Control by coercion: employers' associations and the establishment of industrial order in the building industry of England and Wales, 1860-1914.
For while employers' associations in the building trades flourished during this period, they have seldom received detailed consideration.
These associations sought not only, as Smith contended, to keep down wage levels, but also to collude on a much wider front. They sought, in fact, nothing less than the establishment of industrial order--that is, the disciplined regulation of the work force--so that they might better stabilize a previously highly volatile industry.
This article focuses on two strategies--the "inter-trading rule" and internal organizational reform--used by employers to achieve this goal. Also considered are the wider industrial and social setting of employer-employee relations and the impact of this setting on urban development.
Historians' preoccupation with the performance of the late Victorian and Edwardian economy has, perhaps understandably, distorted the study of British business history. Emphasis has been placed primarily on company performance, technological responsiveness, and commercial developments. Biographical studies of business executives have similarly focused largely on interfirm relations, deflecting historians from taking seriously Smith's incisive observation on the employers' role in the management of the work force. Yet the history of the British building industry in the period between 1860 and 1914 suggests that employers' attempts to manage the work force, and trade union reaction to these attempts, may have shaped the pattern of British industrial development more than has typically been recognized.
While American historians have placed great emphasis on the management-labor interface, British historians, and labor historians in paticular, have largely confined themselves instead to the legal and institutional history of trade unions. Though politically sympathetic to labor and familiar with source material pointing in this direction, British labor historians have only recently discovered the historical dimension of industrial relations. While certain scholars like V.L. Allen and J. H. Porter continue to confine themselves to the institutional approach, others--including Keith Burgess, Chris Wrigley, Roger Davidson, and Roy Hay--have begun to integrate the study of industrial relations into the larger social and political framework of late Victorian and Edwardian industrial capitalism. Studies of employers' associations, however, are still few in number. This article, accordingly, investigates the factors that prompted the establishment and development of employers' associations in the building industry; describes certain methods the employers used to solidify their position; and surveys their achievements up to World War I. thereafter, the use of wartime building licenses as well as the extensive postwar public building program forever disrupted whatever resemblance the industry previously had to the neoclassical model of profit maximization and rational resource allocation.
THE BUILDING INDUSTRY
By 1900, employers believed that the building industry was fast approaching anarchy. There was good reason for this pessimism: the industrys' structure was inherently unstable and output fluctuated wildly because of imprecise appraisal of likely future demand. Because of the atomistic nature of the productive unit as well as the virtual absence of barriers to entry, builders' long-term interests were often undercut by calculations of short-term gain.
In the half-century before 1914, housebuilding was the single most important component of fixed investment, representing as much as 33 percent of British capital formation in some years and only rarely falling below 22 percent. Furthermore, percentages tend to underestimate its significance, since investment in housebuilding significantly affected investment in such sectors as transportation, public utilities, and consumer durables. An important characteristics of housebuilding investment was its cyclical pattern of recurrent peaks and troughs occurring in cycles of approximately twenty years' duration. The variation within cycles was quite dramatic: peak production was commonly ten to fifteen times that of the trough. Because of its size, measured in terms of either investment or employment (it employed about one male worker in ten), the building sector occupied a key position in the national economy.
Residential construction--the most durable form of capital investment--was characterized by particularly long investment cycles. The effect of the low rate of obsolesence on this cycle was most apparent in the trough, since capital depreciation--which in other industries eliminated excess capacity and rekindled investment and production--was particularly slow. Since this was the case, the trough's duration was lengthened. During upswings the industry was beset by the opposite problem: with only a small percentage of the total stock of housing unints constructed in a given year, the building industry was ill equipped to expand output quickly. Since response times ("reaction lags") were lengthy, the cycle was distended.
The nature of firms in the industry also heightened the cyclical nature of nineteenth-century building. In the regional subdivision of late Victorian England and Wales, 70-90 percent of firms employed fewer than ten operatives; 50 percent employed fewer than five men. Frequently in Scottish burghs more than half of the houses were built by firms that undertook only one or two housebuilding projects each year. Because capital requirements were limited, credit was easily available, and builders were not required to prove their skills or offer other credentials, a bandwagon effect was created in the initial phases of a boom. Only a crude code of municipal building bylaws, often poorly enforced, regulated the quality, type, safety, or number of houses put up at such time. A speculative surge developed in anticipation of continuing demand; in the slump that inevitably followed, many builders went into bankruptcy. When demand eventually revived the housebuilding sector lacked the firms and skilled labor to respond and in any event was reluctant to do so until the surplus housing stock was eliminated, a process that might take ten years. With the insensitivity of rents, the complicated structure of demand in its demographic and income components, and the small size of the firms involved, adjustments of supply to changing demand conditions remained crude.
Many self-styled builders were essentially transients in the industry. Their operations were the logical outgrowth of a carpenter's or mason's skill combined with easy credit and a network of subcontracting contacts--plasterers, plumbers, glaziers, and so on. When demand slumped or credit was interrupted, such operations ground to an abrupt halt. Longer-term participants in the building industry were then forced to acclimatize themselves to new market conditions in the aftermath of an overexpansion: excess supply, depressed demand, and virtually no obsolescence to remedy the imbalance.
As a result of "overspeculation" in the mid-1870s and the severe reaction that followed the 1876 boom, various constraints were introduced in the ensuing years--principally more cautious advances from credit institutions and a more widespread adoption of building regulations. These contraints restrained building fluctuations somewhat. Nevertheless, as seen in Table 1, the industry remained highly unstable, with the index of building work varying annually by nine to almost fourteen points in the regional groupings in the period 1890-1914; in individual urban centers the indexes often moved by more than twenty points each year. Other capital-goods industries were more stable. For the years from 1890 to 1913, the index of all manufacturing output moved 3.62 points each year on average; the building index moved an average of 6.15 points (see Table 2). The fluctuations in building output were 70 percent above fluctuations in manufacturing as a whole; by contrast textiles was only 30 percent and engineering 28 percent above the manufacturing total. Not surprisingly, building is usually excluded from indexes of industrial production, because its peculiar instability would skew the overall index.
Coupled with these structural problems were some acute, more recent difficulties, principally rising labor costs and declining labor productivity. Table 3 shows the long-term rise of labor costs as a proportion of total building costs. This trend, combined with a decline in labor productivity estimated to be as much as 14 percent in the period 1890-1910 alone, indicates that the employers' complaints about their operating conditions were not without foundation. Reflecting on the decline in labor productivity, the Building Trades Chronicle commented:
Twenty years ago the bricklayer would lay his 1000 bricks a day when on ordinary work.... [it is] an unwritten law of today  that he lays 400. It is not against the bricklayers alone that complaint of "go easy" practices are brought. From the navvy who digs the foundations to the painter who puts on the last coat of varnish all the men engaged in the building trades are declared to be "tarred with the same brush" in regard to doing less work for more money.
J.H. Clapham reiterated the employers' claim that labor productivity had been halved in the thirty years before 1890, a conclusion also reached by the Glasgow Municipal Commission on the basis of detailed calculations provided by its witnesses.
In such a labor-intensive industry the increasing share of labor costs in total costs was a matter for alarm, if not panic, among building employers. The escalation of labor costs, as A. K. cairncross has shown, was a central force in the collapse of building booms. Rising building costs and recession in the industry were strongly correlated, and he observed that "in 1877, 1899 and 1903 there are clear maxima in building costs and the bursting of a speculative bubble; in 1883 there is another maxima that may have checked an incipient revival." With materials costs falling (Table 3), the Victorian builders saw that wage costs were the critical element in stifling the recovery, or rendering "the final coup de grace" to building booms. Quoting quantity surveyors from Glasgow, Cairncross also noted that a penny on masons' wages added ten pounds to the price of a house. Victorian builders may not have been familiar with the concept of elasticity, but they fully understood that raising wages, and thus product prices, would choke back demand for housing.
During the fifty years before 1914, the American building industry moved increasingly toward the use of high-rise steel-framed buildings, elevators, and related capital-intensive developments. This trend forced organizational changes and increased average firm size. In the British building industry, however, this influence remained largely absent. Conservative building bylaws prohibiting the use of cement and steel construction for certain purposes and excessive load-bearing requirements limited builders' ability to reduce costs through new technologies. Largely traditional construction methods endured. Cement construction, for example, was largely limited to lintels, doorsteps, or non-load-bearing partition walls. Steam-driven machinery for stone dressing or woodworking remained the exception, and the industry was slow in adopting mechanical wood planing, tongue and grooving, and other woodworking techniques. This resistance to change, acknowledged in the 1950s, was confirmed in A.E. Musson's analysis of the 1870 returns on steam horsepower in industry sent to the factory inspectors. Average steam horsepower in building was one-third the average level for British industry. Clapham's survey recorded virtually no significant technological advance in buidling technology before 1886, a conclusion reinforced and chronologically extended by D. L. Burn and Nathan Rosenberg. Thus, like othe sectors of the British economy, the building industry was aware of the best technological practices but was slow to adopt them. Technological advance proceeded more rapidly in American industry. While "cost reducing technical improvements in building were slow-moving, the evidence of their emergence mainly after 1850 suggests that they contributed to making the relative price of building move a little more favorably from the building owner's point of view." To some extent, rising labor costs and declining labor productivity were offset by limited technological change and reorganization within the workshop itself.
Just as employers' costs of production were rising beyond their control, their volume of production was also threatend. Municipalities were becoming more involved in the provision of lodging houses, transport facilities, and gas and water services, as well as schools, hospitals, workhouses, and other institutional buildings. Increasingly they established labor departments both for new construction and for repairs and maintenance. Foremost among these was the London County Council, which was conspicuously active in the 1890s and which, by the turn of the century, was an important element in the building industry. Elsewhere too municipal building departments undertook substantial, financially guaranteed, and often countercyclical council work. Indeed, a further threat was on the horizon, for a suggested solution to working-class housing problems, anticipating that of the 1920s, was that local authorities should build and rent on their own account, a strategy vigourously opposed by builders and landlords alike.
Thus for a variety of reasons, both real and imagined, producers discovered that the product market was becoming increasingly uncontrollable. Building regulations and municipal activities jeopardized employers' control over the methods, designs, and therefore costs of production; trade union pressures made it more difficult to control employment conditions and rates. As the century closed, external constraints on the productive, decision-making unit, the building firm, increased. It was perhaps inevitable step that employers should act collectively to seek tighter control over their daily sphere of operations.
Builders met these challenges to their market position with a variety of responses. As early as 1834 the London Society of Builders was formed to "promote a friendly feeling and the interchange of useful information among those who were engaged in general building in or near London." This voluntary approach to employers' associations was later replicated in the National Association of Master Builders, based in Liverpool and Manchester, which survived only six months after its formation in 1858, and in the loosely structured Central Association of Master Builders in 1859. After the London building strike of 1859, efforts were made to promote employers' associations under the auspices of the General Builders' Association, formed in the mid-1860s. By the end of the 1870s the GBA had active employers' branches in seventy-five to eighty towns in the west and north of England, its main geographical stronghold. Whereas the London builders had taken an aggressive stance of confrontation in the 1859 strike, the GBA had more conciliatory objectives. As its secretary explained, it existed "for the purpose of, as far as possible, enforcing arbritration for the settlement of all disputes between masters and men.
On the basis of its widespread geographical coverage, the GBA presented ideas for a framework of employer-employee relations to the Royal Commission on Trades Unions in 1867. Through its journal, the Builders' Trade Circular, and by initiating a system of hourly rather than daily wage payments, it made a substantial contribution to the consolidation of employers' associations in the building industry. The moderate position and conservative horizons of the GBA during the 1860s and 1870s achieved as much as was possible during periods of generally buoyant trade, when individual considerations superseded consolidated collective action. But the GBA was fatally flawed in two respects: (1) disunity among builders within individual towns, due mainly to the ease of entry to the industry and the high rte of bankruptcy and turnover among firms, and (2) the noninvolvement of the London builders. These handicaps had to be overcome if building employers' associations were to be effective. The Builders' Trade Circular commented in 1879:
Scarcely any trade under the sun has been more harassed and damaged by internal discussions than has the building trade and although the General Builders Association was calculated to remove them in great measure yet without the active co-operation of the great London builders the organisation was fatally deficient.
Thus in a product market both local and immobile, it proved virtually impossible to introduce cohesive employers' organizations in the fragmented building industry, in which competition among employers to secure contracts was the rule rather than the exception. Indeed, given the instability of the nineteenth-century building industry it was tactically sound for the employers to resist any attempts to bind them to prices, quotas, or tendering arrangements. In the upswing there was enough work for most firms, and in the downswing the maintenance of independent action was an essential weapon in securing contracts for the long-term operators in the industry. For the opportunistic speculative builder, the downswing would imply either bankruptcy or, at best, a return to subcontracted work, or even employment as hired labor. Whatever the outcome, for this type of builder, employers' organizations offered very limited benefits. Such employers' associations as did exist were typically responses to short-term local crises posed by strikes or lockouts, as in the 1859 London confrontation. In many areas and for most of the nineteenth century, when the immediate cause for cooperation was removed, the employers' organization almost invariably dissolved and disunity resumed as the individual interests of firms became paramount again.
Association was therefore an almost entirely defensive expedient. This central characteristic continued in the National Association of Master Builders, resurrected, significantly, during the acute cyclical downturn in building activity in 1878. It was again predominantly a northern and midland association, and the London employers were accused of offering only lukewarm support. The association's activities continued along lines already established, with only occasional important departures such as the reemergence of the Central Association of Master Builders and the development of uniform working rules governing the major building trades in London and extending to a twelve-mile radius from Charing Cross.
Conditions toward the end of the century decisively shifted the employers' conservative stance and individualistic orientation. An unusually extended period of depressed building trade followed the peak of 1876 and continued, with occasional respites and local variations, until the late 1880s and early 1890s. Most significantly, after some years of buoyant trade in the 1880s the London building industry also experienced difficulties toward the end of the decade, which swung participants there behind wider forces for employer solidarity. The customary antipathy to collective employer action proved susceptible to a fundamental reappraisal during this period of protracted business difficulty. This reevaluation was all the more urgent because of longer-term strains that were simultaneously emerging, namely municipal building work, deteriorating labor productivity, and an escalating ratio of labor to total costs of production. The squeeze on profit margins in all phases of the building cycle was a cogent argument for a reexamination of attitudes toward collective action.
At least four other factors were influential in reshaping building employers' attitudes toward collective action. All were connected with the independence of the individual firm and the sanctity of the business unit as a decision-making organization. First, firms were increasingly threatened by the growing strength of unionism. In contrast to trends in other industries, the building unions did not decline in strength during the early 1890s, as can be seen in Table 4. The unionized proportion of building operators doubled between 1888 and 1901, when 20 percent of the industry's workers were union members. If there was some general reduction in the unionization of building workers between 1901 and 1910, this trend was avoided in specific trades such as the carpenters and joiners, where one in four was a union member in the early twentieth century. These figures, according to the chairman of the Master Builders' Association, explained the increase and development of his group, and he went on to comment on the arrogant behavior of the trade unions.
The financial strength of the five major building unions also increased, with reserves rising from 133,426 [Pounds Sterling] in 1891 to 180,371 [pounds Sterling] in 1895. Table 5 shows the stark contrast between growing union strength and diminishing employer financial power in the 1890s. The chairman of the Master Builders' Association observed. The disparity between the financial support given by the trade unionists in the building trades to their mutual organisation and that forthcoming from the employers for the national protection of their common rights and interests makes one blush. Recognizing that the unions' financial strength represented a threat to their business, building employers became more aware of their common interests. The unions themselves recognized that their successes might spur more consolidated employer action. For example, the 1895 annual report of the Amalgamated Society of Carpenters' and Joiners' remarked that "the progress of our society has undoubtedly been highly satisfactory." However, the society's president also observed the mobilization of employers: "I sometimes fear that the knowledge of our increasing strength often causes us to underestimate that of the employers ... and that we do not realise the new forces that are being arranged against us." The more discerning observer could see that a change in employer attitudes was under way in the 1890s.
A second factor influencing employer attitudes was the Royal Commission on Labour. Its final report, issued in 1894, stressed that "peaceable relations are the result of strong and firmly established trade unionism" and that orderly industrial relations were best conducted by organized groups representing labor and capital. On the reasonable assumption that the problem of organized labor was not likely to disappear, there was a clear administrative advantage to negotiations conducted between groups representative of both employers and workers. As the Royal Commission observed, "the increased strength of organisation may tend towards the maintenance of harmonious relations between employers and employed in a manner suitable to the modern condition of industry." Establishing a counterbalancing negotiating stance could help employers by reducing the incidence of costly strikes over petty issues. Negotiated wage settlements would constrain one of the variables in the producers' cost equation. Interruption of production would be restricted; costs of production would be known, at least for a prescribed period. As building unions had become increasingly amalgamated and federated by 1900, employers previously unprepared to relinquish their operational autonomy now became more willing to enter into coordinated action. Indeed, until employers achieved a degree of consolidation the industry remained in what the Royal Commission saw as the most volatile phase of industrial relations:
The most quarrelsome period of a trade's existence is when it is just emerging from the patriarchal condition in which each employer governs his establishment and deals with his own men with no outside interference but has not fully entered into that other condition in which transactions take place between strong associations fully recognizing each other.
The third force producing a more confident stance among building employers was a series of court decisions. In the case of Temperton v. Russell in 1893 the officers of various building trades in Hull were held liable for damages to an employer for having persuaded workmen not to renew their contracts with the employer. The workmen had come to the end of their contractual period and were, seemingly, free to seek employment elsewhere; no intimidation had been suggested in this case. Yet the courts endorsed the position of the employer. An equally favorable decision resulted from the Trollope v. London Building Trades Federation case in 1895. Trollope and Sons were granted recoverable damages because the Trades Federation blacklisted them as "unfair" employers. Decisions in the courts dealing with other industries further undermined the unions' position. The legality of picketing became questionable after the Lyons v. Wilkins case in the leather industry in 1896. To a degree, therefore, unions found themselves under attack in the 1890s; occasional decisions in their favor merely added further confusion to the legality of their position. More generally, a favorable disposition toward mergers and employers' organizations existed in a wide range of British industries, and in this climate building employers were emboldened to undertake more forceful collusive action.
Finally, the builders' independence of action was further threatened by the possibility of conciliation and arbitration procedures compulsorily applied by the state rather than as a voluntary extension of employer-employee relations within the industry. Negotiating and other procedures--which culminated in the Conciliation Act of 1896--were under discussion on a national basis in the 1890s. Building employers were anxious to shape policy and influence the outcome of such consultations. Employers felt that representations from builders were needed in these and other areas (for example, workmen's compensation and discussions regarding social welfare in general) lest state encroachment put the conduct of industrial relations in a framework beyond the control of building employers. Employers would have to speak through delegates representative of builders as a whole, which logically required national orchestration of local organizations. Local master builders' associations existed in many of the major towns and cites of the midlands and northern England, and the National Association of Master Builders (NAMB) represented a national executive. However, the NAMB still could not generate a membership or, more crucially, financial reserves sufficient to offer an effective presence in many disputes. In 1890 the NAMB president conceded that, "in comparison to the resources and membership of unions, it was a disgrace that employers of the NAMB should only be able to muster such a beggarly array of names, a situation which would have to be reversed if the NAMB were to grow and be of any use ..." Within many towns significant proportions of builders remained outside the association; nationally many areas were underrepresented or not represented at all. Collusion could not be effective while those free agents remained outside the arrangment. So long as rich pickings, or at least an adequate supply of work, remained for the independent builders, they were unlikely to join an employers' association voluntarily. Only bribery or coercion would bring such builders within the orbit of the employer's association, as needed to achieve industrial control.
Developments in the last Victorian decade seemed to herald a change of heart on the part of the employers. Certainly the buoyancy of the building industry from the mid-1890s to the early 1900s helped obscure some of the underlying problems that confronted builders, but there remained an urgent need to counterbalance the growing power of both labor and the state with the concerted views of building employers. Illustrative of the new resolve was the NAMB president's reaction to the growth of building unions riding on the groundswell of new unionism:
The unreasonable demands and interference of trade unions were forcing the local associations into district federations. Many members considered that the time had now arrived for local associations to be federated so as to enable neighbouring towns and districts to work in greater unity and secure united action in dealing with disputes.
Builders also seemed to show a stiffer resolve following the engineering employers' lockout of 1897. The Master Builders' Journal commented, "there had been no better a contest against increasing demands--demands to manage the masters' business instead of them being allowed to manage their own." Building employers drew further strength from the creation in 1893 of the Freedom of Labour Protection Association, a "blackleg" labor organization active during the engineering dispute, whose rules had been drafted by the NAMB and CAMB presidents in association with others. From these counter-offensives emerged the Employers' Parliamentary Council, a counter-weight to the Trade Union Congress pressure group in Westminster, the Parliamentary Committee. The evidence of the Parliamentary Council to the Royal Commission on Trades Unions in 1904 clearly outlined the employers' stiffening attitude and new-found confidence, for their objective was "to test systematically the efficiency or otherwise of the existing laws for the protection of free workmen and if necessary to obtain an amendment to the laws. By the turn of the century, therefore, the struggle for power and influence in the workplace had spread to the political stage and the courts.
THE INTER-TRADING RULE
The builders' new self-confidence was in part the product of a revamped internal structure in building employers' associations. Previously restricted to builders, the associations in several parts of the country widened their membership definitions to admit virtually any employer involved in the building process. From 1892 in Liverpool and from 1894 in Lancashire, Cheshire, and North Wales, firms of plasterers, masons, and slaters, plumbing and carpentry firms, and most significantly, suppliers of building materials became eligible for membership. The associations recognized the failure of alternative strategies geared toward greater employer solidarity among builders themselves. Nationally the membership of local Master Builders Associations appeared to have reached a plateau in the early 1890s. Their financial strength was limited and thus so was mutual support when confronted with the demands of labor. Real benefits for members were consequently marginal, while significant numbers remained outside the employers' association. Recruitment drives had met with only temporary success; lowering dues had done little to build membership, but had exposed the slender financial reserves of the employers' association. Broadening membership to include all types of employers involved in the building industry was virtually the only remaining untried strategy to achieve a more cohesive front.
The expanded structure of employers' organizations in the north and west of the country understandably attracted attention elsewhere. During the mid-1890s the debate surrounding amended rules for entry continued at both local and national levels. Meetings in 1897 and 1898 saw a loosening in the attitudes toward a broader definition of building employers. The formal change at the national level came in 1901, when the National Association of Master Builders changed its name, in recognition of the wider eligibility for membership, to the National Federation of Building Trades Employers (NFBTE). By 1906 this organization had established a permanent secretary, rationalized existing arrangements into a national conciliation scheme, and introduced a national contingency fund to support local builders in their united opposition to the demands of labor.
Such initiatives at the local and national level reorganized the internal structure of employers' associations in the building industry. However, wider eligibility for membership was one thing; enlistment and actual payment of membership dues was another. How, then, was membership transformed from lukewarm support to enthusiastic recognition? The obstructions to effective employers' action were removed by two vital changes in the 1890s: employers' reevaluation of their vested interests, and of the contribution that collective action could make; and the constitutional reforms that facilitated industrial strength through the expanded recruitment of building employers. But it was the application of a sanction, the "inter-trading rule," that molded employers' associations in the building industry into a cohesive and effective force.
The inter-trading rule was an explicit attempt to impose disciplined practices on building trades employers. If necessary, it was to coerce them into joining the employers' association. The principal objective was to offer a premium for membership, to impose a penalty on the free agent. The rule stated:
(a) That we the members of . . . Building Trades Employers' Association hereby mutually agree not to give or take tenders from or otherwise employ or deal with the regular employers in the building trades of this district and who are not members of this Association, or with a regular member of any other district who is not a member of the . . . Federation or some other branch of the National Federation of Building Trades Employers to which this Association is affiliated.
(b) We agree when placing an order for building Materials in this district to do so with a dealer or manufacturer of this Association if practicable and will in all cases give such members a reasonable preference. Should it become necessary to place an order for materials with a non-member of this or any other district we will use all reasonable efforts to induce the firm to join this or some Federated Association.
The Liverpool secretary, B. Moss, commented on the effectiveness of the inter-trading rule in compelling would-be independent builders to join the employers' association: "I have known a case where a sub-contractor had been in the habit of doing work for about 30 different firms and thought he could do without joining. But through the instrumentality of the inter-trading rule he was forced to come in because not one of the firms would give him a job until he did so.
The diversification of membership beyond builders to other trades, and especially to builders' merchants and suppliers, had a far-reaching effect. Without such an internal reorganization of the employers' association, strong-arm tactics like the inter-trading rule probably could not have been effective. Indeed, had the employers' association not expanded from the NAMB to the NFBTE, the exclusion sanction of the inter-trading rule would have been worthless. The inclusion of suppliers was a particularly potent force compelling building trades firms to join the association. The immediate effectiveness of the reinvigorated employers' associations can be gauged by the willingness of firms to sacrifice their independence of action on the altar of collective mutual benefit. A further rule stated that, "members of this association shall not negotiate or attempt to negotiate with any association upon subject affecting the trade generally . . . but all communication with such associatins shall be made through the secretary, under direction of the committee.
The extensive interlocking of employers within the building and related trades was the most powerful force in the widespread adoption of the inter-trading rule. At a specially convened conference of association secretaries in 1906, the Oldham secretary, E. Dean, stressed that the sanction of exclusion from the association generally forced "an employer who has no other interest in the Association than to obtain work under the inter-trading rule to be attracted to membership." The coercive nature of the inter-trading rule and the sanctions associated with it were spelled out in more detail by the Liverpool secretary: "A quiet invitation by letter or call is absolutely no use unless you have a strong lever by way of strict rules at the back of you . . . you must have rules which compel firms in the trade to join the Association. The inter-trading rule must be adopted."
The inter-trading had originated in Liverpool. Since the founding of the employers' association there in 1866, membership had remained fairly static at about 75; until the inter-trading rule was adopted in 1886, subscriptions had never risen before 100. Thereafter recruitment improved conspicuously, most noticeably after the mid-1890s. By 1901 there were 160 members; by 1906, 280; and by the following year, 400, making the Liverpool Association the largest building employers' organization in the country. The Lancashire, Cheshire, and North Wales association also expanded rapidly. At the beginning of 1897 this group had 661 members, by the end of 1898 some 1,400. In July 1899 they numbered 1,612 subscriptions to their organization. The broadening of eligibility for membership to include all building trades was a vital prerequesite for this expansion in recruitment, but it was the inter-trading rule that acted as the spark.
Among the advantages offered by the inter-trading rule, perhaps the most important was employer solidarity in disputes with labor. Under the rule, a single employer could not be picked off individually by strike action; a strike would not cripple one producer alone, but would hurt competitors also. The rule also stiffened employers' resolve in wage negotiations, especially in the upswing phase of the cycle when they were more vulnerable to the disastrous cash-flow effects of interrupted production. Negotiations conducted on a collective basis fixed wages for an agreed-upon term, thereby stabilizing one crucial element in employers' costs of production, in the short term at least. The inter-trading rule also offered preferential discounts to members for building supplies and a certain degree of order in tendering practices, so that already thin margins were not eroded unnecessarily by materials costs and competitive underbidding. Building employers thus attempted in a limited way to dictate the distribution of work among themselves. The prospect of a controlled contract tendering system was in itself an inducement for many builders to join the association, particularly the smaller ones who could not otherwise secure bulk discounts and would thus be forced to submit higher tenders. To this type of firm, the certainty of some work eventually proved an appealing reason for joining. Solidarity also became increasingly valuable to builders in their dealings with local councils. Nationally the presentation of a coherent builders' view through the Employers' Parliamentary Council proved advantageous at a time when the status of unions and employer-employee relations was being debated.
Thus the inter-trading rule solved the wo principal problems confronting building employers at the beginning of the twentieth century. First, in the most volatile of product markets it offered some prospect of securing work without resorting to uncontrolled tendering practices, which often left such a thin margin of profits that a firm was dangerously exposed if unforeseen difficulties arose or prices increased. At the very least some measure of control over tendering arrangements lessened the risks borne by builders. Second, the inter-trading rule offered a solution to the stagnation of membership growth in the 1890s, which had left the national organization financially vulnerable. Before the adoption of the rule, the employers' association had little clout with either trade unions or its own members; afterward, remaining outside the association when the volume of work was contracting rapidly would have proved fatal to many employers, especially in the worsening cyclical circumstances of the post-1905 period.
The inter-trading rule was never adopted by the national organization, however. It remained a local decision. The membership increased in Liverpool, and the resultant financial solidarity was frequently extolled as local associations deliberated the merits of the rule. The Sheffield secretary, for example, pointed out that his association's membership was only slightly above that of the Altrincham association, although Sheffield's population and building activity were about seven times greater than Altrincham's. A year after the rule was adopted in Sheffield in 1907, the "membership was making marked advances as a result of the adoption of the rule." By 1909 the Sheffield Association had doubled its 1906 membership levels. A similar dramatic upsurge in employers' association membership took place in the midlands following the adoption of the inter-trading rule. Initially Birmingham and Nottingham used the rule, but soon Leicester, West Bromwich, Wolverhampton, and a number of smaller boroughs were drawn into the web, and the rapidly rising membership roll reflected the developing geographical coverage. In Birmingham alone the NFBTE membership rose from 84 in 1908 to 179 in 1910.
Perhaps most important of all was the amendment in October 1909 to the London Master Builders' Association rules. Rule III(b) stated that, "other things being equal, preference in ordering goods shall be given to builders' merchants who are associate members." The inclusion of builders' merchants again proved instrumental in extending association membership. A year later members agreed that all matters of policy on a wide range of topics should be the concern of the association, thus suppressing the liberty, scope, and operations of individual firms. There was a "striking degree of uniformity" in the decline of building work, which affected inner and outer boroughs alike--the volume of building fell in 1908-9 to 50 percent of he average for 1897-1905 and declined to 30 percent in 1911-13. Clearly the building industry in London believed that its aloof stance of previous decades was no longer feasible; here too the advantages of collusion began to be appreciated. Before the adoption in October 1909 of Rule III(b), a variant of the inter-trading rule, membership in the London branch had remained at a level of 160-80 members for most of the 1890s and 1900s. By the end of 1909 there were 258 members, and more than 320 members in 1910 and 1911.
Thus by 1913 membership of the NFBTE was 5,200--four times the level of the 1890s--and the number of associations affiliated with the NAMB had risen from 60 in 1886 to 111. Membership in the combined Lancashire, Cheshire, and North Wales FBTE more than doubled within the organization's first few years, rising from 661 in 1897, to 1,400 in 1898, and 1,612 members in 1899. Naturally the number of associations within this branch reflected its growth. There were sixteen employers' associations in the area in 1897, and twenty-nine the next year. By 1914 there were fifty-four associations.
The rising membership levels and the formation of new branches in Liverpool, Birmingham, London, and other areas have already been noted. But the timing of this expansion varied from place to place. The recession in the building trade in the mid-1880s in Liverpool, and after 1906 in the rest of the country, may have stiffened the resolve to join the local employers' association branch or form a new one. But such a generalized explanation cannot account for the universal sudden rise in membership. The correspondence between cyclical phase and membership increase was inexact. At both local and national level the formation of employers' associations and the corresponding rise in individual membership was closely synchronized with the adoption of the inter-trading rule. In Liverpool expansion followed the adoption of the inter-trading rule in 1886; in the Lanchashire, Cheshire, and North Wales federation it followed adoption in 1894; in Sheffield the inter-trading rule was implemented in 1907. Membership responded almost simultaneously in each place, as it did in London after a similar rule was approved in 1909.
The Liverpool Association made a vital contribution to the rescue of building employers' associations. Well in advance of structural reorganization in other parts of the country, and also anticipating the ultimate need for coercion should other tactics fail, the Liverpool Association was prepared to innovate in order to recapture a degree of control among the producers in the building industry. Smethurst, president of the NFBTE, remarked:
Liverpool was in the van in connection with federation . . . and become the mentor of most other areas in the kingdom . . . [there] had in fact almost been a revolution in its methods largely due to a movement which sprang from Lancashire and Cheshire and spread all over the country finally becoming merged in the National Federation.
The introduction of the inter-trading rule in Liverpool and the northwest may be regarded as an extremely risky, last-ditch venture; the price of failure would have been the assured supremacy of labor interests in the local building industry. Voluntary association had been tried with only lukewarm response and temporary success. Conciliation and arbitration offered some stabilization to the potentially damaging conflicts with labor. Experiments with subscription levels had not significantly advanced recruitment to employers' associations. By the early 1900s, therefore, a number of avenues had been explored, and building employers had resisted the concept of permanent affiliation. No doubt it was hard to give up independence of operations, previously a prerequisite for success in obtaining building work but now a potential liability. But with the changed cyclical circumstances after 1906, the assault on private enterprise by municipal trading and construction, and the continued squeeze on margins, principally from labor costs, principles had to be sacrificed, and the coercive experiment emerged some ten to twenty years behind the precedent set by employers in northwest England.
The spectacular success of the inter-trading rule in reinvigorating building employers' associations reflected changed market conditions, the internal reforms within employers' associations, and the broadening of membership eligibility, as well as the inter-trading rule itself, with its uncompromising stance regarding solidarity and mutual benefits. Only by these means were producers able to assert some control over themselves and hence over their product market.
In this respect the activities of building employers reflected the sruggle for control that was under way in British industry generally between 1890 and 1914. Industrial profits had not recovered from the difficulties of the 1880s; the rate of industrial growth reached a seventy-year nadir between 1900 and 1907, and in per capita terms declined between 1908 and 1913. Money and real wages fell between 1895 and 1913, and the share of wages in the national income declined regularly from the 1893 peak, so that by 1913 that share was below the level of 1870. The corresponding strengthening of the position of rentier and nonwage incomes intensified the passions associated with income inequality. Under such conditions and with the labor supply expanding approximately 10 percent per decade between 1870 and 1910, a new phase of confrontation between labor and capital was virtually assured.
To mitigate such a confrontation social welfare reform was one possibility; conciliation and arbitration procedures another. A third possibility was an alteration in the structure of building firms themselves. Protracted depression from the late 1870s to the early 1890s was to some extent a force for natural selection, with bankruptcies squeezing out some of the weaker, usually smaller firms. There was no decisive merger movement in the building industry, and building firms were conspicuously absent from the listing of the top 200 firms and from the trend toward large-scale production in British industry. Nevertheless, there is some reason to believe that average firm size expanded in the last quarter of the nineteenth century. A direct and potentially more effective approach to the problem was employer's associates, "to meet organisation with organisation," and use the union as "an adjunct in the conduct of their business." With such influences bearing on the daily productive process and on long-term policy formulation through political representation, employer's associations offered a lifeline to builders in the difficult business climate of the years before World War I. That builders in different regions grasped that lifeline at different times reflects local differences in the experiences of the industry.
The reasons for the building industry's adoption of coercive tactics such as the inter-trading rule go beyond the specific nature and structure of the industry itself. In a highly unstable industry it was clearly desirable to control the activities of maverick entrepreneurs who further destablized the product market. But the inter-trading rule was also part of a wider strategy to reestablish parity in the power politics of late Victorian industrial relations. It was an attempt to present a countervailing force to growing trade union strength, which threatened employers' independence of action. It was a reaction to employers' fears that "every month sees unionism become more aggressive and ready to take up matters once considered outside the pale." No longer were hours and wages the only matter of trade union concern; their orbit or operations had become considerably expanded, for example, "by endeavouring to stipulate how many apprentices a master may engage" or by "objecting to the laying in a town stone manufactured in another and perhaps adjacent locality." Their independence threatened, employers not unnaturally sought to reassert their entrepreneurial role. Stronger solidarity conveyed numerous advantages relating to costs of production and the negotiation of the terms and conditions of employment, and for this reason alone the inter-trading rule was an important factor in the balance of industrial relations in the building industry.
But a more fundamental principle was at stake. State intervention was vigorously opposed by building employers. Extensive evidence to the Royal Commissions in 1890-94 and 1904-6 clearly demonstrates the emphasis on vollu in 1890-94 and 1904-6 clearly demonstrates the emphasis on voluntarism and self-determination regarding industrial relations in the building industry. T. Costigan, the London Master Builders Association secretary, captured the sentiments of the builders when he said, "We have always been against state interference and I think employers will object to this and especially to people ignorant of the trades concerned. I am afraid also that this innovation may be the beginning of compulsory arbitration to which we are all strongly opposed."
Furthermore, the increased influence of working-class representatives in parliament and on local councils prompted cries of alarm from building employers. London builders commented that "the fact that they have attempted to place their members on various metropolitan councils . . . means that they aim to have a greater influence than ever upon the building industry." In view of the substantial and increasing scale of local authority building work in the early years of the twentieth century, employers feared the prospect of working-class influence over who won the contracts.
Indeed, reassertion of employers' political muscle generally lay behind the formation in 1898 of the Employers' Parliamentary Council, in which building employers took a prominent part. It was essential to influence legislation that increasingly had a bearing on the operating costs of firms--compensation, insurance, terms and conditions of work, arbitration procedures, and so on. To offer effective resistance to encroachments by both labor and the state, combinations of building employers developed, and the inter-trading rule was one instrument in this solidarity campaign. The rule was critically important to efforts to limit direct building work undertaken by councils themselves, and it generated a solid phalanx of employer opposition.
THE EMPLOYERS' RESPONSE
Late Victorian urban development was influenced by the inter-trading rule and its contribution to employer solidarity. Decades of Victorian housebuilding, largely unconstrained by effective building bylaws, had produced a "housing problem," more specifically a lower-working-class housing problem. Because of vagaries of the building cycle, new housing accommodation for the poorest segment of society was not built in many years. Only in the upswing of the trade cycle could regular incomes contribute to the demand for housing, and only if this movement coincided with the upswing of the housebuilding cycle--that is, if credit was available, there were no excess stocks, and other conditions were favorable--was building undertaken for the poorest tier of wage earners. The quality and amenities of such housing left much to be desired. Overcrowding, public health problems, immorality, and declining church attendance have all been attributed to "the housing problem" during the fifty or so years before 1890. In twenty-two out of twenty-nine London registration districts, the ratio of persons to houses increased after 1851 to reach a record high of 7.85 persons per house in 1881. In Scotland the number of persons per house increased by 47 percent from 1801 to 1871. By 1911, 758,000 Londoners, "more than the entire population of Liverpool, Manchester or Birmingham," were living in overcrowded conditions--more than two persons per room. In provincial cities 10-12 percent of the population lived in overcrowded conditions; in Glasgow 55.7 percent of the residents lived more than two to a room. These were citywide averages; in certain parishes such housing density and the associated social problems were almost universal.
The cyclical characteristics and uncontrolled operation of the product market had contributed much to the housing problem of late Victorian and pre-1914 years. The problem was compounded by the irregularity of supply additions, deficient amenity consistent with low-income demand, congested design to subdivide rents and ground rents among a larger number of tenants, and the poor quality of construction as a result of speculative supply responses to rapid surges of demand--all this made worse by the slow rate of housing obsolescence. The weakness of employers' association before 1890 created many of the builders' later entrepreneurial problems. Product instability and corporate insecurity were largely the outcome of previous cyclical behavior in the housebuilding sector. A complex of developments--protracted recession in the 1880s, the growth of labor power, discussions of municipal housebuilding (feasible in a limited way after 1890) and town planning schemes, the control mechanisms devised by government regarding conciliation and arbitration procedures, and the much wider debate surrounding the distribution of national income and product, particularly welfare reform--catapulted employers' associations into action, as they recognized the permanent threat to their continued existence. The absence of control mechanisms among building employers had generated long-term problems; even at the eleventh hour, discipline among producers might conceivably repair some of the damage and rescue their autonomy from the combined onslaught of unions and government. Through internal constitutional reforms regarding membership eligibility and inter-trading stipulations, the associations achieved a degree of order in tendering and wage negotiations, provided financial solidarity and a political presence, and to that extent brought stability to the marketplace. But these gains were set in the context of a nationally depressed building industry after 1905. Municipal building, town planning, welfare reform, and other general social and urban currents were in motion; the employers' rearguard action of a decade could not stem the free-market effects of a century and the interventionist clamor to correct them.
The inter-trading rule and the membership expansion of the NFTBTE were successful in their immediate objectives, but because many areas (Sheffield and London, for example) were late in adopting those reforms, employers had no opportunity to consolidate their position before the deluge of war swept away normal market operations in the building industry. Building licenses during the war, and public house-building afterward, transformed the product market. As a penalty for their instability and corporate insecurity, and for their inability to order their own affairs before the 1890s, building employers were forced to relinquish a degree of autonomy, and ultimately ceded their interests in the lower echelons of housebuilding to municipal construction. In combining to stabilize some aspects of their operations, employers had won their battle with labor, but their associations could not overcome deeper social and political influences, and in the end they lost the war.
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|Author:||Rodger, Richard G.; McKenna, J.A.|
|Publication:||Business History Review|
|Date:||Jun 22, 1985|
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