Chemical industries: The Path to Market Dominance
Chemical industries: Nineteenth Century Industries
During the latter decades of the nineteenth century and throughout the twentieth century, chemists working in industrial research laboratories, first in Europe and then in the United States, helped make chemicals a significant part of Western economies. For example, aluminum, which had been a prohibitively expensive metal, became an important element in the world economy after the American chemist Charles Martin Hall in 1886 discovered an efficient and inexpensive electrolytic process for making this light and useful metal. The Pittsburgh company that first capitalized on the Hall process later became the Aluminum Company of America.
Similarly, Herbert H. Dow adopted an electrolytic process for making caustic soda (sodium hydroxide) that contributed to the early success of the Dow Chemical Company. Research chemists also helped make the Schoelkopf Aniline and Chemical Company the largest American producer of coal-tar dyes, and chemicals and chemical engineers—by developing an improved method for making sulfuric acid—also helped make the Allied Chemical Corporation a success. DuPont’s chemists, working in the company’s General Experimental Laboratory, created a smokeless gunpowder that was a phenomenal success throughout the world.
The event that, more than any other, fostered the rapid development of American chemical industries was World War I. The war deprived the United States of access to the drugs, dyes, and other organic chemicals produced in Germany. American firms thus had to expeditiously expand productivity and create new chemical industries to meet military and domestic needs. They were aided by government actions such as the confiscation of German patents and the implementation of large tariffs. A good example of a new company that benefited from these policies was Union Carbide, formed in 1917 to manufacture various chemicals from petroleum. Other companies such as Kodak, Monsanto, Hercules, and American Cyanamid also became prosperous and powerful by expansion and diversification.
During the decades following World War I, American firms established over one thousand industrial research laboratories, and chemical businesses profited from discoveries made in their laboratories. For example, during the late 1920’s Thomas Midgley, Jr., discovered odorless and nontoxic organic fluorine compounds (freons) that replaced ammonia as a refrigerant. During the years before World War II, Wallace Carothers, a DuPont chemist, headed a research group that created the first wholly synthetic rubber (later known as neoprene) and a synthetic fiber, nylon, that was put on the market in 1939. Nylon would go on to earn the company more than $25 million. During World War II, well-established companies, such as DuPont, and many new firms produced the large amounts of explosives, synthetic rubber, pharmaceuticals, and other chemicals needed by the U.S. military.
Because of pent-up consumer demand and the success of new chemical products, American chemical businesses continued to prosper in the postwar years. Although such petroleum companies as Exxon, Texaco, and Mobil were the largest corporations in the second half of the twentieth century (and some would categorize these as chemical companies), such strictly chemical corporations as Dow, DuPont, Union Carbide, and Allied Chemical took the place, in total assets and productivity, of automobile and iron-and-steel firms, which suffered because of poor management and increased domestic and foreign competition. U.S. chemical industries grew, through mergers and acquisitions, into oligopolies, and they increased their investments in the research and development of new products, driving their success.
Concrete evidence for this success is the increasing number of chemical corporations in lists of the nation’s top one hundred companies and the increasing proportion of U.S. patents generated by these companies’ researchers, compared with those in other industries. By the early years of the twentyfirst century, the American chemical industry was by far the world’s largest and most productive. Despite growth in assets, workforce, products, and markets, however, American chemical businesses encountered environmental and safety problems, as their products were blamed for polluting the land, water, and air; for precipitating accidents that killed people and damaged property; for overcharging consumers for drugs; and for retrenching on investment in research and development during a period of intense global competition. Nevertheless, some companies continue to exhibit healthy growth, and many new and successful chemicals continue to find their way to eager customers in an increasingly diverse and demanding marketplace.
