The Steel Industry, 1939-1959: A Study in Competition and Planning

By Duncan Burn | Go to book overview
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Chapter X
THE BRITISH INDUSTRY SINCE DENATIONALISATION: THE BOARD IN ACTION

I. PRICE POLICY

Political critics of steel prices at the time when the Iron and Steel Corporation of Great Britain was about to be dismantled said the prices were too high: and they continued to say it afterwards. In the light of their probable effects on demand, investment decisions, the balance of trade and commercial relations and if the object was to simulate the effects of (or secure the results that might be expected from) 'competitive conditions' they were, it has been seen, too low. The twin pursuit of stable prices and low prices, as the analyses in chapters V and VI has shown, had led to the evolution and perpetuation of price control practices which kept profit margins on products subject to price control (especially heavy steel and above all billets) relatively small, and reduced the advantages which firms would have obtained 'in competitive conditions' from using home ores, or from being especially well located to use imported ores, or from operating on a large scale giving advantages to specialisation, or from having first-rate facilities for making cheap hot metal at times of brisk demand for steel. The system gave no price advantage to a user of steel who was located where steel could be made most cheaply; and it was implicit in the arrangements that while prices were kept down when demand was brisk, no firm would reduce its prices out of step in a recession. How much the distortion of incentives from the competitive pattern influenced decisions on production or investment was open to question. Some of the distortions which occurred arose from the way in which the system was worked. The interest of the decisions by the second Board on

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