If the first phase of the new steel industry, which was distinguished by a uniform product, still bore the familiar features of unmistakable British superiority and of diligent imitation on the Continent, maintained by tariffs and cartels, the following phase of diversification, however, brought forth two clearly differentiated autonomous structures. While the terms of the institutional frameworks in both countries continued to be retained as far as possible – state protectionism and collective restrictions on competition in Germany and, after the brief episode with the IRMA, free competition and entrepreneurial autonomy in Great Britain – their production mechanisms developed along quite different directions. Whereas capacities in Germany were further extended for the newly opened markets mainly by using the Thomas process, in Great Britain mainly the open-hearth process was used instead. Much significance has been attributed to this difference for explaining British steel production's lower growth rate during the following decades, claiming that the British steel industry would have been able to maintain its lead on the world markets had it applied the obviously successful ‘German’ production technology. Before we deal with the question of entrepreneurial prescience in both countries, let us first investigate how these different structures and their underlying conditions and motives came into being.

Basic Bessemer steel

The introduction of the Thomas process

When assessing the great economic importance of the Thomas process above all for the German steel industry, it is often overlooked that, in technical terms, it involved only a slight modification to the original Bessemer process.