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This is a detailed account of the British and German Steel industries'
performance during three decades which were marked by radical changes in
technology, in sources of raw materials, and in product markets. Relying on
governmental and corporate archives as well as on the contemporary trade
literature, Professor Wengenroth has drawn a meticulous picture of how
managements in the two countries met the strategic problems raised by
these changes. The author does not however merely trace technological
developments; rather, he uses them as a backdrop for a contribution to the
long-running debate on Britain's relative industrial decline in the late
nineteenth century. Was this the result of massive entrepreneurial failure, or
was it merely the by-product of evolutionary changes that bestowed
competitive advantage on latecomers such as the Germans? The author
argues a detailed case for the latter scenario, and in doing so makes a major
contribution to the debate on the 'Great Depression'.
Enterprise and Technology
Enterprise and Technology
The German and British Steel Industries,
1865-1895

Ulrich Wengenroth

Translated by Sarah Hanbury Tenison

CAMBRIDGE
UNIVERSITY PRESS
CAMBRIDGE UNIVERSITY PRESS
Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, Sao Paulo, Delhi

Cambridge University Press

The Edinburgh Building, Cambridge CB2 8RU, UK

Published in the United States of America by Cambridge University Press, New York

www. Cambridge. org

Information on this title: www.cambridge.org/9780521103336
© Cambridge University Press 1994

This publication is in copyright. Subject to statutory exception

and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.

First published 1994

This digitally printed version 2009

A catalogue recordfor this publication is available from the British Library

Library of Congress Cataloguing in Publication data

Wengenroth, Ulrich.
Enterprise and technology: the German and British steel
industries, 1865-1895 / Ulrich Wengenroth: translated by
Sarah Hanbury Tenison.
p. cm.
Translated from German.
Includes index.
ISBN 0 521 38425 7
1. Steel industry and trade - Germany - History. 2. Steel
industry and trade - Great Britain - History. I. Title.
HD9523.5.W427 1992
338.4'7669142'0941-dc20 92-10572 CIP
ISBN 978-0-521-38425-4 hardback
ISBN 978-0-521-10333-6 paperback
 Contents

List of figures page ix

List of tables x
Preface xii
List of abbreviations xiv

Introduction 1
1 The technology of late nineteenth-century steelmaking 11
1 The puddling process 12
2 Crucible steel 16
3 The Bessemer process 17
4 The Thomas process 22
5 The open-hearth process 25

2 Expanding into the Slump: the railways as major customers

of the new steel industry 31
1 Sales prospects for the early Bessemer works 33
2 Economic development during the 1870s 41
3 Supply potential and market absorption 50

3 Surmounting the Slump: the individual strategies of firms 59

1 Rationalisation strategies 59
2 The Krupp case study 74
3 Rapid driving versus fuel economy 86
4 The modus operandi of the rationalisation strategies 91
5 The export 'safety-valve' 103

4 Surmounting the Slump: collective strategies 119

1 Dumping, tariffs and cartel formation in Germany 119
2 Dumping and cost-accounting 129
3 The temporary recovery of the rails market in 1879-1882 134
4 The last solution: an international cartel 143

5 New processes and new markets 157

1 Basic Bessemer steel 157
2 Open-hearth steel 195
viii Contents
6 Efficiency and capacity for innovation 247
1 Entrepreneurial decline and steel: the British debate 247
2 Precarious protectionist measures versus entrepreneurial autonomy 266

Sources and bibliography 21A

Index 285
 Figures

1 The stages of the Bessemer process page 21

2 The open-hearth furnace 27
3 A Bessemer plant in the 1860s 53
4 Holley's removable bottoms 65
5 The Bochumer Verein's Bessemer plant 73
6 The American lay-out for converters 75
7 The rise of productivity in Krupp's Bessemer works 85
8 Changing from reverberatory furnace to cupola furnace:
the effect on the cost function 92
9 Changing from cupola furnace to the direct process:
the effect on the cost function 93
10 Introduction of Holley's removable bottoms: the effect
on cost function 96
11 The problem-solving procedure employed during
rationalisation of the Bessemer works in the 1870s 97
12 Cost functions for use of German and English pig iron
in the Ruhr 101
13 Abandoning the direct process: the effect on the cost function 103
14 The Peiner Walzwerk's Thomas works in Peine 184
15 The Steel Company of Scotland's open-hearth works at
Blochairn 219
16 The open-hearth works of the Bochumer Verein 220
 Tables

1 Production and export of rails: Great Britain, 1871-1878 page 49

2 Analysis of the production costs for 1 ton of Bessemer steel
atKrupp'sin 1873/4 82
3 Analysis of the production costs for 1 ton of Bessemer steel
atKrupp'sin 1877 83
4 Comparison of the conversion costs for 1 ton of Bessemer
steel at Krupp's in 1873/4 and 1877 83
5 Conversion costs in relation to quantity of steel produced:
Krupp's, 1878 87
6 Steel conversion costs in German works in 1878 89
7 Comparative British and German production costs for Bessemer
pig iron, 1878-1879 98
8 Freight charges for iron ores from Bilbao in October 1878 99
9 Production, consumption and export of rails: Great Britain,
1870-1879 105
10 Average rails prices (ex works) and production costs in Great
Britain, 1872-1879 107
11 Consumption and export of rails: Germany, 1871-1879 113
12 Rails deliveries to the Prussian State and private railways,
1871-1879 114
13 Rail exports, 1871-1878: Britain, Germany, Belgium 115
14 Prices for Bessemer rails at the Bochumer Verein, 1874-1878 121
15 Production, export and consumption of steel rails in Great
Britain, 1879-1882 139
16 Production of steel rails in Great Britain, by district, 1879-1882 139
17 Production, export and consumption of rails: Germany,
1880-1882 141
18 Allocation of quotas in the German Railmakers' Association,
1881 145
19 Allocation of quotas within the British Group of the
International Railmakers' Association, 1884 151
 Tables xi
20 The production and export of acid and basic Bessemer steel
rails: Great Britain and Germany, 1882-1886 155
21 Varying cost inducements for introducing the Thomas process
to the Ruhr in 1885 193
22 Production costs for Bessemer and open-hearth ingots at
Dowlais, 1871-1880 199
23 Analysis of production costs for 1 ton of open-hearth steel 199
24 Construction costs for various large open-hearth furnaces 199
25 The production of open-hearth steel in Great Britain and
Germany, 1873-1879 202
26 The production of open-hearth steel in Great Britain and
Germany, 1881-1890 223
27 The uses of open-hearth steel in Great Britain, 1879-1886 225
28 The penetration of steel in Scottish shipbuilding, 1880-1890 227
29 Open-hearth steel production in Great Britain, by region,
1879-1890 229
30 Cost of production, selling prices and profits in iron and steel
plates at Consett, 1884-1886 238
31 Cost of production, selling prices and profits in iron and steel
plates at Consett, 1887-1890 239
32 Production and prices for 'Handelseisen' according to steel
processes in Germany, 1885-1895 245
33 Production of basic Bessemer and open-hearth steel in Germany,
1888-1898 (1,000 tons) 246
 Preface

Comparative research into one branch of industry in two countries is not only
peculiarly fascinating and, I hope, enlightening; it is also very expensive and I
was only able to complete this project thanks to much generous support. My
thanks are due in the first place to the German Historical Institute in London
and the Deutscher Akademischer Austauschdienst; between autumn 1976 and
spring 1978 they provided financial support which allowed me to engage in
uninterrupted research in British archives and libraries. I am obliged too, to
my former colleagues in the German Historical Institute for their help and
ingenuity, which enabled me to employ this time usefully right from the start.
The British Steel Corporation and its archivists, Mrs Hampson, Mr Charman,
Mr Emmerson, Mr Hassall and Mr Newman were invariably obliging in
providing excellent working conditions in the firm's regional archives. The
same applies to their colleagues in the Public Record Office and the archive of
the National Library of Wales.
In Germany too, it was primarily firms' archivists and their colleagues who
gave me practical support in securing source material. I owe sincere thanks to
Frau Dr Kohne-Lindenlaub in the Historisches Archiv of Fried, Krupp GmbH,
Frau Kuhlborn in Werksarchiv Bochum of Fried. Krupp HUttenwerke AG,
Herr Dr Baumann, the former head archivist, in the archive of August-
Thyssen-Hiitte, Herr Herzog in the Historisches Archiv of Gutehoffnungshiitte
AV and to Herr Dr Hatzfeld, the former head archivist in the archives of
Mannesmann AG. I am equally grateful to the archivists of the Bundesarchiv
in Koblenz and the Archives Nationales in Paris.
The results of this work are critically dependent on evaluating the contem-
porary technical literature of many countries. That this was possible was
largely due to the excellent holdings and unparalleled hospitality of the
Stiftung Eisenbibliothek of Georg Fischer AG, in Schaffhausen, whose former
librarian, Frau Anne-Marie Kappeler, supported my research with great
patience and helpfulness.
The fact that an academic monograph has finally emerged from all this
financial and practical support is thanks above all to my academic teacher
Professor Dr Akos Paulinyi, who not only gave me the opportunity of
 Preface xiii
working with him after my time in London but also took great personal
interest in my work, encouraging me to continue and complete it. It acquired
its shape during my countless conversations with him. Professor Dr Dirk Ipsen
gave friendly advice which helped me sharpen my economic questions and
made them operational.
Following my primary research in Great Britain the book took shape during
my employment at the Institut flir Geschichte in the faculty for Gesellschafts-
und Geschichtswissenschaften in the Technische Hochschule Darmstadt,
where it was accepted as a thesis in the summer of 1982. That same year it was
awarded the Rudolf-Kellermann prize for history of technology by the Verein
Deutscher Ingenieure. The thesis has been abridged and re-worked for
publication. In this I received valuable advice from Professor Dr Knut
Borchard and Dr Peter Alter. All errors are mine of course.
Since the first German version of this book was published in 1986, further
works about the German and English steel industries at the end of the nine-
teenth century have appeared. In spite of this, I decided to leave my text
unchanged for translation, since its basic approach, that of researching the
business history of this branch from the perspective of production technology,
has not been attempted again in this intensive form. As before, I am convinced
that this approach produces insights which cannot be achieved by other means.
In business history we must penetrate as deeply into the technology of the
enterprises as into their finances and marketing etc., if we want to understand
the motives and conditions that determined entrepreneurial business.
Moreover, several changes have occurred with regard to the location of
archival material. The locations and document numbers given in this book refer
to conditions between 1976 and 1980, when I viewed the material.
Finally, I want to thank the Press Syndicate of the University of Cambridge
for having made it possible to produce an English version of this book. My
thanks too to Sarah Hanbury Tenison for supplying the translation, for which
the Stiftverband fiir die Deutsche Wissenschaft has generously provided
financial assistance.

Ulrich Wengenroth
Munich, February 1993
 Abbreviations

BITA British Iron Trade Association

BIT A (year) British Iron Trade Association, annual report for the year
reported on
BT Board of Trade
BSC British Steel Corporation
CIA Cleveland Iron Masters' Association
CRO County Records Office
GHH Gutehoffnungshutte
HA Historisches Archiv
ICTR Iron and Coal Trades Review
IRMA International Railmakers' Association
JISI Journal of the Iron and Steel Institute
PEE Protokolle iiber die Vernehmung der Sachverstandigen
durch die Eisen-Enquete-Kommission (minutes of
the examination of the experts by the Iron Inquiry
Commission)
RC Royal Commission
Reichsstatistik The production of the mines, saltworks and ironworks
(year) in the German Reich and in Luxemburg for the year
reported on
RRC Regional Records Centre
RSW Rheinische Stahlwerke
SC Select Committee
VDESI Verein Deutscher Eisen- und Stahlindustrieller
VDI Verein Deutscher Ingenieure
ZBHSW Zeitschrift fiir das Berg-, Hutten- und Salinenwesen
in dem Preussischen Staate (Journal of the mines,
ironworks and saltworks in the Prussian state)

xiv
 Introduction

The age of steel' is what David Landes called the last thirty years of the
nineteenth century in his standard work on the industrialisation of Western
Europe.1 He felt that this epoch was wholly dominated by the rise of modern
mass production of steel. This was also a period when Great Britain was forced
to surrender her previously unchallenged position as the 'workshop of the
world' and as the most powerful industrial nation. The USA and Germany
proved better adjusted to the demands of the new steel age. Not only did they
both overtake their British tutor's initial lead, but they soon established
themselves at the forefront of world steel production. By the end of the
eighties American steel production, and by the beginning of the nineties
German steel production too, had exceeded the output of British works, which
in the seventies had still dominated the world market.2 Although the American
steel industry presented scarcely any direct competition to British steel, having
unique opportunities for expansion within its enormous and protected internal
market, when the production and export success of the German steelworks was
compared with the relatively backward British performance, it was not long
before the British industry was charged with neglecting to follow up its
technological advances.
Given that all the standard innovations of the new steel technology, the
Bessemer, Thomas and Siemens-Martin processes, had been developed during
the sixties and seventies in Great Britain3 - the last with French assistance -
British entrepreneurs were reproached for failing to exploit to optimum
advantage the opportunities which had been offered first to them. Appearances
seemed to indicate that in Germany, well-developed business strategies were
promoting technical progress more rapidly and applying it more efficiently in
1
David S. Landes, Der entfesselte Prometheus. Technologischer Wandel und industrielle
Entwicklung in Westeuropa von 1750 bis zur Gegenwart, Cologne 1973, pp. 236-53.
2
Re the individual stages and forms of this process see above and Peter L. Payne, Iron and Steel
Manufactures, in: Derek H. Aldcroft (ed.), The Development of British Industry and Foreign
Competition 1875-1914, pp. 71-99, esp. pp. 71-9.
3
The Bessemer process had already been invented in 1856 but was applied industrially only
from the 1860s onwards. See too Gerhard Mensch, Das technologische Patt. Innovationen
uberwinden die Depression, Frankfurt am Main 1975, p. 163.

1
2 Introduction
the key industry of the day. Apparently, not even the especially severe and
protracted depression in the seventies and eighties in Germany had damaged
her steel industry's growth potential. Rather, it seems that it achieved a
particularly high degree of competitivity on the world markets behind the
protection of cartels and tariffs, i.e. in an environment which was basically
hostile to competition.
The present work will examine whether there was a superior German way of
developing mass steel production in the last thirty years of the nineteenth
century and how this differed from the British way. We are therefore not
concerned with giving a rounded business history of steelmaking in the two
countries with all its characteristics and problems, such as Wilfried
Feldenkirchen has undertaken for the Ruhr.4 Our special line of inquiry leads
us into a comparative examination of the relationships between business
strategies and technical progress, with a view to delivering substantiated
observations in the final chapter about the relative efficiency and capacity for
innovation of the German and British steel industries, and of the entrepreneurs
who led them. Our inquiry concludes with an analysis of the debate about
'entrepreneurial decline' in late-Victorian Britain, which centres basically on
the controversy about the relative performances of the German and British steel
industries. Unlike previous contributions to this debate which have compared
the industries on the basis of static definitions of efficiency and which have
relied, for the bulk of their argument, on treating technical progress and its
practical application as a 'black box', to be inferred from its effects on price
and quantity change, in this study we will place the strategies which business-
men employed to confront their commercial problems at the centre. The
historical process which, since the 1860s, led to the formation of the different
structures of the German and British steel industries, both in the technical and
in the institutional spheres, will be made clear.
In order to make it easier to understand the technological dimension of this
process, this analysis will be preceded by a chapter about the technology of
steelmaking in the late nineteenth century. The characteristics of the various
processes set objective limits to the management's 'room for manoeuvre' in the
technological field. We will refer constantly to this during our discussion and
assessment of individual entrepreneurial decisions.
We are confronted by an apparently paradoxical situation, in that the period
of the new steel industry's breathtaking expansion is presented both by
contemporaries and by economic historians also as a period of crisis and slump,
for the industry in particular. Although the degree of crisis is assessed very
variously, no voice has described the years of especially rapid growth after

Wilfried Feldenkirchen, Die Risen- und Stahlindustrie des Ruhrgebiets 1879-1914. Wachstwn,
Finanzierung und Struktur ihrer Grossunternehmen, Wiesbaden 1982.
 Introduction 3
1873 as a period when it prospered. Expanding production and winning new
markets, generally proven means of increasing profits, appear in this period not
to have benefited the steel industry, or only very inadequately so. Nevertheless
both courses of action were extensively pursued, especially in Germany. It also
looked as if the most disastrous consequences were experienced there during
the mid-seventies. We will examine this development in Chapter 2.
It must also be asked why the firms were set so definitely on the course of
expansion when, to all appearances, this was not accompanied by an improve-
ment in their profits. This soon led to recriminations about 'overproduction',
which was supposed to have brought about 'falling prices' and, consequently,
the economic crisis. All the same, it is not very credible that the firms should
have headed straight for disaster with their eyes open and persisted year after
year in mistaken overproduction, without learning anything from an error that
was clear to all. Ulrich Troitzsch has stated that our understanding of the Great
Depression, the first protracted world-wide crisis of industrial capitalism, still
awaits thorough research into the 'origins, processes and results of techno-
logical changes and their connection with economic development'.5 He
anticipated that an important contribution to this would be made by research
into the technical rationalisation of ironmaking which he qualified as a
pressing research problem. We have responded to this initiative in Chapter 3.
In the case of steelmaking the connection postulated by Troitzsch seems all
the more evident, given that immediately prior to the 'Great Depression' the
industry experienced its decisive technological breakthrough in the two basic
innovations of the Bessemer and the Siemens-Martin processes. This stage of
production, with its new and still unperfected mass production processes,
must have appeared as a prior candidate for comprehensive rationalisation, as
opposed to established and long-proven processes for extracting pig iron in
blast furnaces and shaping it in rolling mills. Indeed, it was still not clear which
way efforts could be directed successfully. The works managers had no
previous experience to go by. The firms were therefore confronted by wholly
new tasks, and their continued existence depended precisely on solving them
in the conditions set by the looming economic crisis. And although their first
defensive reaction against the Slump did, as Troitzsch supposed, consist in
rationalisation measures, as we know these did not lead to renewed prosperity.
The question must be asked why the rationalisation measures missed their
mark. Given that they related to the technological aspects of the firms'
operations, an answer can be found only with the help of detailed technical-
historical investigation.

5
Ulrich Troitzsch, Technische Rationalisierungsmassnahmen im Eisenhiittenwesen wahrend
der Griinderkrise 1873-1879 als Forschungsproblem, in: Hamburger Jahrbuch fur
Wirtschafts- und Gesellschaftspolitik 24 (1979), pp. 283-96.
4 Introduction
This innovatory interference in the production process must have entailed
unwanted and even unforeseeable consequences for the enterprises, which in
turn created new problems to which they had to adjust. This new adjustment
could consist of further activities internal to the works, or assume political
forms external to the works, which are the domain of traditional economic
history. In our case, this was represented by the well-researched agitation about
protective tariffs for German heavy industry, which ended in the 4rye and iron'
alliance and contributed to the conservative re-formation of the German Reich
in 1879. However, without research into the technical-historical aspect of
internal measures undertaken by the enterprises, the significance of the steel
industry's cartel and customs policy remains unclear. The research by Hardach
and Lambi notwithstanding, it still cannot be stated whether this policy was the
last refuge of an industry threatened with collapse, after every attempt within
the industry to stave off the crisis had already been exhausted, or whether a
favourable political constellation was merely used as a rallying point. The
question closely associated with this, whether the new cartels within the steel
industry really were the 'children of necessity', can only be answered when it
has been established that all other attempts at stabilising profits had failed.
These forms of collective crisis management and their assimilation into the
strategies of individual works are investigated in Chapter 4. Our final review
of the various strategies employed by German and British entrepreneurs will
show that forms of reaction to economic crisis which developed in the 1870s
continued to determine the collective behaviour of the steel industry of each
nation until the turn of the century and beyond.
Whereas the structure of the German and British steel industries exhibited
great similarities until the early eighties, their subsequent development was
along very different lines. In both cases new opportunities for expansion were
created for the steel industry through diversification of processes and products.
However, this took different routes in Germany and in Great Britain. The
reasons for these divergent developments and the forms they took are dealt
with in Chapter 5. We thereby lay the ground for a comparative assessment of
German and British entrepreneurial efficiency and capacity for innovation in
the final Chapter 6. By then, we will be in a position to review the debate about
'entrepreneurial decline' in the light of a comparison between individual and
collective business strategies and, thanks to our previous technical-historical
analysis, we are not obliged to rest our discussion about the possible failings of
British steel industrialists on mere conjecture. One important finding of this
chapter is that various conjectures about technological relationships and
opportunities, which were fundamental to the various arguments previously
advanced in this debate, do not stand up when confronted with the sources.
The central thrust of this inquiry is directed at the relationship between
firms' strategies and technological progress. What forms did the growth of this
 Introduction 5
branch of industry and the development of its productive capacity take? To
what extent can regional and national differences in the structure of the firms
be attributed to their strategic decisions, and to what extent to external
conditions in the wider sense - supplies of raw materials, market outlets and
national economic policies? Did firms try to modify or compensate for these
external conditions? Which means did they employ to this end? In what way
was technical advance an object of strategic decision-making? Was it
perceived as a dimension which could be directed or influenced? Were there
different strategies in the technical field and how were these determined?
Our research has been guided by these and similar questions. Common to
them all is the notion that firms not only developed explicit strategies in the
administrative field, an aspect of business history which has recently been
better researched, but that they did the same thing in the technical field.
Technological progress was not viewed merely as the application of
technology, which was mainly introduced to the firms from outside, but as a
process determined by strategic decisions on the part of the firms and steered
in its direction. If technical progress as a whole means raising the productivity
of the factors of production,6 it also means that the firms strove very purpose-
fully to raise the productivity of specific parts of their production. Conse-
quently, technical progress could be achieved not only by overall investment in
new-fangled or improved production plant, but also precisely by developing
the existing organisation of production.
Although it would be possible at this point to separate technological progress
from rationalisation measures, as required by the theory of production cost,7 we
have not done so. Research into concrete rationalisation steps has shown that
these have always been supported by a whole bundle of measures, and that they
were generally carried out under varying conditions within individual works as
and when valuable technical information was acquired. It would at the very
least be extremely difficult to establish empirically whether a particular bundle
of measures ultimately led to the establishment of a fundamentally new
production function or only to a shift in an already familiar one. Since it was
anyway a matter of indifference whether the firms drew their profits from a
novel production function or one already in existence somewhere, this
distinction is not relevant to our particular line of inquiry.
The same applies when we treat innovation theoretically and attempt to

6
This is the general definition provided in Kurt Eisner, Wachstums- und Konjunkturtheorie, in:
Kompendium der Volkswirtschaftslehre, Werner Ehrlicher et al. eds., Gottingen 1975 (2),
pp. 246-96, see here p. 281.
7
For this delimitation, which places special importance on the necessity of combining
technological progress with the acquisition of new technical knowledge and the installation of
a fundamentally new function of production, see J. Heinz Miiller, Produktionstheorie, in:
Kompendium der Volkswirtschaftstheorie, I, pp. 57-113, p. 105.
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