Dr. Carlo MorelliEconomic Studies, School of Business,

University of Dundee, Dundee

Jute, firm survival and British industrial policy:

Government action under globalisation.

Workshop on British and Japanese Enterprise,Cardiff University 8-9 August 2011

The rise & decline of Dundee’s jute industry: A story of a staple industry?

Source: 1881-1961: A. Carstairs, ‘The nature and diversification of employment in Dundee’ in S. Jones (ed), Dundee and District (Dundee, 1968), pp. 320, 328.

Table 1 Proportion of Jute Workers in Total Working Population of Dundee 1881-1931

1881 49

1891 48

1931 41

UK Government Working Party Report, 1948

chaired by SJL Hardie the Director of British Oxygen Co.

falling demand & substitution effects Domestic product market competition increased international competition geographical concentration high local unemployment.

output levels of 247,000 tonnes of jute products and cloth only 11,000 workers would be necessary.

Is the ‘staple industry’ story sufficient? The two largest firms Low & Bonar and

Jute Industries did not close and instead thrived.

The decline of the jute industry did not take place until the 1970s.

Government participation in the industry continued until the 1970s.

Debates within the UK Literature

UK relative economic decline

Broadberry & Crafts (1996, 2001); Booth (2003)

Institutional failure and sclerosis

Eichengreen (1996); Olson (1965, 1982) Government & economic management

Tomlinson (1996, 2009); Edgerton (2006)

1945 to the 1970s renewed prosperity

The prospects set out in the Working Party Report failed to materialise

Employment No of firms Output

Employment remained above the figures suggested by the Working Party Report until 1970

Number of establishments grew after 1948 and remained above the 1948 level until 1970

Real Gross Output grew continuously from 1948 to 1970

Methods of Protection & Collusion in Dundee jute industry

Government control through Jute Control & State Tradingestablished 1939, not ruled illegal by the Restrictive Trade Practices Court in 1963

Entry limited through quota imports on raw jute via special licences to 110 quota holders

Prices “equated” along with Dundee prices through agreement with industry and Board of Trade accountants

Seven collusive pricing agreementsGentleman’s Agreement Yarn Prices Gentleman’s Agreement Cloth Prices.

Modernisation in the Dundee jute industry

Introduction of modern spinning equipment Double shift working Replacement of female workers with male

workers Early introduction of job evaluation

A declining female workforce. Men become a majority of the workforce by the early 1960s

Job Evaluation introduced in 1954

35

40

45

50

55

60

65

70

75

1948

1949

1950

1951

1954

1958

1963

1968

1970

1971

1972

1973

1974

1975

1976

1977

1979

1980

1981

1982

1985

1986

1987

1988

1989

1990

1991

1992

Total Wages

Operatives

Source: UK Census of Production, 1951, 1958, 1963, 1968, 1971, 1972

Wages as a Percentage of Net Output

Specialisation: Higher quality & protected product markets

Category % of Jute Control’s sales

% of Dundee cloth production

Heavy bags sacking, woolpacks

15 -

Hessian cloth 60 5

‘Equated goods’ 25 40

‘Excluded goods’ - 55Source: McDowall S. and Draper P., (1978), Trade adjustment and the British jute

industry: a case study, derived from Board of Trade Journal, 16 Aug 1963.

Firm’s response to declining markets (1)

Firm’s response to declining markets (2) Related Diversification:

Polypropelyene and artificial fibres

1966 Polytape Ltd & Synthetic Fibres (Scotland) Ltd.

Low & Bonar – related global textile markets

Disposable & non disposable yarns

Firm’s response to declining markets (3) Unrelated Diversification

Low & Bonar – engineeringJute Industries – oil & services with a UK focus1971 Sidlaw Industries1972 Aberdeen Service Company

Grampian Developments Ltd.

Jute Industries & Low & Bonar today Sidlaw Industries sold to Danisco in 1996

a major Copenhagen based industrial packaging business and in 2011 became part of Du Pont

Low & Bonar remains a textile manufacturer

Conclusions

Relative economic decline vs economic transformation

Firms as agents. Responding to signals Management of decline contrasting periods;

Continuing role of industrial policy under globalisation