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Europe In Retrospect
A BRIEF HISTORY OF THE PAST TWO HUNDRED YEARS

by Raymond F. Betts


CHAPTER FIVE
Concentration

It is the age that forms the man, not the man that forms the age.

THOMAS B. MACAULAY


The international exposition--what we today call a world's fair"--was a mid-nineteenth-century European innovation designed primarily to display the hardware of the continent's industrial technology in an architectural setting of grandeur and fantasy. First defined in the impressive setting of the Crystal Palace of the London International Exhibition of 1851, such international fairs temporarily rose in many European cities in the last four decades of the century.

In its assemblage of a wide variety of the century's ever-increasing products, the international exposition was a symbol of the general concentration of contemporary European culture. Throughout the second half of the 1800s, populations were concentrating in the cities, industry was concentrating in a few geographical areas and nations, wealth was increasingly concentrated in the hands of a capitalist elite, labor was slowly concentrating in unions so as to better its condition, power was more effectively concentrated in a central government and increasingly in a permanent bureaucracy, and, finally, as the century ended, large numbers of men were drafted and concentrated in regular standing armies.

The older European pattern of scattered populations, small-scaled industry, and competing sources of political power, was now transforming into a pattern both more structured and monolithic in appearance. The term "mass", heretofore part of the vocabulary of physics, acquired a new social meaning even before the century ended. Moreover, this realignment of people in space--so easily seen on the production line of the large factory or at the central telephone switchboards in the major cities in the 1890s--was part of a new process of "rationalization": organization structured along orderly lines and with efficiency of effort the purpose in mind.

Only during World War 1, when so much of national effort was directed to running the war machine, were the effects of such social concentration and rationalization imprinted on almost every aspect of European life. But a half-centurv before, the trend had clearly been established.

The New Productivity
When the London Exhibition of 1851 opened, a Scottish preacher gave the invocation which contained the lines: "Produce! Produce! Were it the pitifullest infinitesimal fraction of a product, produce it in God's name!" Productivity thus seemed to enter European life as an admonition, an imperative of both an economic and a cultural sort. Work became a good in itself. Value and quality soon were correlated. Good came to mean big; better to mean bigger; and best to mean biggest. Statistics, until then of little cultural consequence, assumed the state of a science and the function of a social regulator. Voltaire had once quipped that God was on the side with the larger number of regiments. In the new industrial era variations on this statement were accepted as truth. Bv the twentieth centurv the measure of a nation's annual steel production was taken as the most convenient measure of that state's power. Moreover, the brief supremacy that Europe enjoyed throughout the world was based on the decidedly favorable balance of trade that the Continent enjoyed throughout the nineteenth century.

Great Britain, Germany, and France were the great producers and exporters, matched only by the United States and not excelled bv it until the first years of the twentieth century. Thus the statement that Europe was the "world's workshop" was not an exaggerated one. Increased production was generated by a combination of new industrial technologies and new business techniques.

The last quarter of the nineteenth century has frequently been considered the era of the second phase of the Industrial Revolution. Just as iron and coal had characterized the first phase, now steel and electricity came to the fore, joined in the early twentieth century by oil. Such a distinction is, however, one of emphasis or intensity, not one of kind or quality. Technological change was an underlying characteristic of all nineteenth-century industrialization, with new inventions and improved processes accelerating production and increasing its range.

Yet the core industry was metallurgical. First iron, then its offspring, steel, were the materials upon which modern industry was structured. And no manufacturing was more concentrated than that of coal and iron. The late eighteenth-century method of converting coal to coke improved the iron smelting process and later was important to steel production where high temperatures were so necessary. Thus, a new economic geography of industrialization appeared, running along short transportation axes that brought coal and iron to the factory. The Midlands of England, where Manchester and Sheffield are situated; the Ruhr Valley, where Dusseldorf and Essen are situated; and the Saar Valley, where Metz and Mannheim are situated--these became the major factory regions.

After a number of refinements in production, primarily designed to reduce impurities, steel replaced iron as the basic industrial metal. Both less brittle than iron and inherently stronger, steel soon stood everywhere around the Continent: on the grocer's shelf in the form of the "tin can," in the Parisian sky in the form of the Eiffel Tower, and out of the arsenals of Krupp in the form of cannon.

COMBINED STEEL PRODUCTION
OF GREAT BRITAIN, FRANCE, AND GERMANY
PERIODANNUAL AVERAGE IN METRIC TONS
1880-843,270,000
1890-046,850,000
1900-0414,450,000
1900-1327,260,000

Other industries appeared, with chemical and electrical products now adding a new dimension to the international market, and with an entirely new industrial product--individual transportation--first making its appearance with the bicycle. The machine tool industry also took on major proportions thanks to the refinement of steel (the Bessemer process) and the new device of interchangeability of parts--both developments American in origin. Thus, in the second half of the nineteenth century, industrial production was refined, diversified, and increased so that even the most rural or poverty-ridden family might exhibit one of its products, whether a Shefffield knife, a kerosene lamp, or a spool of thread.

But beyond the smallest product was amassed new business techniques which represented the new scale of social life as well. No less an opponent of the capitalist system than V. I. (Nikolai) Lenin (1870-1924), leader of the Russian Communist Revolution of 1917, explained it this way: "The enormous growth of industry and the remarkably rapid process of concentration of production in ever-larger enterprises represent one of the most characteristic features of capitalism."

The "ever-larger enterprise" was best defined as the corporation. An outgrowth of the older joint-stock company that had served seventeenth- and eighteenth-century commercial development so well, the modern corporation made its appearance in the nineteenth century but only became the prevalent business form in the second half. Enjoying the advantage of limited liability (the stockholder could legally lose no more than his invested share in the corporation; hence the English expression "Limited" or "Ltd." ) and provided with the means of amassing great quantities of capital for investment purposes (by the device of the stock issue), the corporation not only suited best the needs of private industrial development but also encouraged that development with the money it pumped into equipment, factories, and inventions. It was the expensive requirements of railroad construction more than any other economic development that provided the impetus to the use of corporate structure.

With the corporation's financial flexibility and expansive power, and with the increasing complexity of industrial productivity and marketing, the process of economic concentration intensified just before World War I. In every European country new forms of combination were tried, but the most famous, and commented on, was the cartel. Legalized and well practiced in Germany above all other countries, the cartel was an effective means by which to control the marketing of goods; it was a mutually arrived at agreement among producers in a given industry either to (1) regulate production (determine the amount and the percentage of goods that each member concern would produce); (2) regulate the market (geographically divide the market among the member concerns and/or regulate prices). The two great German cartels were the Rhenish-Westphalian Coal Syndicate (1893) and the Steelworks Union (1904).

The concentration of the means of production was paralleled, but in no way as sharply, by the organization of large banks. Lenin later interpreted their appearance as marking the advent of the age of finance capitalism. According to him, this was the period in which the financial interests gained control of the economy, with bankers sitting on the boards of directors of large corporations, and with the major lending banks providing the immense sums of capital needed for further industrial expansion. The financier, no longer the entrepreneur, was the "captain of industry," and he sailed a straight course to wherever high interest rates existed.

Lenin's argument has been severely criticized for being grossly simplistic, even anachronistic--that is, offering a description of a situation that did not yet exist. But there was also evidence to support his general assertion. As industrial development grew more complicated, the need for even greater capital financing was felt, and it was primarily through bank loans and stock issuance that the entrepreneur was able to finance his activities. In this sense, therefore, individual private ownership declined; corporate ownership increased; and bank investment portfolios contained increasing amounts of stocks and bonds of a corporate nature. As one critic has remarked, Europe was held together by a thread of gold in the early twentieth century.

NEXT:  Toward a New Social Order






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