1940s >> 1942 >> no-452-april-1942

Two Stories of Synthetic Rubber

Two newspaper reports on synthetic rubber together provide an illuminating commentary on the capitalist outlook and on the way in which war speeds up the development of new industries and thus destroys the value of investments in the old ones.
The first is from the Times Washington Correspondent (Times, March 28th, 1942):—

  The revelation of the nature and effect of a cartel agreement between the Standard Oil Company of New Jersey and the I. G. Farbenindustrie, of Germany, has aroused bitter feeling in and out of Congress. Broadly, it has been shown by Mr. Thurman Arnold, Assistant Attorney-General, in evidence before a Congressional committee, that an American process for the manufacture of synthetic rubber, which was withheld from American manufacturers, has been made freely available to the Germans, and that in 1939 the Standard Oil Company’s subsidiary in the Reich was helping to design plants for the manufacture of aviation spirit according to an American formula.
The Standard Oil Company had secured from the Farbenindustrie its process for the making of Buna rubber, but, Mr. Arnold said, had delayed its use in the United States because the Hitler Government objected. Then the Standard Oil Company had developed its own butyl process for the production of synthetic rubber. Before America entered the war the company had informed Germany, alone among foreign nations, of this process, and had refused the licensed use of it to independent producers in the United States.
Mr. Arnold continued his testimony to-day, in the course of which he said that the Farbenindustrie was found to have more than 100 cartel agreements in the United States, for “one cartel agreement leads to another.”

It may be added that the Company denies that its cartel agreement “weakened the war effort,” but does not dispute the facts.
The second is from the Manchester Guardian (March 24th, 1942), and deals with the Government schemes to speed up and cheapen the production of synthetic rubber in order to meet the situation caused by the Japanese conquest of the rubber producing territories in the Pacific. It is estimated by the Oil and Gas Journal of U.S.A. that the synthetic rubber known as “Buna” can be produced from raw materials taken from the petroleum industry cheap enough to be sold at not more than 10 or 15 cents per pound (5d. to 7½d.). The Guardian questions this, and shows that the cost of production will actually be much less, with consequent drastic effects on the marketing of plantation rubber:—

  That forecast applies, of course, to a scale of output that may not be reached for two or three years. But it disregards the fact that capital expenditure, which will account for almost the whole of the production cost, will be cheapened by Government assistance, either through tax reliefs or by low-interest loans. Further, while the war lasts certain raw materials necessary for both synthetic rubber and aviation spirit will be somewhat short, but as soon as the war ends abundant supplies will be at hand. All this means, first, that the plantation interests must abandon all hope of seeing “shilling rubber” return, and, secondly, that they will have to concentrate, when the time comes, on finding means of competing with the new rival.

What is true of rubber will be equally true of many other raw materials and finished products which will be faced with the competition of substitute products and goods produced in countries whose industries have been developed under the pressure of war.
Edgar Hardcastle