Britain's Missed Opportunities for International Competitiveness Post-1945

In the post-1945 period, the British economy encountered several significant hurdles that prevented it from achieving greater international competitiveness. Various factors contributed to this lag, including poor technical management, ineffective trade union organization, and structural issues in education and research. This article delves into these challenges and their consequences, providing a comprehensive analysis of the opportunities and missed opportunities for British economic growth.

The Quality of Technical Management

The most critical factor that hindered the British economy's competitiveness was the quality of technical management. In comparison to other advanced European countries, British technical management lagged significantly. One primary reason for this was the career preferences of individuals. Unlike France or Germany, where individuals often pursued careers in industry, many British individuals opted for financial services or public service, placing British industry at a disadvantage.

Salaries for middle management in Britain were approximately half of those in France and Germany, adjusted for the cost of living. Additionally, the British education system did not emphasize engineering and scientific education as strongly as institutions such as the Polytechnique and Ponts et Chaussees in France. This had a noticeable impact, particularly in transportation, where two significant public projects were initiated by the British government but ultimately had to be canceled.

Trade Union Organization

The organization of trade unions also contributed to Britain's difficulties. Britain had 115 trade unions, while France had 6 major trade confederations and Germany had 17 major industrial unions integrated into the DGB. This fragmented structure often caused craft interests to conflict with one another, and closed shops (where union members are required to belong to the union) were illegal in both France and Germany. In Germany, striking was illegal until after the wage agreement had expired. These factors hindered industrial development, despite the role trade unions played in securing safer conditions for workers.

Foreign Policy and International Relations

Britain's foreign policy also played a crucial role in its economic decline. After World War II, Britain aimed to carve out its own independent power status, separate from the USSR and United States, by aligning with the Commonwealth. This was supported as early as the 1920s by Ramsay MacDonald, who advocated for free association between free people as a model for colonial relations. The Labour Party, however, prioritized maintaining colonial powers within the British sphere of influence, aligning closer with Australia, New Zealand, and the United States than with Continental Europe.

Britain's aspiration to be the chief power in Europe and organize it along a British-French axis led to its refusal to join the European Single Market in 1954. This decision was compounded by the Suez Canal crisis, which resulted in a loss of influence due to decolonization. By the time Britain finally joined the Single Market in 1973, Europe had coalesced around the German-French axis.

Economic and Structural Issues

Britain also faced structural issues that hindered its economic competitiveness. Fewer students pursued engineering or other hard sciences compared to Germany, and even the United States. Ha Joon Chang's research suggests that inflation does not necessarily lead to reduced economic growth, as evidenced by South Korea and Brazil. However, the attempt to achieve macroeconomic stability with low inflation, as seen in Taiwan, Singapore, and Japan, led to better economic growth outcomes.

When the oil crisis struck in the 1970s, the growth rate in developed countries, including the Soviet Union and Eastern European countries, Yugoslavia, Japan, and the UK, decreased. In Britain, the textile industry had already halved its employment between 1945 and 1970, and many enterprises were unprofitable. The British government's loose monetary policy further exacerbated the situation by causing inflation to rise, adding to the economic challenges. This period was marked by a general sense of Britain's economic decline, despite the efforts to reign in inflation.

References:

Britain's Decline: Its Causes and Consequences by Nicholas Henderson Relative Decline and British Economic Policy in the 1960s by Hugh Pemberton