Creating a Synthetic Organic Chemicals Industry in the United States, 1914-1930
Prior to World War I, Germany dominated the world's production of synthetic dyes and pharmaceuticals, supplying nearly all consumed in the United States. When the war severed the supply of German chemicals to the United States, key manufacturers, policymakers, and chemists lobbied strenuously to promote the development of a domestic industry. Under protectionist policies and through the confiscation of German property in the United States, among other strategies, the United States built a domestic synthetic organic chemicals industry by 1930. Without protection after the 1960s, the dyes section of the U.S. industry quickly faded, but a broader-based industry thrived on newer synthetic organic products.
Key Words: United States, synthetic organic chemicals, policy, World War I
Prior to World War I, Germany supplied the world with synthetic organic chemicals, particularly synthetic dyes and pharmaceuticals. Since the 1870s, firms like BASF, Bayer, and Hoechst had grown into a powerhouse industry and become perhaps the most sophisticated science-based industry of the era. Their research laboratories and great number of chemistry PhDs, efficient use of interrelated by-products at every stage, and worldwide sales network gave the German industry nearly ninety percent of the market. When World War I arrived, the supply of synthetic dyes and pharmaceuticals exported from Germany slowed to a trickle. In the United States and elsewhere, the shortages caused hardship as prices soared or as textile industries and medical patients went without. Key manufacturers, government officials, and chemists worked to build a domestic synthetic organic chemicals industry through the war and 1920s. The federal government established promotional policies for the infant industry ranging from the mundane, if effective, steep tariff rates to the confiscation of German chemical property. By World War I, the United States by many measures had become the most advanced industrial country in the world, but, in the sector of synthetic organic chemicals, the United States was the underdeveloped nation compared to Germany. The challenge lay in developing a scientific and manufacturing expertise that could match the decades of experience in Germany.
Although President Woodrow Wilson and the Democrats in Congress opposed new tariffs, they relented in 1916 and made an exception for synthetic dyes and related chemicals because of the great outcry from the shortages and the continuing threat from a "world monopoly." When the more protectionist Republicans took office after the war, they imposed an extremely steep tariff in 1922 that essentially prohibited any German dyes from entering the United States unless it had no domestic rival. In a more radical policy than the tariff, the United States confiscated German chemical property, including subsidiary plants, patents, and trademarks. The government sold the confiscated patents to the nonprofit Chemical Foundation, Inc., newly formed to license the patents to American-owned firms. Revenue from license fees helped the Chemical Foundation lobby on behalf of the industry, sponsor research fellowships, and publicly promote the discipline of chemistry. Confiscation of the patents took away an important form of market control from the German firms, and the Chemical Foundation used its ownership of the patents to provide another layer of protection for the nascent American firms by denying the Germans the right to export products to the United States covered under their former patents or, more commonly, by requiring a steep license fee from the Germans on imports.
The tariff, patent confiscation, and other legal and diplomatic decisions created a domestic market with extraordinary protection from German competition. However, those policies could not address the fundamental need to build a domestic technical competence. The U.S. industry needed to train hundreds of chemists and to build efficiently operated plants, tasks much more difficult than passing legislation to protect the market. To some extent, the vast war production of TNT and picric acid, chemicals closely related to dyes, helped to create a pool of chemists and workers with at least some relevant experience (the production of war gasses contributed to a lesser extent). A few experienced European chemists, primarily pre-war immigrants, contributed their knowledge. Firms like Du Pont funded fellowships and otherwise developed close partnerships with university chemistry departments in an attempt to increase the supply of quality organic chemists for growing research and development laboratories. The U.S. companies ran into persistent difficulty trying to scale up laboratory procedures to efficient plant operations. Du Pont rather famously dumped tens of millions of dollars earned from war explosives into its production of dyes. Firms with fewer resources regularly failed. The managers often reported needing extra time to learn, for example, that one should stir a vat at five revolutions more per minute to achieve a better product or that they could not sufficiently decipher the German patents to yield a commercially viable product. By the late 1920s, the United States as a whole had developed a larger and more effective core of knowledge in the field, but the pursuit of technical knowledge continued to be the largest hurdle for the industry.
By 1930, after millions of dollars invested and much of it lost, the United States possessed a domestic industry, but parts of the industry fared better than others. In dyes, the flagship product of the German industry, the United States relied heavily on a tariff for most of the twentieth century; when the tariff came down in the 1960s, the U.S. dyes industry shriveled over the next two decades. However, the struggle to develop synthetic dyes helped increase the knowledge base in organic chemistry, and other product lines flourished. In the 1920s, Bakelite and other synthetic phenolic resins grew dramatically as the early plastic formed everything from radio consoles and hair combs to electrical insulators. Also in the 1920s, the United States led the development of aliphatic organic chemistry and the related shift from coal tar to petroleum as the key raw materials. Ethylene and the other aliphatics led to more modern plastics, among other products. Just at the end of the 1920s and into the 1930s, discoveries in polymer chemistry, most famously nylon, led to a range of synthetic fibers. In short, the U.S. created a domestic synthetic organic chemicals industry, but it took a different form than the pioneering German industry. The U.S. industry never truly succeeded in matching the Germans in synthetic dyes, but it developed promising and profitable new lines of products.