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Entrepreneurial Failure Reconsidered: The Case of the Interwar British Coal Industry

Published online by Cambridge University Press:  11 June 2012

Michael Dintenfass
Michael Dintenfass
Affiliation:
Michael Dintenfass is assistant professor of history at the University of Wisconsin—Milwaukee.
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Abstract

In this article, Professor Dintenfass reexamines entrepreneurial efficiency in the interwar British coal industry. Using previously neglected company documents, he shows that cost-reducing and price-enhancing innovations in coal extraction, organizational practice, and marketing were not widely diffused, though neither geology, finance, nor industrial relations inhibited their adoption. He concludes that mismanagement was an important cause of the British coal industry's misfortunes in the 1920s and 1930s, but that the coalowners' failure to employ the new techniques cannot be attributed to the structure of the industry or to the survival of outmoded forms of business organization.

Type
Articles
Information
Business History Review , Volume 62 , Issue 1 , Spring 1988 , pp. 1 - 34
Copyright
Copyright © The President and Fellows of Harvard College 1988

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References

1 For a characteristic exposition of this point of view, see McCloskey, Donald N. and Sandberg, Lars G., “From Damnation to Redemption: Judgments on the Late Victorian Entrepreneur,” in Enterprise and Trade in Victorian Britain, ed. McCloskey, Donald N. (Boston, 1981), 55–72Google Scholar. More extended presentations of these arguments and the methodology on which they are based can be found in McCloskey, Donald N., Economic Maturity and Entrepreneurial Decline (Cambridge, Mass., 1973)Google Scholar and Sandberg, Lars G., Lancashire in Decline (Columbus, Ohio, 1974)Google Scholar.

2 Elbaum, Bernard and Lazonick, William, “An Institutional Perspective on British Decline,” in The Decline of the British Economy, ed. Elbaum, Bernard and Lazonick, William (Oxford, 1986), 2Google Scholar. See also Lazonick's essay on “The Cotton Industry” and Elbaum's discussion of “The Steel Industry before World War I” in the same volume, and Lazoniek's, “Industrial Organization and Technological Change: The Decline of the British Cotton Industry,” Business History Review 57 (Summer 1983): 195–236CrossRefGoogle Scholar.

3 Buxton, Neil K., “Entrepreneurial Efficiency in the British Coal Industry between the Wars,” Economic History Review, 2d ser. 23 (Dec. 1970): 476–97CrossRefGoogle Scholar; Buxton, “Entrepreneurial Efficiency in the British Coal Industry between the Wars: Reconfirmed,” ibid. 25 (Nov. 1972): 658-64; Buxton, “Avoiding the Pitfalls: Entrepreneurship in the Coal Industry Again,” ibid.: 669-73; Buxton, , The Economic Development of the British Coal Industry (London, 1978), chaps. 7–9Google Scholar; and Buxton, , “Coalmining,” in British Industry between the Wars, ed. Buxton, Neil K. and Aldcroft, Derek H. (London, 1978), 48–77Google Scholar; quotation from Buxton, “Entrepreneurial Efficiency,” 477.

4 Buxton, “Entrepreneurial Efficiency,” 492-95.

5 Kirby, M. W., “Entrepreneurial Efficiency in the British Coal Industry between the Wars: A Comment,” Economic History Review, 2d ser. 25 (Nov. 1972): 655–57CrossRefGoogle Scholar; Kirby, “The Control of Competition in the British Coal-Mining Industry in the Thirties,” ibid. 26 (May 1973): 273-84; Kirby, , “Government Intervention in Industrial Organization: Coal Mining in the 1930s,” Business History 15 (July 1973): 160–73CrossRefGoogle Scholar; Kirby, , The British Coalmining Industry, 1870-1946 (London, 1977)CrossRefGoogle Scholar; and Kirby, , “The Politics of State Coercion in Interwar Britain: The Mines Department of the Board of Trade, 1920-1942,” Historical Journal 22 (June 1979): 373–96CrossRefGoogle Scholar.

6 Kirby, “A Comment,” 655.

7 Annual Reports of the Secretary for Mines, 1921-1939/46, Public Record Office [hereafter PRO], POWE 7/55-73. By “labor costs” I mean wages paid in cash.

8 Buxton, “Entrepreneurial Efficiency,” 495, 494.

9 The only work of business history directly concerned with interwar British coal companies is Dintenfass, Michael, “Managing Industrial Decline; Four British Colliery Companies between the Wars” (Ph.D. diss., Columbia University, 1985)Google Scholar. The coalmining operations of some British steel producers are discussed in Tolliday, Steven, “Industry, Finance and the State: An Analysis of the British Steel Industry in the Interwar Years” (Ph.D. diss., Cambridge University, 1980)Google Scholar.

10 “Schedule of Sales and Costs from 30 June 1876 to 30 June 1938,” Currer Briggs Family and Business Papers, Leeds District Archives [hereafter LDA], Acc. 1708, no. 13; Henry Briggs, Son & Co. Ltd. Minute Books, kept at Brotherton Library, University of Leeds, MS. 160, vols. 4 and 5; Companies Registration Office [hereafter CRO], File #2026; and Mining Year Book, 1930-39. Figures for the average profit per ton per annum of the British coal industry are available in Annual Report 1938, PRO/POWE 7/72 for the period 1922-32 and for the years 1933-38 in Coal Mining Industry. Annual Statistical Summary of Output, and of the Costs of Production, Proceeds and the Profits of the Coal Mining Industry for the Year Ended 31st December, Cmd. 4554, 4877, 5142, 5427, 5699, and 5983.

11 “Ashington Group Collieries Statistics 1872-1945,” Northumberland Record Office [hereafter NRO], 538/8; Mines and Quarries: General Report with Statistics for 1913 by the Chief Inspector of the Mines, “Part III—Output,” Cmd. 7741; and Annual Reports 1921-39/46, PRO/POWE 7/55-73.

12 Ashington Coal Co. Ltd. Minute Books, nos. 7-11, NRO/ZMD 54/10-14; CRO File #58660; “Summary of Capital Expenditure. The Ashington Coal Co. Ltd. Estimate of Value. Coal Industry. Form Q. 1/H,” PRO/POWE 35/248; and “Balance Sheets and Profit and Loss Accounts. The Ashington Coal Co. Ltd. Estimate of Value. Form Q. 1/Q,” PRO/POWE 35/248.

13 Buxton, “Entrepreneurial Efficiency,” 482.

14 Return by H.M.S. Inspector M. H. Pickering concerning “Coal-Cutting Machinery during 1902 in the Yorkshire District,” 6 Feb. 1903, PRO/POWE 6/21; Donald Henry Currer Briggs, A Merchant, A Banker and the Coal Trade, 1693-1971 (N.p., 1971), 11; letter from W. Hargreaves to W. Geoffrey Jackson, 6 Jan. 1923, W. Hargreaves Letter Book 1911-1925, LDA/NCB/A1/5/10, no. 2, pp. 782-83; Henry Briggs, Son & Co. Ltd. Tonnage Book 1909-14, LDA/NCB/A4/7, pp. 217-70; and Annual Report 1922, PRO/POWE 7/56.

15 Henry Briggs, Son & Co. Ltd. Tonnage Book 1924-29, LDA/NCB/A4/9, unpaginated; Colliery Guardian, 24 Aug. 1934; Henry Briggs, Son & Co. Ltd., Description of Collieries (1938), Currer Briggs Family and Business Papers, LDA Acc. 1708, no. 21; Annual Reports 1922-38, PRO/POWE 7/56-72. The proportion of output cut by machine in Yorkshire as a whole was also 51 percent in 1937.

16 “The Ashington Coal Co. Ltd. Estimate of Value. Coal Industry. General Description of the Company's Undertaking. December 1950,” PRO/COAL 37/4, p. 3; Ashington Coal Co. Ltd. Minute Books, no. 4, NRO/ZMD 54/7, p. 154, and no. 7, NRO/ZMD 54/10, p. 188; and Annual Reports 1922-23, PRO/POWE 7/56-57.

17 Ashington Coal Co. Ltd. Minute Book, no. 7, NRO/ZMD 54/10, p. 188; “Ashington Group Collieries Statistics 1872-1945,” NRO 538/8; and Annual Reports 1922-38, PRO/POWE 7/56-72.

18 “Ashington Group Collieries Statistics 1872-1945,” NRO 538/8; and Annual Reports 1937-38, PRO/POWE 7/71-72.

19 Ashington Coal Co. Ltd. Minute Book, no. 8, NRO/ZMD 54/11, p. 18; Ashington Collieries Magazine, March 1925, 528; April 1925, 561; May 1925, 603, and Sept. 1927, 343; and Colliery Guardian, 24 April 1925, 1009, 15 May 1925, 1201, 11 Dec. 1925, 1408, 2 Sept. 1927, 68, and 9 Sept. 1927, 166.

20 Buxton, “Coalmining,” 60-61. The French figure is for 1935.

21 Buxton, “Entrepreneurial Efficiency,” 483-84, 490-91.

22 Ibid.

23 Ibid., 483. On the cost of mechanization in interwar British coalmining, Buxton was inconsistent. In his discussion of the Durham coal industry, he suggested that the extensive employment of mechanical cutting devices would have involved “heavy capital expenditure.” On p. 492 of the same article, he asserted that “the entrepreneur was able to apply the new techniques of the twentieth century such as the mechanical cutter, loader and conveyor at relatively little cost since these ‘minor’ innovations entailed no previous scrapping of older capital equipment.” For a further comment on this problem, see pp. 31-32.

24 Ibid.; Buxton, “Coalmining,” 64, 66.

25 Buxton, “Entrepreneurial Efficiency,” 482.

26 Ibid., 483.

27 Annual Reports, 1921-1939/46. PRO/POWE 7/55-73.

28 Briggs's costs of production have to be compared with those of the Yorkshire coal industry as a whole because no cost data are available for West Yorkshire alone. As South Yorkshire was a district of thick seams and large companies, costs of production there may well have been lower than in West Yorkshire. To the extent that this was so, Briggs's disadvantage in total costs in the period 1929-34 is exaggerated and its cost advantage from 1935 understated.

29 Ashington's advantage over the Northumberland coal industry in nonlabor costs of production did not derive from bulk purchasing. Annual expenditure on materials and stores at the firm averaged 27 percent more per ton than the average materials-and-stores costs of the district as a whole over the period 1936-38. The differential between the cost of labor-plus-stores-and-materials per ton at the company and for the county coal industry averaged 11 percent.

30 Report of the Royal Commission on the Coal Industry (1925), I, Cmd. 2600, pp. 57 and 60. The critics also maintained that there were technical economies of scale in coal extraction deriving from large-size mines and that the small size of British mines was thwarting their realization. Buxton convincingly showed that efficiency in the actual mining of coal was unrelated to mine size. See Buxton, “Entrepreneurial Efficiency,” 479-82; Kirby's writings about the structure of the interwar coal industry are listed above in note 5.

31 Buxton, “Entrepreneurial Efficiency,” 488, and Buxton, “Coalmining,” 72.

32 Buxton, “Entrepreneurial Efficiency,” 488.

33 Kirby, The Coalmining Industry, 160, and Annual Report 1938, PRO/POWE 7/72.

34 “Northumberland,” 4-5, PRO/COAL 12/17; Colliery Guardian, 7 Aug. 1931 and 16 June 1939, 1048; and Annual Reports 1931 and 1938, PRO/POWE 7/65 and 7/72; West Yorkshire Coal Owners' Association, Statement Shewing Outline of History and Development of the Coal Industry in the West Yorkshire Coalfield 1875-1913 (Oct. 1925), 4, Currer Briggs Family and Business Papers, LDA Acc. 1708, no. 12; “West Yorkshire,” PRO/COAL 12/115; and Bates, James A., “Investment in the Coal Mining Industry, 1919 to 1939” (Ph.D. diss., University of Nottingham, 1955), Appendix C, Part I, p. lxxiiGoogle Scholar.

35 Certainly, the skeletal data on concentration reproduced in the text do not bear on the question.

36 Political and Economic Planning [hereafter PEP] Report on the British Coal Industry (London, 1936), 3Google Scholar.

37 If economies on nonlabor costs really were a function of company size, then Briggs's advantage over other West Yorkshire producers is probably understated by the comparison between the firm and the county because of the larger size of colliery undertakings in South Yorkshire.

38 Lazonick, “The Cotton Industry,” and Elbaum, “The Steel Industry before World War I,” 18-50, 51-81.

39 Ashington Coal Co. Ltd. Minute Book, no. 8, NRO/ZMD 54/11, pp. 279, 282, and 285-86; and “Northumberland. Minutes of the [Coal] Commission's Visit to Newcastle on Wednesday and Thursday, 7th and 8th October 1931,” pp. 1-2, PRO/COAL 12/17.

40 Buxton, “Entrepreneurial Efficiency,” 485 and 491.

41 The distinction between coalmining as an “extractive” industry and as a “manufacturing” one comes from PEP, Report on the British Coal Industry, 130.

42 Ashington Coal Co. Ltd. Minute Book, no. 8, NRO/ZMD 54/11, p. 23; “The Ashington Coal Co. Ltd. Estimate of Value. Coal Industry. Technical Report and Estimate of the Coal Industry Value of the Company's Undertaking by Geoffrey Dixon Mayhew, M.I. Min. E., December 1950,” p. 2; “The Ashington Coal Co. Ltd. Estimate of Value. Coal Industry. Commercial Report by Walter James Drummond. December 1950,” p. 2; and “The Ashington Coal Co. Ltd. Estimate of Value. Coal Industry. General Description of the Company's Undertaking. December 1950,” p. 3, all in PRO/COAL 37/4; and Ashington Coal Co., Ltd. (Newcastle-upon-Tyne, 1937), 13, NRO/538/250/2Google Scholar.

43 “Plant and Equipment. The Ashington Coal Co. Ltd. Estimate of Value. Coal Industry Form Q. 1/6,” PRO/POWE 25/248; Ashington Coal Co., Ltd., 28; Annual Reports 1937-38, PRO/POWE 7/71-72; and “The Ashington Coal Co. Ltd…. Commercial Report by Walter James Drummond,” pp. 4, 6-7, PRO/COAL 37/4.

44 Bound Returns from Colliery Companies to the Northumberland Coal Owners' Association [hereafter NCOA], NRO/NCB/C. 444 and 587. In this paragraph, and in all others discussing the disposal of coal, the label “Northumberland” refers to members of the NCOA. In 1913 they raised 95.3 percent of the tonnage mined in the county of Northumberland and employed 93.4 percent of the district's miners.

45 Ibid. There is no evidence that Ashington's steam, household, and industrial coals were in any way inherently superior to the coals mined by other Northumberland colliery companies.

46 “Historical Record,” Currer Briggs Family and Business Papers, LDA Acc. 1708, no. 6; Annual Report 1935, PRO/POWE 7/69; and Briggs, Son & Co., Description of Collieries (1938), 6-7, Currer Briggs Family and Business Papers, LDA Acc. 1708, no. 21.

47 Colliery Guardian (annual reports made in January); Briggs, Son & Co., Minute Books, Brotherton Library, University of Leeds, MS. 160, vols. 4 and 5; and Letter from W. Burton to the Co-operative Wholesale Society Ltd., Henry Briggs, Son & Co. Ltd. Letter Book, series “M,” LDA/NCB/A1/5/9/M. 13, p. 483.

48 That the sale value of Briggs's coal increased more slowly than did Yorkshire's and, indeed, fell below the district level in the period 1936-38 suggests that the higher prices that the firm's coals fetched before 1936 did not derive from their intrinsic properties.

49 Report of the British Coal Delegation to Sweden, Norway and Denmark. 13th to 25th September 1930, Cmd. 3702, pp. 6 and 9; PEP, Report on the British Coal Industry, 10; and Ministry of Fuel and Power, Coal Mining. Report of the Technical Advisory Committee (1945), Cmd. 6610, 34, 98, and 134.

50 In 1929 Waterloo Main was the eighteenth largest of 85 West Yorkshire coal companies (in terms of output) and eighteenth out of 69 in 1932. In both years Briggs ranked third. “West Yorkshire,” PRO/COAL 12/114; “West Yorkshire,” PRO/COAL 12/115; and “Minutes of the [Coal Mines Reorganisation] Commissionssion's Visit to Leeds on Wednesday, Thursday and Friday, January 20th, 21st, and 22nd, 1932,” p. 6, PRO/COAL 12/115.

51 “Annual Return under Coal Mines Act, 1911. Mines and Quarries. Form 23,” 1916 and 1918-22; “Annual Report on Safety Lamps, Electrical Apparatus, Rescue Work, Pit-Head Baths and Horses. Mines Department. Return 33,” 1922-38; and “Annual Report on Output and the Number of Persons Employed under Coal Mines Act, 1920. Mines Department, Return 34,” 1929-36 and 1938. All three sets of returns are filed under NCB/Waterloo Main Colliery Co. Ltd. in the Leeds District Archives.

52 A detailed account of the relocation of Waterloo Main's mining operations can be found in Dintenfass, “Managing Industrial Decline,” 398-99.

53 “Annual Return under Coal Mines Act, 1911 … Form 23,” 1922 and “Annual Report on Output … Return 34,” 1923-36 and 1938, both in LDA/NCB/Waterloo Main Colliery Co. Ltd.; and Annual Reports, 1922-23, 1936 and 1938, PRO/POWE 7/56-57, 7/70, and 7/72. There are no returns pertaining to Waterloo Main for 1937.

54 “Annual Return on Output … Return 34,” 1929-36 and 1938, LDA/NCB/Waterloo Main Colliery Co. Ltd.

55 “Waterloo Main Colliery Co. Ltd. Sales Journal,” pp. 1-48, LDA/NCB/Waterloo Main Colliery Co. Ltd. The importance of household coal sales to Waterloo Main's total sales proceeds cannot be dismissed as a chance occurrence due to an unusually cold winter. The importance of household coal sales was apparent even during the summer. Sales of domestic coal accounted for 37 percent of the total tonnage sold by Waterloo Main in July 1938 but for 47 percent of sales proceeds; in June 1939 household coal accounted for 32 percent of tonnage sold but for 41 percent of total proceeds.

56 Greaves, Perey C., Black Diamond: Gleanings of Fifty Years in the West Yorkshire Coalfield (Wakefield, 1938), 88Google Scholar.

57 In 1913 Throckley ranked thirteenth out of 28 members of the NCOA in both output and employment. Bound Returns to NCOA, NRO/NCB/C. 313; and Throckley Coal Co. Ltd. Minute Books, NRO. 407/9-12 and NRO. 1276/1.

58 Ibid., NRO. 407/11, pp. 105, 134, 221, 234, 243; NRO. 407/12, pp. 6, 37, 103, 153, and 170; NRO. 1276/1, p. 6; and Annual Report 1938, PRO/POWE 7/72. In all likelihood Throckley derived less benefit from the mechanization of extraction than other concerns because the firm failed to introduce mechanical conveyors until 1935 and then restricted their use to two coalfaces.

59 Bound Returns to NCOA, NRO/NCB/C. 396, 434, 511, and 581.

60 Ibid., NRO/NCB/C. 414, 424, 468, 476, 519, 525, and 582; and Annual Reports 1922-23 and 1937-38, PRO/POWE 7/56-57 and 7/71-72.

61 Throckley Coal Co. Ltd. Minute Book, NRO. 407/10, p. 23. In its 1945 Report, the Ministry of Fuel and Power's Technical Advisory Committee estimated that the minimum tonnage that the economical operation of coal washery required was 1,000 tons daily or roughly 260,000 tons per year. See the Ministry of Fuel and Power, Report, 99. Information about the progress of mechanical coal washing in Northumberland can be found in the Annual Reports 1932-38, PRO/POWE 7/66-72.

62 Bound Returns to NCOA, NRO/NCB/C. 444 and 528. Between 1913 and 1933 the tonnage the NCOA sold as foreign bunkers (including Throckley's sales) decreased by more than 16 percent.

63 Throckley Coal Co. Ltd. Minute Books, NRO. 407/11-12; the details of Throckley's arrangements with Martins Bank, Ltd. can be found in ibid., NRO. 407/11, p. 167; William Armstrong and Sons Papers, NRO/725/C54/1/239.

64 Ibid.; Throckley Coal Co. Ltd. Minute Books, NRO. 407/9, pp. 10 and 165; NRO. 407/10, p. 136; and NRO. 407/12, p. 209. The calculation of the burden of royalty obligations on Throckley's mining costs is based on the particulars of the company's leases, available in the Armstrong Papers, and cost data in the Throckley Coal Co. Ltd. Minute Books.