Who Wants a Cartel? Regulating European Timber Trade in the Nineteen-Thirties
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Who wants a cartel? Regulating European timber trade in the nineteen-thirties Elina Kuorelahti Academic dissertation to be publicly discussed, by due permission of the Faculty of Arts at the University of Helsinki in Lecture room 12, Main Building (Fabianinkatu 33), 13 October 2018 at 12 o’clock. © Elina Kuorelahti ISBN 978-951-51-4479-9 (paperback) ISBN 978-951-51-4480-5 (e-book) Unigrafia 2018 Helsinki Abstract This dissertation studies the making and maintaining of an international cartel; the European Timber Exporters’ Convention (ETEC), which regulated the yearly export volumes of seven to nine member states from December 1935 until October 1939. The ETEC is analysed in two levels, the national and international. Analysis on the national level concentrates on the biggest ETEC member, Finland, and to lesser extent Sweden. The dissertation is divided into two parts and six chapters and it proceeds chronologically. The first part explores the formative phase of the ETEC starting from 1931 and the second part follows the ETEC years 1935–1939. The ETEC has been mentioned in some academic works, but the topic has not been studied previously at length. The main research question is who supported, nationally and internationally, the making and maintaining of the ETEC and why. The key concept of this work is cartel and the main theoretical framework is the economic and organisational theories on cartel formation as well as business historical literature showing that even before the birth of modern competition laws, governments, inter-governmental bodies, and banks regulated, encouraged, or otherwise influenced in the formation of cartels. Besides firms and their role in the cartel, this work studies how banks, national governments, and inter-governmental bodies contributed in the making and maintaining of the ETEC. Methods and materials used in this work follow the conventions of history research. Research material consists of nearly 17.000 pages of archive documents restored in twelve archives in three countries. Organisations and people who were involved in the making and maintaining of the ETEC have produced the research material; governments, banks, Swedish and Finnish timber trade associations, British timber importing firms, and the League of Nations. Material is analysed by historical methods based on source criticism and triangulation. The key argument of this dissertation is that, first, the governments and banks in timber trading countries as well as the League of Nations contributed in the making and maintaining of the ETEC, and second, the involvement of these actors worsened the ability of Finnish and Swedish firms to get their voices heard. Trade politics and diplomacy intertwined with the cartel process, particularly strongly between 1931 and 1933, but the Finnish materials suggest that the political tension in the ETEC remained in the background through the nineteen-thirties. The Finnish timber trade association SSY remained concerned throughout the decade over a potential intervention of the government to the negotiations if the SSY and did not deliver satisfactory negotiation results; and this fear catalysed the ETEC-policies within the SSY. Analysis on the national implementation of the ETEC in Finland shows that a large number of firms— particularly the big ones—opposed the making and maintaining of the ETEC, but national interests discouraged Finland from withdrawing from the ETEC process. This dissertation concludes that many members of the Finnish ETEC organisation, on the one hand, feared government intervention to ETEC matters, but on the other hand, the organisation used the threat of economic sanctions as well as government intervention to pressure on the cartel-opposing Finnish timber firms to accept and follow their ETEC quotas. Banks and the government collaborated to varying decree with the Finnish ETEC organisation, and to some extent also with the Swedish ETEC organisation. This dissertation often discusses pressure in national and international networks in diplomacy, politics, and business. The analysis shows that the self-determination of firms, industry associations, and governments can become compromised through external pressure. Compromised self-determination puts the previous interpretation of the ETEC as a voluntary cartel in Finland and Sweden in a new light. This work concludes that, for Finnish timber firms, the ETEC was not a question of free choice even though they were not legally coerced to join the international cartel. Acknowledgements This work would not have seen the daylight without the help of many people and institutions. I want to thank Professor Markku Kuisma for bringing the ETEC into my knowledge and hiring me to work as a part of his research team, funded by the Finnish Academy. Niklas Jensen-Eriksen has taken most of the practical supervising work during my dissertation project, and I owe him my deepest gratitude of all help, advices, encouragements, and time he has given me to help me this far. Thank you! Several organisations have funded my working in Finland and abroad. Almost all of my archive material being somewhere else than in Helsinki, my basic work has required a lot of travelling. In addition, research grants have been the economic backbone for me for years. I want to thank Eino Jutikkala fund in the Finnish Academy of Science and Letters for a two-year research grant; the Foundation for Economic Education for financial help to cover the costs of affiliating to the University of Cambridge as well as for grants to finish this manuscript; Kulturfonden för Sverige och Finland for several archive trips to Stockholm; Kanslianeuvos Kaarle Koskimiehen ja Irma Koskimiehen rahasto in the University of Helsinki, the former department of Philosophy, History, Culture, and Arts, and the Alfred Chandler travel grant in the Business History Conference for funding my numerous conference trips in Europe and the US. I also want to thank all the organisations that have granted me a permission to use their archives. I am very grateful for all the archivists National Archives of Finland, Riksarkivet, ELKA, Svensk Bankföreningen, Centrum för Näringslivshistoria, Archive of Foreign Ministry of Finland, Bank of England Archive, Bank of Finland Archive, and the National Archives; you have helped me to find material and carried back and forth hundreds and hundreds of folders on my request. Many colleagues have read my work and helped me to develop professionally. Professor Martin Daunton in University of Cambridge, Trinity Hall, gave me many crucial advices in the early stages of my work and his encouraging words helped me onwards. Year in Trinity Hall in Cambridge, surrounded by economic history seminars and lectures guided my dissertation to a new level; thank you Martin for making it happen. Professor Susanna Fellman and her support has meant a lot to me during this PhD project. Susanna’s expertize on international cartels is simply amazing and I admire her natural ability to mentor young scholars to think they are not as nearly lost as they think they are. Also, thank you Susanna for inviting me to the economic history seminar at the University of Gothenburg; the feedback helped me to develop my argumentation. Similarly, thank you Professor Ben Wubs in Erasmus University in Rotterdam for inviting me to visit your business history seminar; also that feedback changed my work (for better). I want to thank Martin Bemmann in University of Freiburg for sharing his timber trade material with me; they have been incredibly valuable. Also, I want to thank the European Business History Association for accepting my paper proposals and including me in the lovely collective of European business historians. I have made many good colleagues and friends in the yearly meetings of EBHA, and listening to these people and their views have made a huge impact on this dissertation as well as on my professional growth. I want to thank all the professors and students of our PhD seminar in the University of Helsinki for commenting on my work; thank you Juha Siltala, Panu Pulma, Aaro Sahari, Maiju Wuokko, Mirkka Danielsbacka, and Petteri Norring. Also peer support in our book projects and the overall collective of Finnish historians has been vitally important to me; thank you Reetta Hänninen, Aleksi Mainio, Henrik Tala, Kaarlo Havu, Eeva Kotioja, and Saara Hilpinen for many helpful and fun conversations. Anitra and Saku, thank you for laughs, the serious stuff, and having just one more beer before we really must go. Dir. mus Marjukka Riihimäki and Philomela; thank you for being my soul-soothing oasis every week. You people and the music we make together is a crucial source of wellbeing and happiness to me. You cure my stress, and that’s a lot. I am lucky to have a supporting family. When I have been away, my parents and in-laws have been my strategic resource; they have taken care of our children, done our laundry, and cleaned our kitchen. They have always supported and encouraged me in this path, and I want to thank you for that. My parents have hosted me on my writing-weeks in Jyväskylä and Saarijärvi, and besides peaceful writing environment and food, they have given me a couple of excellent advices about the structure of this work—and academia in general. Thank you! Finally, I want to thank Tommi, my companion in life. We have shared many great adventures together, and I want to thank you for sharing also this one with me. You are an academic yourself, so you know what it takes. You have given me