From Depression to Devolution: Economy and Government in Wales, 1934-2006

From Depression to Devolution: Economy and Government in Wales, 1934-2006

by Leon Gooberman

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ISBN-13: 9781783169580
Publisher: University of Wales Press
Publication date: 04/15/2017
Pages: 304
Product dimensions: 5.40(w) x 8.40(h) x 0.90(d)

About the Author


Leon Gooberman is a research fellow at Cardiff University Business School.
 

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CHAPTER 1

DEPRESSION, WAR AND RECONSTRUCTION, 1934–1951

The economic inheritance

Wales was almost entirely pastoral prior to the Industrial Revolution, although its rich stocks of natural resources meant that some pockets of mineral workings and proto-industrialisation existed, but were relatively small in scale. However, its resources led to an eruption of economic activity during the eighteenth and nineteenth centuries. By the late eighteenth century, the presence of coal and iron ore had facilitated large-scale iron industries along the heads of the south Wales valleys and parts of north-east Wales, copper deposits in Anglesey were being mined, while Swansea had emerged as a major copper producer. Slate emerged as a major industry, while zinc, manganese and lead mines were also active. However, while industrialisation in the rest of the UK created demand for raw materials, it was often a double-edged sword, in that the creation of national and international markets enabled greater competition, sometimes at the expense of activities based in Wales. For example, copper mining was in decline by the early nineteenth century, with smelting plants in Swansea increasingly sourcing ore from overseas, while the mid Wales wool industry failed to make the transition to large-scale production.

However, the mid nineteenth century saw an intensification of resource-based growth within some sectors. The slate industry, concentrated in northwest Wales, grew rapidly between 1830 and 1880 as new markets opened up in the UK and beyond. By the final decade of the century, it employed over 20,000 men, almost half of whom worked in the giant quarries of Penrhyn, Dinorwic and oakeley. Meanwhile, the relatively small Flintshire and Denbighshire coalfield, employing some 10,000 men by 1880, also coexisted with a range of other industries, such as lead smelting and brick-making. However, the greatest upsurge in activity occurred in south Wales, where the hugely successful iron industry, which produced up to a third of the UK's entire output by the 1830s, gradually lost its status as a leading sector to the coal industry. Geology and geography played important roles within the iron and coal industries. As steel gradually replaced iron in the later nineteenth century, exhaustion of limited ore resources, combined with the need for large sites closer to ports, saw the industry gradually shift to coastal locations. Tinplate manufacturing developed between Port Talbot and Llanelli as well as in adjacent inland areas, while lead, copper and zinc were also produced. Within coal, the vast reserves of the south Wales coalfield combined with the railway boom to provide both the raw materials and the market access necessary for it to thrive. By the late nineteenth century, a large-scale mining industry and transport infrastructure was established throughout the south Wales valleys, with 449 collieries by 1878, while south Wales possessed one of the world's most densely developed rail networks. Urban centres sprang up to service these industries with, for example, the population of the coal-exporting port of Cardiff rising from some 10,000 in 1841 to 182,000 in 1911.

Despite this rush of activity, the fortunes of some resource-based industries fluctuated. Steam-powered ships enabled the greater importation of agricultural produce and the tinplate industry was affected by the imposition of tariffs by the United States from 1891, while expansion within the slate industry was curtailed from the 1880s by stagnation within domestic construction and from the 1890s by overseas tariffs. However, 'King Coal' powered onwards. It had enabled the steam-powered industrialisation that allowed the UK to emerge as the 'workshop of the world', and then as its trading fulcrum. Its rise seemed unstoppable, with employment in the northern and southern coalfields rising from 80,000 in the 1880s to 242,000 after 1910. By the end of the nineteenth century, more than half of the coal produced in Wales was exported. Historian John Davies estimated that a quarter of the global trade in the sources of light and energy originated from south Wales, comparing the role played by the Bristol Channel to that of the Persian Gulf in the 1980s, while the late-nineteenth-century Amman Valley, in the coalfield's far west, was remembered later as a 'regular little Klondike'.

By 1901, the Western Mail could point to how natural resources had cemented the place of Wales as 'one of the brightest and most truly civilised spots in the queen's dominions', featuring 'a tale of growth in material and industrial prosperity', but resource-led development had created an economy that was remarkably concentrated, both sectorally and spatially. In that year, over 60 per cent of the occupied male workforce was active within a narrow band of occupations generally dependent on resource extraction: mines and quarries; metals and engineering; transport and agriculture. Many of the remaining workers were similarly dependent, whether working within the great commercial centres that sprang up to service the coal-export trade, or within the retail or service activities dependent on wages generated by resource extraction. While women were by no means absent from the paid labour market, they were at a disadvantage in such an industrialised economy, tending to concentrate within domestic service. By 1921, almost one out of every three occupied men in Wales worked in mines or quarries, with most of these working in the coal industry, within which employment stood at a remarkable 278,000. This inevitably concentrated population where the most valuable natural resources were found, meaning that sectoral specialisation ran parallel to population concentration. By 1921, some 65 per cent of the population of Wales lived in the two southern counties of Glamorgan and Monmouthshire, although these accounted for less than 20 per cent of its total land area. Other, smaller, concentrations of population were found around the north-east Wales coalfield and the slate workings of the north-west. While pockets of mineral workings existed elsewhere, population density remained low throughout the rest of Wales, with many areas impacted by large migration flows to the newly industrialised areas.

Sectoral and spatial concentration led to fragmentation within Wales, and integration without. While the relationship between the south Wales coalfield and its coastal hinterland did create an integrated regional economy, the economy of Wales as a whole faced outwards, through its role as a resource base for the UK and beyond. Linkages between concentrations of activity were conspicuous by their absence, while Wales had little or no status as a unit of governance. At the same time, while resource-led activity had created an urban Wales, it was also to prove a fatal weakness. Wales was so obviously suited to primary production, demand for whose outputs seemed insatiable, that virtually no diversification occurred, while the sheer scale of primary industries meant that other activities were often crowded out. For example, Cardiff never developed as a shipbuilding centre, despite its status as a major shipping centre and the availability of raw materials. Contemporary debate raged as to the reasons why, but a likely explanation is that by the late nineteenth century, shipyards required a range of sub-contracting industries, most of which were absent from the city and the surrounding area. More broadly, Wales had little presence in the second industrial revolution, of the later nineteenth century, while areas such as the English midlands developed specialisations in new manufacturing sectors, such as electrical goods. Against this background, many areas lacked a base of small, diversified, manufacturing businesses of the type often necessary for the formation of a self-sustaining, commercially minded middle class.

None of this mattered when the demand for natural resource goods was high, helped by the UK's dominant role within the global trading system, but the impact of the First World War was devastating. While it was expected that normal trading conditions would re-establish themselves during peacetime, this did not happen. Many export markets, lost during the war, had found alternative supplies, while the growing use of oil reduced demand for coal, especially within shipping. The coal and steel industries suffered from over-capacity, while the government's 1926 decision to return to the gold standard at pre-war exchange rates led to a highly valued currency, pricing some exporters out of markets. The industrial economy was devastated, with the predicament summarised, in nostalgic terms, by James Griffiths, Labour MP for Llanelli between 1936 and 1970, as:

It all came so suddenly and caught us unprepared. In those halcyon days before 1914, everything had seemed so settled and sure, the economic base so firm, the livelihood of our people secure and our communities prosperous. Year by year, the basic industries expanded, there was work for all and life was becoming better and fuller.

We never paused to ponder on how narrow was the base of the economy which had developed since the birth of the First Industrial Revolution, nor gave a thought to what would happen if its foundation crumbled. Three out of five of our people depended for their livelihood, directly or indirectly, on coal, steel, tinplate and slate. Then came the 1914 war and within a generation all was changed. 'King Coal' was dethroned, the old tinplate mills gave way to the new strip mills, and slate was replaced by the cheaper if more brittle tiles as a shelter over our heads.

While external forces buffeted the economy throughout Wales, the lack of diversification in the areas most dependent on coal and iron led to concentrated areas of deep depression, with its effects most visible in the south Wales coalfield. By 1928, the Times described the area as one where mining had brought 'strange townships into existence, straggling snake-like up the valleys' and 'now, where the pits are closed, they have nothing to live for'. The iron industry fared little better, with iconic works at Cyfarthfa, Blaenafon and Ebbw Vale having closed by 1930, as had much of Dowlais, with production either reducing in scale or being relocated to the coast. However, the already bleak picture worsened during the Great Depression of the early 1930s, when global trade collapsed by some two-thirds between 1929 and 1933, and the UK's exports dropped by a third between 1929 and 1931. Governments made some efforts to drive efficiency through encouraging consolidation within the coal industry, but met with little success. Overall, the 1920s and 1930s saw dramatic declines in export dependent primary sectors. Employment in the coal industry of south Wales halved, falling from 271,516 in 1920 to 126,412 in 1936, while steel production collapsed by some 40 per cent between 1929 and 1931. Similar problems beset north Wales, with 4,000 out of Shotton's 6,000 metal manufacturing employees losing their jobs on 1931's 'Black Friday', while the coalfield workforce shrank by over 40 per cent between 1921 and 1936, equal to some 7,000 employees. Meanwhile, the slate industry struggled to compete with mass-produced roofing tiles, while export volumes wilted under the pressure of tariffs. The larger mines and quarries generally managed to survive, with employment in north Wales remaining static at some 8,000 over the period, although the industry retreated from its more marginal outposts, such as those around Corris.

However, the scale of the collapse in the southern coalfield meant that this area dominated national conversations as to the slump's regional impact, overshadowing problems in other areas. While local impacts varied across south Wales, with continuing demand for anthracite mitigating the downturn in some western areas, a 1934 plea from Nantyglo and Blaina District Council for government support highlighted the scale of the disaster. It detailed how, out of the eight or nine local collieries employing some 4,500 men operating before 1921, only one remained, and that was employing fewer than 250 men, compared with its normal complement of 1,000. Similar closures and rundowns throughout the coalfield meant that the percentage of insured people registered as unemployed in Glamorgan and Monmouthshire reached a monthly average of over 40 per cent in 1932, remaining at over 30 per cent until 1937. Within these counties, rates were highest in areas most dependent on resource-led industries, whilst those with more diversified economies, such as coastal towns and cities, generally fared better.

As well as the immediate impact on those employed and their families, closures led to a spiral of decline, where reduced purchasing power led to the closure of supply-chain businesses, which then led to further declines in other industries, such as transport. Finally, local authorities lost rate income while needing to increase expenditure on public assistance. This pressured the delivery of other services, including those that supported regeneration. out-migration then occurred, which further reduced purchasing power and led to more decline with, for example, 318 empty shops in the Rhondda by 1935. Population levels fell as people fled to towns such as Slough and Oxford, where newer industries such as the motor industry were establishing themselves, with the population of the Rhondda falling by some 16 per cent between 1931 and 1939. Overall, these problems combined to create, in the words of the government-appointed commissioner for such areas, 'a general atmosphere' that was 'most unfavourable to local initiative and a deterrent to industrial enterprise', resulting in the area becoming 'unattractive', and 'although the feeling' was 'very difficult to analyse', it was 'extremely persistent'. The depth and length of the depression led to endemic long-term unemployment, with Aneurin Bevan, Labour MP for Ebbw Vale, famously comparing this to 'living in the middle of a graveyard and spending most of your time reading the inscriptions on the tombstones'.

However, some recovery was evident at a UK level from 1932 onwards, led largely by rising real incomes for those in work causing greater demand for items such as household durables, cars and housing. While Wales was not immune to such changes, they had little impact on the coalfield. A survey of south Wales stated in 1937 that while there had been 'a measure of recovery', a 'mass of chronic unemployment' remained in place, 'peculiar to this and other regions which have not developed large new industries to compensate for contraction of basic industries such as coal mining and steel making'. While the rich endowment of mineral resources had enabled the creation of extractive or processing activities, there was no such attraction for newer industries, which focused on lighter manufacturing and consumer goods. These tended to locate close to their main markets, with growth concentrating in the south and Midlands of England. Between 1932 and 1938, almost half of all new factories opening in the UK did so in London and the south-east of England, while Wales attracted a paltry 1.6 per cent.

By the mid 1930s, the two-speed nature of the UK's economy was apparent, with the south and Midlands of England, defined as 'inner Britain', growing rapidly. However, the rest of the UK, defined as 'outer Britain', struggled to share in the recovery. Despite this, the upturn in lighter manufacturing industry evident in 'inner Britain', as well as rearmament, benefited Wales to some extent during the later 1930s. New metal plants were opened at Ebbw Vale and Cardiff's East Moors, and Shotton in north Wales reopened and expanded, while output of pig-iron, from which steel was made, doubled throughout Wales between 1935 and 1939. Despite some glimmers of hope, unemployment remained high, both in absolute and relative terms, when compared to the UK. As late as 1938, unemployment throughout Wales stood at 25 per cent, compared to a UK rate of some 13 per cent (see Graph A1.2, Appendix 1), while far higher rates persisted in black spots, such as parts of the south Wales valleys. Overall, the 'locust years' of the 1930s were to have a defining influence on government attitudes towards regional economies over the long term, but, paradoxically, their short-term impact on policy was limited.

The great depression and the birth of regional policy in the 1930s

Prior to the 1930s, governments saw unemployment 'black spots' as symptoms of global conditions, as opposed to any structural weaknesses. The dominant 'Treasury view' discounted any stimulus, as it believed that this would only act to displace private sector investment, achieving no net impact. As a result, unemployment was seen as a social, not an economic, problem. The economist John Maynard Keynes articulated an alternative view, proposing greater intervention, but was largely ignored, with an influential Treasury mandarin, Sir Richard Hopkins, leisurely dismissing a Keynes-authored report on international trade as 'mysticism' in 1937. The government's approach to the regional problem focused on the transfer of their 'surplus' labour to the thriving areas of 'inner Britain', spurring the creation of the Industrial Transference Board in 1928. This operated through labour exchanges in areas of high unemployment, with virtually all such exchanges in Wales located in the industrial south. It matched claimants with jobs elsewhere in the UK, with transferees given training and contributions towards moving costs. Inevitably, out-migration caused great concern, with the affected areas losing many of their most able workers, making attracting new industry even harder. Despite the focus on transference, the government was keen to promote industrial self-help, in part to distract attention away from its lack of action, with the Board of Trade encouraging local authorities to form the National Industrial Development Council for South Wales in 1931. Despite its impressive title, it focused on activities such as promotional documents, trade fairs, lobbying government and collecting data, such as that contained in its two industrial surveys of south Wales.

(Continues…)



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Table of Contents

Acknowledgements ix

List of tables xi

Abbreviations xiii

Introduction 1

I Depression, War and Reconstruction, 1934-1951 9

The economic inheritance 9

The great depression and the birth of regional policy in the 1930s 15

Total war and central planning, 1939-1945 22

The impact of government action 27

Reconstruction, 1945-1951 33

Interventions 39

II The Age of Factories, 1951-1970 51

Economic growth and regional policy during the 'golden age' 51

Growth and decline within the resource-based industries 57

Interventions 61

The administrative emergence of Wales 71

Conclusion 77

III Keeping Afloat: The 1970s 85

The end of the 'golden age' and the peak of regional aid 85

Uncertain times in the resource-based industries 90

The Welsh Office and job creation 93

Interventions 98

Conclusion 108

IV Crisis, Response and the Impact of Margaret Thatcher: 1979-1987 113

The collapse of manufacturing and the eclipse of regional policy 113

Redundancies, subsidies and strikes in the resource-based industries 118

Emergency action from the Welsh Office 123

Interventions 127

Conclusion 142

V A New Wales? 1987-1997 151

Optimism and disappointment 151

Changing views at the Welsh Office 156

Controversy within the development agencies 161

Interventions 165

Conclusion 179

VI Devolution and Its Discontents: 1997-2006 185

Stability and growth 185

The last years of the Welsh Office, 1997- 1999 188

Quagmire at the National Assembly for Wales, 1999-2006 191

The bonfire of the quangos 196

Interventions 199

Conclusion 211

Conclusion 217

Appendix 1 Data 225

Appendix 2 Maps 227

Appendix 3 Organisational Genealogy, 1936-2006 239

Bibliography 241

Index 255

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