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Managing Competition in German Coal, 1893–1913

Published online by Cambridge University Press:  03 March 2009

Lon L. Peters
Lon L. Peters
Affiliation:
Senior Economist, Public Power Council, 500 N.E. Multnomah, Suite 729, Portland, OR 97232.
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Extract

The history of the Rhenish-Westphalian Coal Syndicate before World War I demonstrates that a cartel can be established and maintained in the face of significant disintegrative forces, including many members, heterogeneous production and cost conditions, dynamic markets, competition from outside producers, and cheating. Opportunities for individualistic behavior, including contractual loopholes and horizontal combinations, combined with a collusive objective function that emphasized overall control and stability, allowed the cartel to survive for over two decades without government interference or support.

Type
Articles
Information
The Journal of Economic History , Volume 49 , Issue 2 , June 1989 , pp. 419 - 433
Copyright
Copyright © The Economic History Association 1989

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References

The material for this article is drawn in large part from “Cooperative Competition in German Coal and Steel. 1893–1914” (Ph.D. diss.. Yale University. 1981). research for which was supported by the Social Science Research Council and the Council on West European Studies at Yale University. Additional support for the quantitative aspects of the article was provided by the National Science Foundation (Grant No. SOC-7901429) and the Mellon Foundation. The support and comments of Michael Bernstein and the computational wizardry of Thaddeus Shannon are gratefully acknowledged. As always, the continuing advice and encouragement of William Parker have helped bring these ideas to the light of day. The usual caveat applies.Google Scholar

1 Williamson, Oliver E., Markets and Hierarchies: Analysis and Antitrust Implications (New York, 1975), chap. 12.Google Scholar

2 For a similar investigation of the steel industry during the same period, see Peters, Lon L., “Are Cartels Unstable? The German Steel Works Association Before World War 1,” in Technique, Spirit, and Form in the Making of the Modern Economies: Essays in Honor of William N. Parker (Greenwich, 1984), pp. 61–85.Google Scholar

3 See table 3.12 of Peters, Lon L., “Cooperative Competition in German Coal and Steel, 1893–1914” (Ph.D. diss., Yale University, 1981), for a complete list of mergers. Firm size is measured here by official cartel quota.Google Scholar

4 See Dunker, Max, Die neueren Zechenstillegungen an der Ruhr (Leipzig, 1907), pp. 1–25;Google Scholarthe arguments of Funke, representative of the most southern lean coal mines, in the Council meeting of Mar. 17, 1902 (Bergbau-Archiv beim Deutschen Bergbau-Museum, Bochum, 33/26);Google Scholar and Innern, Reichsamt des, “Denkschrift, betr. die Stillegung verschiedener Steinkohlenzechen des Ruhr-Revjers” (Berlin, 1904), p. 8, which found the depth to thickness ratio for lean coal to be three times that for other coal types.Google Scholar

5 Goldschmidt, Curt, Ueber die Konzentrarion im deuschen Kohlenbergbau, eine oekonomische Studie (Karlsruhe, 1912), pp. 65–66. The later form of incorporation was known as AktienGesellschaft (AG), the earlier as Gewerkschaft.Google Scholar

6 Duncker, Zechenstillegungen, p. 47: Reichsamt des Innern, “Denkschrift,” pp. 8–11;Google Scholar and Lederniann, Ernst, “Organisation des Ruhrbergbaues unter Beruecksichtigung der Beziehungen zur Eisenindustrie” (Inaugural-Diss., Universitaet Leipzig, 1927), p. 35.Google Scholar

7 See Bartz, Otto, “Aufbau und Taetigkeit des rheinisch-westfaelischen Kohlensyndikats in ihrer Entwicklung von 1893 bis 1912” (Inaugural-Diss., Friedrich-Alexanders-Universitaet Erlangen, 1913), chap. 4, table 1.Google Scholar

8 See, for example, the disputes between the Bochumer Verein and the Syndicate in the late 1890s, Werkarchiv Fried. Krupp Huettenwerk AG, Werk Bochum (hereafter WA/Krupp-Bochum), 45301 Nr. 1.Google Scholar

9 Data from the Jahrbuch fuer den Oberbergcuntsbezirk Dorirnund, various years; and from Hoffmann, Walther, Das Wachszun der deutschen Wirischaft seir der Mitte des 19. Jahrhunderts (Berlin, 1965), tables 104, 135.Google Scholar

10 Bergbau-Archiv 33/26, Nov. 8, 1902.Google Scholar

11 On the regulations, see Bertenburg's Fuehrer durch die wichrigsien Geseize und durch die Verordnungen fuer die Berg iterksbetriebe im Oberbergamisbezirk Dortmund nebst Berggesetz fuer die Preussischen Sraaren unler Beruecksichiigung saemilicher Aenderungen (4. Auflage, Gelsenkirchen i.W.. 1910), p. 195; and Novelle 12.12.1900, III, section 33.1. On the results of the regulations, see Bergbau-Archiv 33/52. June 27. 1898.Google Scholar

12 Bartz, “Kohiensyndikat,” chap. 3, table 1.Google Scholar

13 See Bergbau-Archiv 33/63. Nov. 23, 1910; 33/64, Dec. 12. 1911; and 33/50–68, passim, for other references to this competition.Google Scholar

14 For output changes, see Hatzfeld, and Schreiber, , “Die geschichtliche Entwicklung und wirtschaftliche Bedeutung des Saargebiets,” Zeirschrift flier das Berg-, Huerten und Salinenwesen, 67 (1919), PP. 33–80;Google Scholarand Bartz, “Aufbau und Taetigkeit,” chap. 3, table 1. For the cartel's response to competition from the government and imports, see Peters, “Cooperative Competition,” pp. 108ff, 203ff.Google Scholar

15 Williamson, Markets and Hierarchies, p. 239.Google Scholar

16 WA/Krupp-Bochum 453 01 Nr. 10, Apr. 15, 1903.Google Scholar

17 All data from Bergbau-Archiv 33/423. For calculations, see Peters, “Cooperative Competition.” pp. 91–92.Google Scholar

18 See Peters, “Cooperative Competition.” pp. 93–94.Google Scholar

19 Bergpolizei-Verordnung III, sections 16. 18. See Bertenburg's Fuebrer for the regulations, and Peters, “Cooperative Competition,” pp. 95ff. for details. See also Bergbau-Archiv 33/26, Nov. 17, 1902.Google Scholar

20 A planned examination of firm-level data will identify the cheaters and the likely effects on the efficiency and cost of production.Google Scholar

21 Statement of Krabler, Nov. 8, 1902. Bergbau-Archiv 33/26.Google Scholar

22 Bergbau-Archiv 33/26, Nov. 8. 1902.Google Scholar

23 Bergbau-Archiv 33/26. Nov. 8 and 17. 1902; and 55/54606 Nr. 3 (Gruppe Bochum), Mappe 3: renewal negotiations of July 6, 1903.Google Scholar

24 See Verein fuer die bergbaulichen Interessen im Oberbergamtsbezirk Dortmund, “Denkschrift betr. die Verhandlungen des Deutschen Reichstages ueber die Kohlenfrage am 3., 6. und 7.12.1900” (Essen, 1901 [Library of the Verein deutscher Eisenhuettenleute, Duesseldorf, Ni 8]); and the Syndicate's 1898 Annual Report, Bergbau-Archiv 33/1695.Google Scholar

25 The case involved the purchase of Friedlicher Nachbar by Baaker Mulde. Friedlicher Nachbar was organized as a Gewerkschaft, so that unanimous assent from all shareholders was necessary for the asset transfer. For a lengthier discussion, see Peters, “Cooperative Competition,” p. 85.Google Scholar

26 On the first case noted, see Enrscheidungen des Reichsgerichts in Zivilsachen 48 (1901), pp. 305–17, the Syndicate versus Hannibal.Google Scholar

27 Bergbau-Archiv 33/59. Apr. 21, 1906.Google Scholar

28 See table 3.8 of Peters, “Cooperative Competition.” p. 137.Google Scholar

29 See Bergbau-Archiv 33/52, June 27, 1898;Google Scholar and Passow, Richard, ed., Materialien fuer das wirrschaftswissenschaftliche Studium, vol. 1, Kartelle des Bergbaues (Leipzig, 1911), p. 88.Google Scholar

30 Bergbau-Archiv 33/53, June 22, 1899. See also 55/546 06 Nr. 2 (Gruppe Bochum), June 22, 1899.Google Scholar

31 Passow, Marerialien, p. 88.Google Scholar

32 See Peters, “Cooperative Competition,” p. 104.Google Scholar

33 Jahrbuch fuer den Oberbergamtsbezirk Dortmund (1901/1904), pp. 696, 705. The average price quoted for the Ruhr is across four grades.Google Scholar