The business structure of Britain

The business structure of Britain at the time was predominantly made up of small, family owned firms, inherited from the Industrial Revolution. This structure resulted in only the bigger businesses being able to directly take their own wares abroad, whereas the smaller companies relied on poorer export sales methods. Foreign competitors based their industries in mass production, cheapening export costs for themselves, as opposed to the more expensive methods used by many British firms.

The criticism of the entrepreneur in this case was that if they had have worked together, rather than pulling in individual directions, whilst trying to gain the biggest profit they could in the home market, they could well have been more successful. Their foreign prospects could have been greatly increased if they had colluded to export as an industry, rather than individual firms. By either definition this was failure, as it was a valid action, requiring no altering of limitations, which was ignored by most industries. Although the industry could not change the size of its firms in the short term, it could have worked towards a better outcome.

Another fair criticism of the entrepreneur at the time was the failure to adapt to lower prices abroad. The major competitors, America and Germany, had huge amounts of raw materials within their own borders, which resulted in many cases – such as the iron and steel industries mentioned by Saul (S.B. Saul, 1985) – in lower input costs than the stubborn British firms. The example given illustrates how rather than using newly discovered phosphoric ores found in the Midlands, the industry continued importing Spanish ore, as it had for many years, as opposed to adapting, and bringing costs down. Regardless of all other factors, the industry could well have chosen to change to Midlands ores, without having to change the constraints put upon them by the economy. Once more the entrepreneur can be seriously questioned as to why he failed to spot this important fact.

Having shown that many accusations were thrown at entrepreneurs during this period, some justified, some less so, some almost entirely beyond their control (the distinct class system in Britain not encouraging a particularly close working relationship between entrepreneurs and their workers), it seems appropriate, to give a more balanced view on the subject, to look at a few more positives created by the work of entrepreneurs. It has already been mentioned that in many industries, under the circumstances at the time, entrepreneurs made many decisions that paid off, at least in the short term. Many did as much as they could, but at this time German and American progress was far greater – this was not necessarily wholly the British entrepreneurs fault, perhaps simply the natural progression of other economies industrialising to catch up Britain.

To some extent, entrepreneurs must be credited with their decisions to abandon the somewhat flagging manufacturing industry, and take their business to the service sector instead. Whilst manufacturing was, as has been shown, very unsuccessful, in terms of innovating and with keeping up with foreign competition, the new British service sector was much stronger. Entrepreneurs could innovate far more, as labour could be newly trained, rather than re-trained as would have to happen in the manufacturing industries, if a movement to mass production was to occur.

Education was also less important in the service sector, as it was regarded as less skill-based than the current manufacturing industries – but the entrepreneurs migrating across the sectors had skills that could still be of use services. Despite foreign competition dominating many avenues in the industrial sector, few had seriously set up large industries in the service sector, giving Britain the chance to gain World market share in it. High growth in this sector proved what a positive response this was by entrepreneurs.

Critics have countered this argument with the statement that there may not necessarily have been a need to move to services at this point, however good this decision was, and that there were many unexplored avenues and ventures still available in manufacturing. The blame was placed on the shoulders of the entrepreneurs once more, who in many cases failed to invest and develop technologies in such potentially important industries as the chemical industry. Perhaps the most general but frank criticism of them was that they didn’t properly fulfil one of the key responsibilities of the entrepreneur – to risk take. Although the move to services could be pointed to, this was an obvious move given the poor investment and innovation that was taking place in manufacturing. The entrepreneur at this time failed on many levels, even when the constraints at the time were considered, to take charge and invest in potentially risky ventures, whereas many abroad were willing to do this.

Despite this argument though, despite the faults that were clearly made, many factors contrived to result in the slow economic growth at this time, and to blame the entrepreneur solely for this would be unreasonable. Certainly blame can be laid on him for the basic mistakes such as not using cheaper input materials when they were available, and perhaps they could be blamed, if it were not for their action in other areas. The manufacturing sector did fail, in several ways, as have been shown, but the growth rate was at least buoyed by the move to services, where labour was cheaper to train, and higher profits could be made faster.

The entrepreneur in an individual industry cannot be blamed for the high wages at the time, or the very fast industrialisation of Germany and the US amongst others, nor can he be put at fault for the predominantly small scale of businesses at the time. To conclude, despite faults, under what could be called demanding conditions, the entrepreneurial performance during the last decades of the 19th century and early 20th century cannot be called a complete failure, due to a number of less well documented, intelligent decisions which kept parts of the economy afloat whilst others uncontrollably suffered.

References:

– British Entrepreneurship in the 19th Century – 2nd ed. (1988) (Payne, Peter L., MACMILLAN EDUCATION LTD) The Myth of the Great Depression 1873-1896 Second Edition (1985) (Saul, S.B., Higher and Further Education Division, MACMILLAN PUBLISHERS LTD) Industry and Empire: The Making of modern English Society, Vol.II 1750 to the Present Day (1968) (Hobsbawm, E.J., Penguin Books, Ltd.) The Decline of Industrial Britain 1870-1980 (1992) (Dintenfass, http://www.EH.net)