NATURAL,  EXTERNAL OR INEVITABLE  FACTORS	81
It may be concluded that the iron and steel industry shared in
a common feature of lack of flexibility in production and marketing,
disadvantages which it could have overcome; the extent and signi-
ficance of this lag will be postponed for appraisal in a later chapter.
(c) capital
i. changes in capital supplies
The passing of the Limited Liability Consolidating Act in 1862
greatly increased the availability of capital for industry. From 1870
to 1913 British industry was not handicapped by difficulties in
raising capital, although there was an outflow to high-yielding
foreign investments. Even these, however, represented in real
terms British exports going out to build up capital equipment
abroad and meant, therefore, increased activity for home industry.
Moreover, home industry in general, including the iron and steel
industry, was in a sound dividend paying position. From 1870 to
the end of the century borrowing got cheaper, but after 1900 it
grew dearer up to the war in 1914. As the rate of interest depended
on total savings in relation to the demand for loans., the rise meant
that either less wealth was available for investment, or opportunities
for investment were increasing faster than capital supplies, even
when allowance has been made for changes in the value of money.
During the war interest rates rose and remained afterwards
appreciably higher. Between 1918 and 1920 there was a good deal
of capital expenditure in anticipation of a demand to make up for
the assumed or real deficiencies of civil production during the war.
The boom was, however, short-lived; the increased demand did
not materialize and during the severe depression that followed
there was little investment in capital goods requiring the products
of the iron and steel industry. Prices fell and this made people
prefer to hold their savings in a liquid form rather than to re-equip
industry for which they could see no immediately profitable future.
Industry was faced with the problem of excessive capitalization,
due, in part, to the unduly high amounts paid for firms absorbed in
combination schemes during the artificial boom, in part to the water-
ing of capital. Owing to the fall in production the high capital charges
on industry could not be met, or could be met only with difficulty.
In the iron and steel industry in particular, capitalization had
been increased two and a half times in 1923 compared with 1913,
and investment had taken place with little regard to development