The American Steel Industry and Small Business during the Great Depression in the 1930s : From a viewpoint of the transition in the demand structure

Abstract

During the great depression in the 1930 s, although the American steel industry was controlled by the big business system, the small businesses that were providing secondary light steel products increased. That increase was closely related to a transition in the demand structure of the steel industry that a change of the economic structure involved. The purpose of this paper is to throw light on what the small businesses were in those days and the significance of small business in the big business system by focusing on the transition of the demand structure of the steel industry during the period. The small businesses that were providing secondary light steel products increased and succeeded in spite of the great depression, because of their optimum location, R. and D., technological innovation, correspondence to new demands, and use of electric furnaces. Demands of secondary light steel products were growing with the transition of the demand structure. The transition of the demand structure reflected a change in the economic structure in the 1930 s, and that meant a change from a capital-goods-investment leading economy into a consumer-goods-consumption leading one. On one hand small businesses which were engaged in producing and finding secondary light steel products were increasing with the transition of the demand structure, on the other hand the rest of small businesses engaged in producing secondary products in connection with the construction industry and capital goods were withdrawing. The big businesses were afraid of falling down together because their production system, which was concentrated on heavy steel products, was too large to deal with decrease in prices and change in demands for their products. By the 1920 s Elbert Gary, the president of US Steel, organized the steel products market by working out the Basing Point System in order to get rid of price competition and technological innovation. However, the great depression compelled the big business system into reorganizing itself, that is, bandoning the Basing Point System and constructing another production system which was concentrated on light steel products. Thus the big business found out a great interest in primary, moreover secondary light steel products market to survive the great depression. In conclusion, I would like to say that the significance of small business is at once to correspond to new demands and pioneer new markets and to encourage the socio-economic dynamism that means the transition of the demand structure in the economic society controlled by the big business system.