Friday, November 12, 2010

Electric Santayana III: Let's Not Think About Rob Schneider Any More, If That's Not too Meta

I hadn't intended to blog about this again any time soon. But then there's this.

"Britain was slow to move from the old industries of the first Industrial Revolution into modern sectors like electrical engineering, which impeded the adoption of mass-production methods. It also failed to adopt precision machinery that depended on electricity, which prevented it from producing machined components for use in assembling typewriters, cash registers, and motor vehicles. The same story can be told about other new industries like synthetic chemicals, dyestuffs, and telephony, in all of which Britain failed to establish a foothold." 

(Barry Eichengreen of the University of California, Berkeley, from here. Thanks to Brad Delong for bringing this to my attention. Hey! That's me boiling dry down in the comments!) It's hard to know what to make of this. The criticisms themselves float in a timeless space that may refer to the 1880s or the 1930s. It's only when Eichengreen goes on to discuss their causes that we nail down the chronology:

"A final explanation for Britain’s failure to keep up makes economic policy the culprit. Britain failed to put in place an effective competition policy. In response to the collapse of demand in 1929, it erected high tariff walls. Sheltered from foreign competition, industry grew fat and lazy . . . . Herein lies the most convincing explanation for British decline."
Professor Eichengreen isn't setting himself up as a historian of British industry here. He has a Very Important Message for modern Americans, and a cautionary tale from somewhere far away and long ago serves his rhetoric well. Who really cares whether the story is true or not? Well, if Professor Eichengreen substituted "Atlantis" for Britain in the example above, he wouldn't get much traction! It's the appearance of historical fact here that gives his warning its persuasive power.  And he's made judicious use of weasel words here so that historical criticism is hard. Britain was "slow" to move into modern industries like electrical engineering. So Britain could have had an electrical engineering industry. It's just later than soon. When I start talking about the 1930s, the good Professor can wave at the map of the past that exists only in his mind, he can say, "that's not what I meant!"

He does, however, say that British industry got fat and lazy in the 1930s, after the global tariff wars of 1929. He doesn't say that electrical engineering and "telephony," did not exist by this time, but I assume that I'm safe in thinking that they must have been particularly lazy. Leaving aside the question of why tariffs and export subsidies made American and German industry fit and active, I can put British industry on the treadmill, haul out some calipers, and maybe learn a thing or two after the jump.

So. You can check these things, you know. It's not as easy as it could be, if the British government were to put the half-decennial Census of Production reports online, or if Engineering or The Engineer were ever to find a big enough bag of money on the street to digitise their massive archives. But if you're at a big research library, you can swing by the stacks and get great, bound volumes of those journals. Engineering in particular covered the Census of Production when it came out, and surveyed the state of the engineering industry annually. 
One of the first things you learn is that British industry made fewer cars than American. In 1935, for example, the US produced ten times  (unit value or numbers, my notes are a little unclear) the cars that Britain did. Britain comes in barely ahead of Italy, and behind France! Of course, it also comes in behind Canada and ahead of Germany. (Yes, that's right. Mighty Germany produces fewer cars than Italy, France or Canada.) Patriotic as I am, I find that in no way a likely "league ranking" of world industrial powers. And, taking another production category (BTW, I'm slipping to and from aggregate production and the production for export categories here), I find Canada nowhere in sight. The rank table for motorcycle production goes UK; Germany; US; France. What's going on here? Well, consider agricultural machinery: now it is US; UK; Germany; France. And locomotives: UK; Germany; USA; France; Sweden. Where did the Swedes sneak in from? Or  machine tools: US; Germany; UK; France. Switzerland. Or textile production machinery: UK; Germany; US; France; Switzerland. If I add in electrical machinery, Holland emerges on one of our league tables. Bicycles gets Japan a mention. If I threw in sawmilling and papermaking, I'd have to launch a new bibliographic entry, since the British journals didn't deign to consider an industry with so little British participation, but I would catch a moment when the American industry was reequipping with Russian technology.
All of this begins to suggest that maybe individual industries are individual. We're all special snowflakes. Engineering did its best to provide some kind of aggregate ranking of world engineering production for export, and, surprise, surprise, fat and lazy British industry was nip-and-tuck with Germany for the lead. America typically ranks not that far ahead of Switzerland. This is, of course, for a good reason. The United States has a huge internal market. This does not explain why German and British exporters were less successful than indigenous American producers. Tariffs might, but the blatant tip-off here is the differing trajectories of the automotive and motorcycle industries. Try taking a motorcycle across North America one summer, and parking it around downtown with it the next, and I think  you will come to appreciate why it is a hobby vehicle on this spacious continent and a viable commuting option in crowded Europe. Newsflash: different consumer markets have different tastes. Only a dissimulating British technocrat could pretend to not understand that.
So, speaking of the electrical engineering industry, what do we learn about this particular non-foothold fat and lazy industry? How about that its share of the engineering sector (by value) rose from 16.6% to 23% (total sector output by value: £198 million, 1925; 249 million 1935) by at least 15%, annually. That employment rose each year: 1934, 258,000; 1935, 271,000; 1936, 292,000; 1937, 334,000; 1938, 340,000. Notice that the 1938 increases in exports and employment came during a global slump when overall British engineering employment and exports fell!

How do these figures come to differ so much from the impressionistic data upon which Professor Eichengreen is presumably basing his argument? Let's look at the sectoral breakdown of electrical engineering industry products from the 1935 Census of Production, as reported by pioneering management consultant O. W. Roskill (brother of the historian) in the 7 July 1935 number of Engineering: Electrical machinery, 32.5% (up 2.5% from 1925); Electrical wires and cables, 15.8%, down by 1.7; telegraph and telephone apparatus, 9.1%, down 1.7% (so much for "no foothold in telephony"); wireless valves and electrical lamps, 5.0%, up 0.6%; batteries, 5.6%, down 1.7; lighting accessories and fittings, 1.9%, down 0.2; heating and cooking apparatus, 2.5%, down 17.5. The residual goes into the "other" category, by definition small and variegated products.

What immediately strikes us here is that the market for British-produced ranges, space heaters, kettles, light bulbs and radios has fallen, in some cases, precipitously. It's that mass production for a mass market thing, again, although it's not Americans who are dominating this industry, but another firm with established expertise and a history of privileged access to two major war economies. So, turn an electrical consumer good over in Britain in 1935, and, chances increasingly are, it will say "Made in Holland." Just like, today, it will say, "made in China," for, again, reasons unique to the industry, country and times. Hey! There is a point to make in respect to the main thesis of Professor Eichengreen's paper. It's just not what he thinks it is!

At the same time that the industry as a whole has gained ground. The products that have driven this increase are large electrical generators, switchboards, the "1200 channel cable" that the GPO is laying up the centre of Britain, the miles of cable required to electrify major urban railways (LRTs in modern speak)  in various parts of the world. And how did this industry get so dynamic? According to Engineering's leading article, "Electrical Engineering in 1935," 3 January 1936, 26-8, it's because of the National Grid. Those who thought that the  stimulus imparted by the Grid would be temporary have proven wrong. Rather, industry invested huge amounts to bring its equipment into line with the new 50Hz standard, leading to massive investment in production facilities. That is why the industry can export cable and plant all over the world now.

Some kind of an argument is occurring to me about the need for a national American standard of broadband access, and the way that investment in that might further promote an existing American worldbeating industry and drive exports.

Nah. What's needed is tariffs to make sure that America's washing machines are made in Arkansas.

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