Stevenson Plan

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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.

1 Background
2 The plan
3 The outcome
4 Conclusion
5 References

[edit] Background

In the early 1900's increased reliance on the automobile and the use of rubber in common products such as boots was 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 is 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, the situation was that natural rubber sources develop rather slowly (rubber trees must grow for six or seven years before they are productive) and synthetic rubber was not yet practical.

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 effects rubber trees in Brazil that reduces productivity and causes 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 was keenly aware of the importance of a stabile supply of rubber for prosecuting a modern war.

[edit] 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.

[edit] The outcome

In 1922 British interests control 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 are beginning to threaten the American way of life, so Hoover informs the British that if the Stevenson Plan stays in effect the United States will try to protect itself in any way it can. DuPont, under the direction of Elmer Keiser Bolton has been working on synthetic rubber since 1920. Thomas Edison, along with several tire companies are trying to create American based rubber production with little success. By 1928 the Stevenson Act is repealed, but not after expanding Dutch rubber plantations have successfully captured most of the rubber market in the United States.

[edit] Conclusion

Tired of regulation rubber producers return control of rubber prices to the free market. This works well until the Great Depression in the 1930s lowers demand for rubber and again rubber prices plunge. Rubber producers once again turn to regulation to maintain prices. This time it is done under the auspices of the International Rubber Regulation Agreement which is signed by all major rubber producing countries. This law does succeed in governing the price of rubber to the satisfaction of producers and most consumers. However, Japan is a consumer of rubber in the 1930s which it is using to support its war effort in Manchuria and China, and is not happy with the price of rubber. This is one of the provokations that the Japanese say lead to the attack on Pearl Harbor and the United States entry into World War II.