The Wasting of the British Economy (Routledge Revivials)

Sidney Pollard

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317831648
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Originally published in 1982, this book examines the problem and looks at the causes of the repeated crises which the country has undergone since the war. The basic cause is stated to be the failure to invest in the modernisation of the British capital equipment and the consequent loss of competitive power. This failure, in turn, is seen to be the result of Government policies which, for the sake of a variety of short-term aims, sacrificed the future by deliberately inhibiting investment.

1 THE FACTS — AND DO THEY MATTER?

1 Some Data and Some Unpalatable Facts

This book is about economics, and about economic policy. It is part of an incessant debate which has now been going on for many years, and to an outsider it might possibly seem that the debate is too exclusively concerned with one aspect of life only. Money, after all, is not the only thing that matters, and even if it can be shown, as there will be no difficulty in showing, that the British record of economic policy is one unbroken chain of abysmal failure, Britain is still a fine country to live in. Are the media right to occupy themselves so obsessively with economic affairs, and are we all right to judge governments almost solely by their economic performance? Is this not a sign of a poor sense of values?

There is no doubt that man does not live by bread alone, and that the good life does not depend merely on economic success; yet neither should the pervasive effect of economic performance on other spheres of life be underrated. It affects so many things: not only what we can afford to eat or wear, but also the ability of the medical profession to save lives, the chances of poor children to receive the education their talents deserve, the health of the national theatre, and even the tone, the good temper and the humanity of political and public life. It may even be that the British have accepted meekly the plan to become an atomic dustbin for other countries because as a poor nation we cannot afford to be as choosy as others who are vigorously rejecting such a role. So the state of economic health has very wide implications. That must be, in part, a justification for this book.

How do we measure economic success? There are many different things that people want; the same people want different things at different stages of their lives, and perhaps even on different days of the week. Each society will be better at providing some of these things than others, and again this will vary over time. How can we bring all this on to a single denominator?

There is no perfect measure, but over the years economists have been devising methods for bringing together into a single figure the total of the output of all goods and services of a society in a given period, usually in one year. Adding up apples and oranges or motor cars and theatrical performances does present logical difficulties, but the rationale behind doing it in money terms is that, at any rate in a free society, each person will lay out his or her money in such a way as to get the most benefit out of their disposable income. If £5 will buy a theatre seat or three gallons of petrol, then this must represent, roughly, equivalent values in society's eyes, or else there would be a rush on one or the other, and the alternative would remain unsold.

There are various ways in which these totals of goods and services can be summed. We may include, or exclude, imports and exports; we may include or exclude the capital used up in the year's work. A commonly preferred measure is Gross National Product (GNP), which will mainly be used here. By dividing it by the number of inhabitants, to obtain GNP per head, we have a rough and ready standard. By using an appropriate exchange rate, we can then compare GNP per head in different countries, provided they are not too far away from each other in culture, and by re-calculating everything in constant prices, we can compare different years for the same country.

How does Britain fare in such comparisons? The statistics confirm the national consciousness of a staggering relative decline, such as would have been considered utterly unbelievable only a little over thirty years ago. At the end of the war, when Britain had emerged as one of the victorious great powers helping to shape the peace, she was still among the richest nations of the world, ahead by far of the war-shattered economies of Europe. On the continent, only the neutrals, Sweden and Switzerland, were better off than Britain, and elsewhere only the United States and Canada. Britain was among the technical leaders, especially in the promising high-technology industries of the future: aircraft, electronics, vehicles. The problem that exercised the statesmen of the day was whether the rest of Europe, even its industrialised parts, would ever be able to come within reach of, let alone catch up with, Britain.

Nor was that lead a temporary fluke, a result of the more destructive effects of the war on the Continent. On the contrary, the British lead in 1950 was fully in line with that of 1938:¹ and even more so with that of earlier decades, when the British position had been firmly in the van of Europe. It had a solid and traditional foundation.

Today the picture is startlingly different. British GNP per head is little more than half that of her immediate neighbours and of other countries that are, in their build-up, most like Britain (see Table 1.1).

In this category only Italy is still behind Britain, and even there northern industry has higher productivity; it is just the south, with its almost African backwardness, which brings down the average to below the British level. Since the war, Britain has been successively overtaken by Norway, Iceland, Finland, Denmark, Holland, Belgium, West Germany, France, Luxemburg, Austria, Australia, New Zealand and Japan, not to mention a number of oil-producing states.

After having led the world for two hundred years, Britain is no longer counted among the economically most advanced nations of the world. A wide gap seperates her from the rest of industrialised Europe. The difference as measured in national product per head between Britain and, say, Germany, is now as wide as the difference between Britain and the continent of Africa.³ One short generation has squandered the inheritance of centuries.

The same point is illustrated graphically in Figure 1.1. It will repay close study. The picture it conveys is that the world has passed Britain by — as if, in a convoy travelling together, all the other ships are sailing serenely on while Britain has gone aground, helplessly watching the rest of the convoy disappearing over the horizon. The captains of the convoy still meet for regular consultation, but while the others represent vessels which are seaworthy and moving towards their destination, the British captain commands a vessel which is little more than a hulk. To drop the metaphor, when British Ministers meet others at their regular conferences, they share the problems of unemployment and business cycles, of currency adjustment and structural change, of defence expenditure and social welfare provisions. Yet these outward similarities hide an underlying fundamental difference: their economies go on growing, providing substantially more resources year by year to deal with it all, while the British economy virtually stagnates. British representatives may behave as if they belonged to the same economic world, but in a very real sense they do not. The British experience is unique.

Table 1.1: GNP per Head and GDP^a per Man Hour 1977–9, Nine Countries²

	GNP per Head 1978 (US$ 000)	GDP per Head 1979 (US$ 000)	GDP per Man Hour 1977 (USA = 100)	GDP per Head 1982 (US$ 000)
Switzerland	13.32	14.97	65	11.01
Sweden	10.53	12.28	79	12.07
West Germany	10.43	12.45	84	10.88
Belgium	9.81	11.26	94	9.85
Netherlands	9.36	10.62	84	–
France	8.83	10.86	79	10.63
Japan	853	8.72	52	10.34
UK	5.51	7.16	61	8.82
Italy	4.18	5.69	68	8.46

Note: a. GDP = Gross Domestic Product.

Source: OECD, Economic Survey (November 1979); Angus Maddison, ‘Long Run Dynamics of Productivity Growth’, Banca Nazionale del Lavoro Quarterly Review, no. 128 (1979), p. 4. Globus (Frankfurt/Main).

There used to be talk of a ‘German economic miracle’, the sheer incredible recovery of Germany out of the depth of the hunger and destruction of her defeat, following the Erhard reforms. Since then the recovery of France has seemed even more miraculous, emerging as it did after a century and a half of stagnation and growing relative backwardness,⁴ ou...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Table of Contents
• List of Tables
• List of Figures
• Preface
• 1. The Facts — and Do They Matter?
• 2. First Causes
• 3. Causes Behind Causes: Why Has Investment Been Low?
• 4. The Contempt for Production
• 5. The Learning Process
• 6. Alternative Causes
• 7. Permissive Causes
• 8. Current Outlook and Future Prospects: Some Conclusions
• Index