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International Socialism, Spring 1967

 

Pat Fortune

Chemicals

 

From The Notebook, International Socialism (1st series), No.28, Spring 1967, pp.4-5.
Transcribed & marked up by Einde O’Callaghan for ETOL.

 

Pat Fortune writes: The Distillers Co are the first major casualty in the increasingly competitive international chemical industry. The real boom started shortly after the war in the USA with the growth of the petrochemical industry and the vast markets for plastics. Production has been growing steadily at about 10 per cent a year in the USA and very quickly attracted a diverse range of industries switching their capital into chemicals.

Although growth started later in Europe it has been even more spectacular in some fields. Between 1958 and 1962 production of plastics increased by 105 per cent. In Britain chemical production is expanding twice as fast as general industrial production. But the attraction of capital to such a growth industry has already resulted in serious overproduction problems. The large amounts of capital necessary for new investment and decreasing profit margins put the chemical industry in the vanguard of monopoly capitalism. Even for an advanced technological industry, chemicals are an incredibly complex industry with something like 15,000 distinct chemical entities being produced. Apart from normal capitalist competition the chemical industry has several competitive processes peculiar to itself. The most important is that of interprocess competition whereby the same chemical may be produced by very different means of synthesis at comparable cost. In addition, rapid technological innovation can render a complete plant uneconomic. Interproduct competition occurs whereby different types of chemical are competing for the same end use. With the increasing integration of major chemical companies through primary, manufacturing and marketing process, the ability to replace the products of other industries becomes important. Thus three different companies marketing cellophane, polyethylene film and acetate film compete with the paper and metal foil industries to wrap food stuffs. To complicate matters companies not primarily involved in chemicals are entering and capturing specialised fields. The penetration into chemicals by the petroleum industry in the 1920s is marked by the fact that 60 per cent of the value of American chemical production is today represented by petrochemicals.

The first signs of overproduction occurred in the USA 10-15 years ago and were marked by the setting up of companies in Europe. The European branches of such companies as Du Pont, Dow and Monsanto are major European organisations; in Britain, Monsanto has a sales turnover second only to that of ICI. In some cases American companies are importing the products of their European works to compete successfully in the USA. In the last three years every major British manufacturer of resins and plastics with the exception of ICI and BP has been taken over or amalgamated with an American company.

The value of American chemical production is nearly twice that of all major West European chemical producers and annual investment per employee of $2,000 in the USA compares with $1,200 in Europe, although it should be noted that a labour force of 900,000 in the USA produces seven times the value of chemicals of a labour force of 450,000 in Britain. The pre-eminent technical know-how of US industry forms a valuable export to national industries in Europe and has helped American chemical companies buy major parts of these industries which need the advanced technical knowledge to stay in business.

The result of this American dominance in world chemical markets is that, while a company like Distillers gladly opts out – into the safer world of whisky – a mammoth company, even by American standards, such as ICI, has to raise £20 millions on the open market to stay in the running. Present capital investment by ICI will be tied up in production plant for up to five years before the profits start returning – if they do, given over-production and technical obsolescence lurking in the background. At the present moment the computers of ICI are busy working out detailed projections of chemical markets in 1980.

Labour’s philosophy of planning and State intervention may have little to do with the needs of the British working class, but it is life or death to Paul Chambers of ICI.

 
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