New Ways for Indigenous Manufacturing: How Research Revelations Have Defined a Future Path

© 2012 by John Fenton. All rights reserved.

No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means without the written permission of the author.

Published by AuthorHouse 08/24/2012

ISBN: 978-1-4772-2320-8 (sc)

ISBN: 978-1-4772-2321-5 (e)

Any people depicted in stock imagery provided by Thinkstock are models,

and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

Contents

INTRODUCTION

Cultural change for enhanced UK manufacturing

Economic growth but not indigenous-manufacturing growth

Value of the cultural critique

Financial sector superiority: over-a-century-old US/UK ‘problem’

Trading in ‘fictitious capital’

Mercantile culture and corporate governance seventy years on

Defining terms: culture, business and industry, mercantile

Production model concepts: Fordism and Flexible Specialisation

The culture of traditional British manufacturing

Economic and cultural changes since the 18th century

A possible contemporary threat to indigenous industrial growth

How small to medium scale manufacturing might re-grow

Main objective for this study

Acknowledgements

Chapter 1 Lead-up to manufacturing by the ‘new industries’

Pre-Victorian cultural influences

Downside of early UK national culture: an emerging ‘coolie’ class

Establishment opposition to Victorian manufacturing

Malign influence of certain cultural factors

Contrasting cultures of merchants and manufacturers

An industry-hostile elite and a disenchanted workforce

Industry suffering from a deeply flawed educational culture

The public school exception that proved the rule

Industry disapproval by the literati

Advancing towards the ‘New Industries’

Pre-World-War I UK motor industry pioneers

Chapter 2 ‘New industries’ start slowly, and expand rapidly, 1905-1945

A national culture unsympathetic to manufacturing

Motor industry culture hung on the choice of production model

Drawbacks of the fordist production model

UK ‘craft-mass’ production model once preferred over Fordism

Shortage of investment capital

Fears of globalisation and FDI

Near revolution in the labour market and growth of financial sector

Decline of the industrial middle classes hampered management

Adverse effects of industrial protectionism

Chapter 3 Industrial/national culture, 1945-1975 relative decline of indigenous UK manufacturing

Historic absence of appropriate education for manufacturing staff

Post World-War-II motor industry recovery: fast and then slow

Clouds gather over the nascent British Motor Corporation

Misguided actions of BMC directors

Growing competition from the transplants

A recent assessment of BMC’s comparative market ‘failure’

Performance of BMC relative to transplant manufacturers

Growth in globalisation a further threat for UK’s ability to innovate

Prosperity led to change in the national culture

Towards the final indigenous UK volume motor industry merger

Learning from the lead up to BLMC bankruptcy

Should trade-unions be blamed for the BLMC collapse?

Post World War 2 economic realities

Cultural effects on decline of the indigenous UK motor industry

An economic culture damaging to industrial reorganisation

National culture had affected the industrial culture

Changing cultures of the middle and working classes

Educational constraints on industrial progress

Successive governments’ failure to sustain industry

Onward march of globilsation

Chapter 4 Decline of indigenous UK manufacturing, 1975-2005

A malign cultural inheritance

Effective directorship squandered by government’s aid withdrawal

BLMC/BL production increased while UK market share dropped

Different forms of individual ‘production-models’

Rover Group privatisation soon led to the

BMW takeover

Intensification of the British mercantile and deferential cultures

The wrong focus on manufacturing within education and training

Small ‘c’ conservatism and the two cultures in British education

Class-divides and looking backwards hurt industrial performance

Change in political culture led to a painful economic legacy

Shorter- and longer-term, economic consequences

Downsides of globalisation, FDI and choice of production model

Distrust and individualism: malign effects of the liberal economy

The final decline of MG-Rover also reveals malign cultural effects

Chapter 5 New conditions for developing British manufacturing

The UK industrial culture inheritance

Recent crises increase the need for economic/cultural rebalance

Reconnecting politicians with industrial endeavour

Sustaining impetus of high-tech start-ups as well as the joy of craft

Economic needs for enhanced manufacturing input

Encouraging an appropriate manufacturing culture

21st century UK national culture hinders manufacturing revival

Stimulating a change in the national culture

Questioning the certainties of UK industrial culture

A slimmer monarchy to diffuse ‘establishment’ power

Tackling the sacred cow of land ownership

Reforming government policies and institutions

Reforming industrial democracy

A seminal plea from the workshop

Reform of the British education system

School-level educational reforms need priority

University level reforms focus on technology

Requirements for the knowledge economy

Reform of the financial sector

Need for UK to change from being a Liberal Market Economy

APPENDIX A

Towards an enhanced motor-industry specialist sector

Marketing the electric vehicle (EV)

Near-future opportunities for EVs, from press reports

Developments for farther future EV operation, from press reports

APPENDIX B

US transplants, set up in the UK, and US acquisitions of UK auto-components businesses

APPENDIX C

Graphs figured in main text

APPENDIX D

Tables figured in the main text

REFERENCES

About the Author

INTRODUCTION

This book is especially topical in both the UK, and other mature economies, as wider public interest in manufacturing is clearly evident following disenchantment with financial sectors, and with rising youth unemployment. Rather than being an economics study the book’s scope and content sets out to reveal the discordant cultures (identified by researchers) operating in industry and government, schools and universities, as well as the negative social and economic influences in UK and other national cultures that still inhibit manufacturing revival. The proposed readership will thus include opinion-leaders in all areas of public life concerned with influencing national culture in the direction of promoting indigenous manufacturing.

The book will have further appeal to social-science and engineering faculty libraries within higher education establishments, their academics teaching manufacturing management, and to post-graduate and undergraduate students undertaking related research projects in universities and business schools, interested in a cultural critique. The work’s joint focus on national and industrial cultures, involving manufacturing-industry directors, senior engineers and managers within small - to medium-volume producers, will appeal to this further category of readers. Many potential readers are facing the prospect of changing the operation of their firms, not just to enhance growth, but to profit from new technologies.

The book uses indigenous UK car-manufacturing as a case study, which also has a wide public interest, and is being subject to major change by its small to medium scale practitioners. This is in transferring from a conventional culture of vehicle manufacture, once crudely defined as a ‘blacksmith industry’, to one involving electric-vehicle design, development and construction, in the style of what was once termed a ‘laboratory industry’, being involved in both electric-propulsion and vehicle-control. A further objective is to widen the horizons of those medium sized companies in specialist-vehicle making, alongside principal companies in the supply-chain for motor manufacture together with larger scale after-sales service-engineering. Such companies might well take up of the challenge of electric-vehicle development and construction, by emulating the much praised culture of the German Mittelstand sector of her industry.

Previous publications about lessons to be learned from earlier national decline have principally embraced military, imperial and economic decline, the latter being divisible into its various sectors, including manufacturing, services and finance. Meanwhile most cultural studies of industrial decline have been, unlike this one, broadly focussed considering the whole economy, while some academics see the missing focus as being a study of an individual corporation at the micro level. This study incidentally focuses on one of the so-called ‘new industries’, which evolved during the slow run-down of the original ‘staple industries’ of the UK Industrial Revolution, and therefore has considerable historical interest. The study also uncovers the long-rooted bad practices that still corrode national and industrial cultures. It applies to a volume-industry sector dating from 1905 that became one organisation that was bankrupted and nationalised in 1975 before its final demise in 2005.

Cultural change for enhanced UK manufacturing

Solving the youth-unemployment situation in the UK requires expansion of those industrial sectors having relevantly high employment levels, alongside a growth in start-up companies that have arisen from recent technological innovation. While considerable progress at inspiring a new industrial culture has been made in research by UK management schools, many proffered solutions apparently fail to reach the board-room or shop-floor levels of medium sized British companies, which do not in general seem to match those of the successful German mittellstand.

During the Industrial Revolution many indigenous UK manufacturers were non-conformist (dissenters from the state-established Anglican religion) and were closer than their merchant counterparts to both the working-population and to the civic interests of their urban environment. A long-term mercantile culture had of course existed for centuries, alongside that of the UK’s pioneering manufacturing economy, and had long been associated with international trade and imperial preference (principally trading within empire markets). At the same time the mercantile/aristocratic connection between them had been strengthened by the intermarriage of merchants and aristocrats (exchanging pecuniary for social advantage; see below).

Economic growth but not indigenous-manufacturing growth

However, an important proviso in the study of cultures related to so-called ‘industrial decline’ is that economic growth, albeit absolute and not relative, has in fact prevailed for the whole UK economy, since the start of the 20th century, despite the contraction of the indigenous manufacturing sector in recent decades. According to Collins & Robbins⁰.¹ the ‘long-boom’, from the end of World-War 2 to the recession in 1974-6 (when the UK indigenous volume motor industry leader became bankrupt), involved UK industry, excluding foreign transplants, in relative rather than absolute economic decline for that period, which in political terms has been described as the ‘social-democratic era’.

Despite the periodic decline in UK indigenous manufacturing the annual growth rate for the whole manufacturing economy throughout the entire period from 1880 to 1974, remained mostly positive: from 1% between 1900 and 1913, to 2.3% between 1922 and 1938, to 3.2% between 1957 and 1965. Annual productivity growth in these three periods was 0%, 1.1% and 2.4%. Comparative productivity growth for different nations is seen in Table 1 of Appendix D. However, the ‘big-business’ sector of UK manufacturing became unusually large, with the concentration ratio of the largest 100 firms increasing from 16% in 1909 to 32% in 1958 and 41% in 1970. For the US, the equivalent concentration over the 1960s period was just 30%.

Decline must therefore be assessed with care, in that an economy is made up of a multitude of activities and relationships, many beyond the national territory. What is clear is the recent erosion of the UK share of world trade in manufactured goods, the share dropping from 9.6% in 1960 to 5.8% in 1975: see Fig.1 in Appendix C. UK percentage share in world trade of manufactured goods dropped from 45 to 35 between 1880 and 1900. The fall in UK share is shown for 1883 to 1905 and then onward for most of the next century. A continuous fall is seen over the whole period apart from the single rise presumably corresponding to the intensive post-World-War II export drive.

The public perspective is that the motor industry in the second half of the 20th century epitomised UK manufacturing industry’s ‘decline’ and thus makes it a useful case study for the wider industry. By clarifying the peculiarly British institutional factors, and accompanying cultures, affecting the premature relative decline of one prominent indigenous manufacturing industry, this book highlights those negative aspects which, if reversed, might help to sustain both new industrial entrepreneurship and the growth of existing indigenous manufacturing operations. Such a process might also stimulate government to curtail foreign take-overs of those nascent UK high-technology enterprises that hold valuable intellectual property rights that are important to the future national economy.

Value of the cultural critique

Older-generation ‘management-studies’ academics, with their desire to restrict themselves to a ‘scientific’ analysis of decline, have been sceptical about the cultural-studies approach which can involve a more imaginative style of analysis. Scientific analysis has already provided apparently satisfactory explanations for industrial decline but the solutions suggested have not always led to effective reforms. Younger generations of management academics now recognise the usefulness of multi-disciplined approaches to research and already the ‘cultural critique’, of the type used here, has been applied extensively to economic decline at the macro level. According to Andrew Gamble, reader in political theory and institutions at Sheffield University, a respected analyst of UK decline, a gap is now said to remain in the literature for considering at least a certain number of institutional factors affecting decline, particularly at the micro-level of the firm⁰.².

The objective here is thus to examine this single automotive sector as a case-study to throw light on the factors that threaten the retention of a critical mass of general indigenous manufacturing that is needed to foster the technological research and development, for nurturing both the knowledge economy and small-to-medium scale manufacturing. The relevance of this project is evident in Gamble’s work that addresses problems inherited from the UK’s external trading culture. He argues that an anti-industrial political culture had become based on the: ‘complex of attitudes and values which have created a social climate in England that has acted as a constant brake to industrialism’. The early ‘industrialists eventually accommodated themselves to the social and political order of the ruling landowners’. However, such ‘theories’ have the problem of vagueness and ‘what would be most valuable would be to have detailed business histories showing how cultural attitudes held back innovation and the adoption of best-practice business models and technical processes’, he suggests.

Financial sector superiority: over-a-century-old US/UK ‘problem’

Achieving the gradual rebalance of the UK economy, to advance the resurgence of indigenous manufacturing, has to be seen in the light of the history of the financial sectors of both the UK and the US. Current discussions in the better informed element of UK media relate to the differences, between productive and financial capitalism, thought to have their origins in the concerns of researchers and commentators shortly after the Industrial Revolution. That period coincided with the increasing centralisation and concentration of capital in the large corporations that had come into being in the US, which witnessed the growth of the crucial role of banks and financiers. The more recent near collapse of the banking sector in the UK has to be seen in the light of the beginnings of US financial capitalism in the late 19th century, at a time when former industrial owners in the UK were joining the ranks of the aristocracy, and moving from productive activities to finance.

Thorstein Veblen, a pioneer US researcher in this field writing at the beginning of the 20th century, divided economic structure into two divergent purposes: one of acquisition and one of production, being respectively ‘pecuniary’ and ‘industrial’⁰.³, which seem to resemble the current divide between the financial and manufacturing interest in the UK. However, in the US the timing was several decades after the first of the vast American industrial corporations had emerged towards the end of the UK Industrial Revolution. This was when a new class of super-rich took on the title of ‘leisured class’, as their founders passed on the running of their organisations to general managers, which was to occur later in the UK. Because the demands for the necessities of life were less pressing, for the well endowed and socially exclusive leisured class, it was the least responsive to the need for change and thus became the conservative class, arguably ‘conserving the obsolescent’.

Consequently, Veblen argued that innovation became a phenomenon of the ‘vulgar lower classes’, the leisured class shrinking from it in their perception of involvement in it being seen as ‘bad form’. This passed on to the middle classes as it became ‘incumbent upon all reputable people to follow their (the leisured classes) lead’, by using their surplus energy to partake in conspicuous consumption, a situation recognisable in the new ‘service class’ in the UK. ‘Thus all classes, including the labouring poor, who were too deprived to risk any innovatory choices, had ‘become stiffened against (any form of) innovation’. Meanwhile, industrial efficiency is best served by ‘individual honesty, diligence, peacefulness, good-will, absence of self-seeking, recognition of causal sequence’. The phrase ‘pecuniary purpose’ is defined as conserving the predatory temperament and being concerned with ownership, plus the functions of acquisition and accumulation typically seen in financing and mercantile activities. Occupations that involved the production of goods, by contrast, had little predatory tendency but did of course have a pecuniary component, and it is noted that the discipline of modern life neither eliminates the ‘aristocratic virtues nor fosters all the bourgeois ones’.

Trading in ‘fictitious capital’

Hilferding in 1910 believed that the most important consequence was the significant rift between the industrial capitalist and the industrial entrepreneur⁰.⁴. A further consequence was the introduction of a ‘promoter’s profit’, which was the result of selling shares in a newly formed joint-stock company for considerably more than the capital