THE RATIONALISATION OF INDUSTRY

Otago Witness, Issue 3862, 20 March 1928, Page 5

THE RATIONALISATION OF INDUSTRY

WHAT IT WILL MEAN TO THE EMPIRE.

By A. E. Tomlinson.

’(Special fob the Otago Witness.) The future of Empire is a future of Empire trade. That is a truism which many far-sighted men have striven to carry into practice in the past, and which all equally far-sighted men realise to-day. Trade is the backbone of Empire, and is is essential that every thinking person in the British Commonwealth of Nations should understand the transitional period through which industry is passing to-day. Only through such understanding can we hope to progress to the ultimate ideal of the Empire as the greatest single economic unit the world has ever seen or traded with. British industry to-day is in a state of transition—transition from the old played-out theories of cut-throat competition and the so-called free play of economic laws to the new era of co-operation, regulation of output to consumption, and unification on a national and Imperial basis; transition from the methods of rule of thumb and muddle through to the new era of science and scientific organisation —and the outstanding feature of this process of transition is what is called “ rationalisation.” Many people may confuse rationalisation with nationalisation, which is about as near the mark as confusing efficiency with deficiency. As a matter of fact, it is very difficult to give an exact definition of rationalisation, because it is so many-sided, and manifests itself in so many different forms and processes. A fairly comprehensive definition is: “ The full application of science and scientific method to industry secured by unification of all the processes of production and distribution.” In short, rationalisation is simply the best use of brains and co-operation. It is the very latest phase in the natural evolution of industry. Cut-throat competition amongst all the warring tribes of commerce is. as dead as the feudal system. The old order of things, when every manufacturer was out to beat his neighbour, and to hustle him into liquidation if possible, when your neighbour’s profits were supposed to be your losses, has gone .the way of Saxon heptarchy. “ Lunatics never combine,” said Mr Keynes, t’ famous economist, and he further pointed out that the old beggar-my-neighbour policy was so devastating that every go-ahead and prosperous industry spent half its time trying to get rid of it. Combines and amalgamations which we see sprouting so vigorously in the fields of industry are but one step, a very important step, in the process of rationalisation. Combines by bringing the whole of an industry in all its branches, raw material, manufacture, research, sales and distribution, finance, under central control facilitate the full use of scientific method which is the essence of rationalisation. The old trusts aimed at profits and high prices; the modern combine aims at service and efficiency. It is simply the logical result of the scientific outlook in business, and as such it is its own justi* fication and defence. It is the last word in scientific method and organisation, and it is the finest instrument which the best business brains of the Empire can use for furthering the interests of the Empire’s industries. What are the solid benefits of the combine as a step in rationalisation? First, we have finance; a large-scale company with a large reserve and va«t resources can obtain its capital for extension and development at a much cheaper rate and with much greater facility than the smaller concern. Then we have the question of raw materials; the big combine is in a much better position to secure cheaper markets and to guard against exploitation; often it is the actual producer of its own raw’ materials, as when steel firms own collieries, iron ore mines, and limestone quarries. All this makes for economy and efficiency. Coming to actual production w r e find that modern plant and equipment often

demand the expenditure of millions of capital, and is constantly being superseded and calling for replacement. Only a big combine fitted for large-scale production can afford to lay down such plant and to keep it up to date at the lowest possible cost. Then, again, the combine can attract the finest technical and administrative brains to its staff, afford them ample scope and opportunity. In modern industry the part played by research and new inventions is everincreasing, and this is one of the very strongest arguments in favour of the combine. By a pooling of brains, by an adequate financing of research, and the results of research the combine can advance whole decades ahead of its smaller competitors. It can test and utilise all the latest processes and devices, and in its own great research laboratories has a most powerful instrument of enterprise and progress. ; The last link in the'chain is distribution, and here the combine has a very obvious pull—indeed, ’ many modern fusions are formed simply for the marketing and selling side of the industry. A large-scale business is in ready

touch with all the available markets; its sources of information are fresh and up to date; its agencies cover world markets, and it is able to throw out its huge efficient tentacles in any direction. In all markets, it commands respect, and secures all the economies of central control.

Such are but a few of the benefits of amalgamations, but there are patent economies and advantages in a thousand directions. On the Labour side a big company can afford to give its workpeople better conditions, more security, and a generous provision of welfare and recreative activities—indeed, many responsible Labour leaders have already given the combine its blessing. Combines are but one step in rationalisation. Another aspect is the control of world markets and the stabilisation of prices. Stabilisation is one of the crying needs of industry to-day, and is con-stantly-called for by leading economists. Unrestricted production without reference to the needs of consumption is archaic. It results simply in violent booms and slumps, with industry tossed on the gigantic waves of alternate prosperity and distress.

It is the aim of rationalisation to oil over and smooth down those waves, and to provide industry with a level fairway for its advance. This brings 1 us to the question of the Imperial cartel as a final step in the evolution of British industry. In the transition stage of the new organisation of industry into rational units the first essential is the unification of industries on a national basis, but this should be but a step towards rationalisation on an Imperial basis. The way has already been shown by the creation of the huge Empire chemical combine, Imperial Chemical Industries, Ltd., which has been formed with the avowed and definite intention of concentrating on Imperial trade in its own branch of industry. It is a big venture and an entirely novel one, but the British race has a genius for doing things on the big scale, and Britons have never shied from the word- “ impossible ” in building their heritage up. The chemical industry has given a lead to the Empire, and when other industries follow suit, as they assuredly must, we will be moving perceptibly nearer the ideal of a single Imperial economic unit. There are many difficulties and dangers in the wav.

The dangers are, first, the habitual apathy of the Briton on questions of the first importance like this; and, secondly, the risk that Britain or other components of the Empire may be tempted by immediate economic benefits or by geographical contiguity into other economic units than the great Imperial one. This second danger cannot be regarded lightly. Looking at the world to-day we find a new regrouping and reorientation of forces taking place. On one .side of the Atlantic is a rich and enterprising country with immense natural resources, no lack of brains and vitality, intensely materialistic and highly efficient. Though almost the.size of a continent, it has free trading within its borders and has the whole of a vast home market sheltered behind mountainous tariffs. Already one of the dominions, Canada, does a greater volume of trade with that country than with Britain, and there will always be a force of trade gravity drawing them to a closer rapprochement. Ihe United States is one great economic group. On the other side of the Atlantic we have gradually forming another economic group, the projected European Customs Union. Faced by severe competition from the United States, the various countries and nations are being driven to sink their prejudices and animosities and merge their interests in an economic alliance. This second world grouping, the European Customs Union, has become almost a fetish with business Mn on the Continent. Amid all thes e contending forces, what is to be the position of Britain? On the one hand she is being urged and cajoled to join the European complex; on the other side is the possible policy of isolation. Either of those alternatives would mean sacrificing all that we gained and all that we bled for in the Great War.

there is only one policy for Britain, and that is the policy of Empire. Standing alone, she would be swamped by the other world groups. Joining any one of •them she would fatally weaken ’ tb e ties of Empire and throw away the trump card in her hand. As a component part of the British Commonwealth of Nations, however, she would face w’orld competition without a qualm. A few figures strikingly illustrate the position. The United States has an area of ’3,000,000 square miles with a population of over 100.000,000; Europe, an area of less than 4,000,000 square miles and a population of 420,000,000; Britain, an area of 88,000 square miles and a population of less than 50,000,000. Take the Empire as a whole, however, and we find that it has an area of twice that of Europe and the United States put together and a ' population greater than Europe! In raw materials and natural resources the Empire, is equally predominant, oil being practically the onlv one in which she is at present at a disadvantage. The Empire has a huge preponderance in rubber, nickel, and jute; she leads in gqld and tin, and has ample supplies of other minerals. Her coal resources are enormous; in foodstuffs she produces 27 per cent, of the world’s supplies of wheat in rice 66 per cent., in cattle 53 per cent.* and in sheep 51 per cent. An equally encouraging tale is told with other commodities of all kinds.

The Empire then is easily the world’s greatest economic group. " Nor is she behind m brains, vigour, push, and

technical ability to develop her resources. She has an undisputed reputation for jus- - I , c . e,’. s P ol 'ting spirit, • and administrative ability. All that is needed is full economic cooperation. How that can be secured is for th e business men and industrialists of the Empire to work out. We cannot expect those countries, like Canada and Australia, which have fostered young industries behind tariff walls to sacrifice them and b e content with farming in all its branches. All those problems would have to. be solved by means of quotas of production and allocated markets together with an Imperial compensating pool for such industries as suffer under the new arrangement. All these devices are familiar to anyone. versed in the direction of great industries, and could easily be put into operation. Finally, the whole Empire economic unit would have to be protected by tariffs, but with complete freedom of trading within its own borders. To achieve this we must proceed by the modern . road of rationalisation, rrom rationalisation on a national scale w e will the more easily step to rationalisation of all the industries of the Empire. This is looking far ahead, and to many it may seem a vision of impossibility One thing i s certain: to the ties already existing of race and sentiment must be added the solder of trade and the cement of economic advantage. Without them the whole structure of the British Commonwealth of Nations is imperilled ; with them we can build an edifice which will stand the shock and strain of centuries and ever grow stronger and more sublime.