i 18 
In a number of the basic industries, such as coal-mining, iron and steel, 
engineering and electrical manufacture, the large productive unit came into 
existence for a different reason : technical conditions made it impossible for the 
small producer to come into the system. The capital required to develop a 
coal-mining undertaking or lay down a blast-furnace, steel-furnace, or rolling- 
mill plant, or develop a series of engineering workshops, meant that only large- 
scale production could be undertaken with any degree of profit. 
The main difficulty confronting the manufacturer lay, not so much in reaching 
a vast public, as in securing some basis of selling prices, which would cover the 
annual charges represented by his capital expenditure, allow a reasonable margin 
for depreciation, and also allow him profit additional to the working costs. He 
was not in the position of the producer of a standard article of everyday consump- 
tion with a rapid capital turnover and a low margin of profit on each article. 
His fixed charges represented a very high proportion of total costs, and consti- 
tuted, in themselves, a limiting factor to price, while the capacity of his plant to 
increase output indefinitely, which was a feature of organizations employing a 
large number of small automatic machines, or machinery engaged solely on one 
standard constructional detail or process, reached a limit very soon. 
It is important to make this distinction clear at the outset, since many 
critics of manufacturing efficiency in the basic industries have proclaimed aloud 
the advisability of cutting down prices, of obtaining a higher output per unit and 
of opening up demand. The demand for the products of the coal-mining, iron 
and steel and engineering industries is not elastic ; it can only be stimulated 
within very narrow limits, and it is at least doubtful whether the sacrifice of profits, 
even temporarily, to cause such a stimulation is economically justifiable. The 
element of competition has much more importance in the case of such industries 
where the market is incapable of expansion than in other industries where the 
demand can be rapidly stimulated, and, in the cause of self-preservation, the 
isolated large manufacturing unit has tended either to form amalgamations with 
other units in the same range of activity, or, failing this, enter into negotiations 
with them with a view to determining standard prices and manufacturing 
specifications. 
In this country, owing to the predominance of the Free Trade doctrine and 
the steady exposure of industry to unrestricted foreign competition, the manu- 
facturer could only maintain his position intact so long as technical ability or 
financial superiority gave him something like a monopoly in his main products ; 
it was no longer a case of competition in price but in design and quality. In the 
early years of the industrial epoch, a Free Trade policy meant little or nothing to 
the industrialist, but when the growth of technical knowledge and manufacturing 
experience, fostered by tariffs, brought other countries almost into line and