Stevenson Plan

The Stevenson Plan was an effort by the British government to stabilize low rubber prices resulting from a glut of rubber following World War I.

Background

In the early 1900s, increased reliance on the automobile and the use of rubber in common products such as boots were driving demand for rubber. At that time rubber was made from naturally occurring latex which is found in the sap of certain plants. These plants form a section of the Family Asteraceae called Cichorieae. The most useful of the Cichorieae for latex production is the rubber tree, whose cultivation is restricted to tropical climates. At this time about 75% of rubber was controlled by British corporations, spurring efforts in Russia, Germany and the United States to reduce dependence on British rubber. All three countries were trying to develop methods of manufacturing synthetic rubber, and the United States Rubber Company began producing natural rubber in Sumatra in 1910. However, synthetic rubber was not yet practical, and natural rubber sources develop rather slowly (rubber trees must grow for six or seven years before they are productive).

Between 1914 and 1922, natural rubber prices fluctuated between $0.115 and $1.02 per pound for several reasons. One reason is a blight that effected rubber trees in Brazil that reduced productivity and caused British and Dutch rubber producers to start new plantations in Malaya and in the Dutch East Indies.

A second reason was that after the 1917 October Revolution, Russia renewed its effort to make synthetic rubber as part of two projects: 1) Project Bogatyr in which rubber is made from ethyl alcohol, and 2) Project Treugolnik in which the feedstock is petroleum. These projects succeeded in reducing Russian demand for British rubber.

A third reason is that during World War I (1914-1918), demand for rubber was high resulting in new sources of rubber being developed. Following the War, demand for rubber diminished, creating a glut of rubber on the market and very low prices. The world became keenly aware of the importance of a stable supply of rubber for containing and initiating a modern war.

The plan

Around 1920 the British Rubber Growers Association turned to then Secretary of State for the Colonies, Winston Churchill, for help. Churchill initiated a committee of inquiry consisting primarily of Association members and chaired by Sir James Stevenson to come up a plan to stabilize rubber prices. The committee came up with the Stevenson Plan which would stabilize prices by limiting the tonnage of rubber exported. The Plan was realized in the form of the Stevenson Act which Churchill lobbied Parliament to pass and was enacted in November, 1922.

The outcome

In 1922, British interests controlled about 75% of rubber production and the United States consumed about 75% of the rubber produced. The British were still paying war debt to the United States following World War I, and needed to have a profitable rubber industry. The Dutch refused to go along with the plan out of a philosophical reluctance to regulate their industry and because they would profit from a unilateral action by the British. In the United States tiremaker Harvey Firestone reacted angrily to the act as did Secretary of Commerce Herbert Hoover.

By 1925 high prices resulting from the Stevenson Act were beginning to threaten the "American way of life", so Hoover informed the British that if the Stevenson Plan stayed in effect, the United States would try to protect itself in any way it could. DuPont, under the direction of Elmer Keiser Bolton had been working on synthetic rubber since 1920. Thomas Edison, along with several tire companies, was trying to create American-based rubber production, but with little success. By 1928, the Stevenson Act was repealed, but not after expanding Dutch rubber plantations had successfully captured most of the rubber market in the United States.

Conclusion

Tired of regulation, rubber producers returned control of rubber prices to the "free market" (it is difficult to describe the market as "free" when British government-subsidized concerns held a 75% share of the primary capital resource). That worked well until the Great Depression in the 1930s lowered demand for rubber, and again rubber prices plunged. Rubber producers once again turned to regulation to maintain prices. This time it was done under the auspices of the International Rubber Regulation Agreement which was signed by all major rubber producing countries. This law succeeded in governing the price of rubber to the satisfaction of producers and most consumers. However, Japan was a consumer of rubber in the 1930s, using rubber to support its war effort in Manchuria and China, and its leaders were not happy with the price of rubber. This wasone of the provokations said to motivate the Japanese to the attack on Pearl Harbor and the United States entry into World War II.

References

* [http://www.le-bois.com/chronique_latex_uk.pdf Dr. Jean-Luc Sandoz, "The Indian Rubber Tree: An Ally for a Real Sustainable Development?"]
* [http://www.time.com/time/archive/printout/0,23657,787834,00.html "Rubber Restricted", Time Archive, Foreign News, Monday, May. 07, 1934]
* [http://pslc.ws/macrog/exp/rubber/synth/supndem.htm "The Story of Rubber, Supply and Demand"]
* [http://etd.lsu.edu/docs/available/etd-04152004-123145/unrestricted/chapter2.pdf Phillip James Johnson, "Seasons in Hell:Charles S. Johnson and the 1930 Liberian Labor Crisis", Chapter 2: "The Gentlemen of Akron", Doctoral Dissertation, Department of History, Louisiana State University (March 31, 2004)]
* [http://www.ciaonet.org/book/cohenw/author.html Warren I. Cohen] , [http://www.ciaonet.org/book/cohenw/chapter2.html Empire Without Tears: America's Foreign Relations 1921-1933, Chapter 2: "The Uses and Impact of American Economic Power, 1919-1929", Temple University Press (1987)]
*Eugene Staley, [http://www.lib.byu.edu/~rdh/wwi/comment/investor/Staley04.html "War and the Private Investor", Chapter 4: "How Investments Serve Diplomacy", Doubleday (Garden City, New York, 1935)] ASIN B00085BXLM
*Fred P.M. VAN DER KRAAIJ, [http://www.liberiapastandpresent.org/1926FirestoneCA.htm The 1926 Firestone Concession Agreement]