the 1870s onwards’.  In 1902 McKenzie wrote ‘If our workmen are slow, the masters are often enough right behind the times.  In spite of all recent warnings, there is a stolid conservatism about their methods, which seems irremovable.  Even great houses, which have the name of being most progressive, often enough decline to look into new improvements.’

This contemporary literature could well have exaggerated the truth, yet, Hoffman writing in the early 1930s was hardly less severe in his condemnation of British industrialists and merchants.  Two American authors, Landes and Hoselitz, have also remarked on the apparent failure of British enterprise in this period.  Moreover, studies of individual business firms confirm the belief that entrepreneurial initiative and drive was flagging particularly before 1900.   Aldcroft argued that ‘it would appear therefore that the British entrepreneur had lost much of the drive and dynamism possessed by his predecessors of the classical industrial revolution’.

However, Coleman and Macleod argued that the apparently damning evidence on the British businessmen is crude and that the dates misleading for it was more than a mere mid-century shift of attitude.  They argue that the evidence is ‘partial…because it is concerned only with failings and wholly ignores successes’.

Aldcroft analyses four aspects, which are relevant to the question in hand – technological progress, methods of production, scientific research and technical education, and commercial methods.  I will analyse each of these and put forward Aldcroft’s reasons for the shortcomings of Britain’s entrepreneurs and his account for their deficiencies.

 Concentrating on the adoption of new machines and processes to produce both old and new products, the evidence suggests that Britain lost her former technological leadership in a number of industries.  The failure to adopt new techniques, that is new machinery and other cost-reducing innovations, as rapidly as our competitors was one of the chief reasons for the fact that British export price indices were generally above European and American levels and ultimately for the decline in the rate of growth of the economy.  For example, between 1886 and 1913, Britain lost her position as leading producer and exporter of iron and steel. Aldcroft argued that the deteriorating position could be attributed largely to the failure of British iron and steel makers to keep abreast of modern developments.  Although steel capacity more than doubled in the couple of decades before 1914, there was no significant change in technical practice.  

Britain was slow to modernise her plant or to adopt now processes for steelmaking and coking. The more extensive use of the ‘direct’ process of steelmaking (liquid pig conversion direct to steel) could have resulted in considerable economies, whilst the adoption of by-product recovery ovens for coking would have permitted greater utilisation of waste gases and by-products.  However, in 1913, less than 28% of the iron intended for steelmaking was sent in liquid form to the converters, whereas as early as 1900 some 75% of German steel was made by the direct process.  The Survey of Metal Industries in 1928 found that at nearly every state of the productive process British manufactures lagged behind their rivals with the result that “ few British works, if any, are modern throughout in equipment and practice, with coking ovens, blast furnaces, steel furnaces and rolling mills adjacent to one another, and making full use of waste gases’.  Aldcroft explains that the difficulties of the industry were enhanced by the shifting pattern of and deterioration in coal and iron ore resources, but personal deficiencies are alone responsible for the failure to adapt.  As Orsagh says, ‘A lack of enterprise was responsible for the continued existence of small, relatively inefficient, independent works; just as a lack of enterprise was responsible for the failure to innovate at a more rapid pace.  The British entrepreneur, to judge by his behaviour, was unlike his German and American counterparts’.

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Aldcroft points out that the failure to adopt labour-saving machinery in the coal industry was also partly responsible for the decline in productivity from the 1880s onwards. In 1924 only 19% of British coal output was cut by machinery compared with 70% in America.  In the tinplate trade the position was much the same, particularly after 1891, when the Americans made rapid progress in this field.  Similarly, the adherence to traditional techniques in the cotton industry was accompanied by diminishing returns.  In contrast, the efficiency of the American cotton industry increased considerably in this period because of the greater ...

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