ABSTRACT
In surveying the development of the British economy since the early 1950s the economic historian can, perhaps, be excused for suffering from an extreme feeling of déjà vu. In historical terms several of the statistical indices of growth are impressive. Taking the years 1950–74 output-per-man-hour in British manufacturing industry increased by well over 200 per cent: gross fixed investment (other than in dwellings) was running at a rate of 15 per cent of gross national product with an acceleration in the rate (to over 17 per cent) after 1965. As for the standard of living, between 1938 and 1974 total consumers’ expenditure at constant prices doubled: since 1945 the real weekly earnings of manual workers have also doubled. Taking the years 1968–9 to 1974—5 – a period noted for the growing burden of personal taxation – average real incomes, while they rose by 23 per cent before tax, still rose by a substantial 17 per cent after tax. No wonder then that despite the extent to which consumption levels have been periodically sustained by borrowing from abroad Sir Henry Phelps Brown has emphatically concluded that ‘the British people today are far better supplied with the necessities and amenities of life, and more fully provided with remedial and supportive services than ever in their history before’.1 Yet, at the same time, the postwar decades are regarded by many commentators both at home and abroad, as years of national economic decline, a period when Britain fell further and further behind its principal overseas competitors in the league table of economic growth. The literature on Britain’s postwar economic ills is vast: managerial weaknesses, excessive trade union power and restrictive practices, an anachronistic social structure, an inadequate education system, the rising tide of government expenditure and weaknesses in government economic policy generally – all of these hypotheses and more, have their supporters and all of them, either singly or in some combination, are regarded as primarily 106responsible for Britain’s alleged failure as an industrial and trading nation. The element of déjà vu lies in the fact that a substantially similar list of weaknesses can be and, as noted earlier (see Chapter 1, passim), has been applied to the British economy in the 1870–1914 period. And in exactly the same way that the problem of British economic decline before 1914 was a relative phenomenon vis- à -vis the faster growing economies of Germany and the USA, so the problem in much of the postwar era has been relative rather than absolute. Since 1950 the country’s economic performance has been highly respectable in historical terms (seeTable 10, p. 146), but since the mid-1950s the British economy has lagged behind a growing number of competitors. No matter which index of economic performance is taken – the rate of growth of GDP (seeTable 11, p. 146), of GNP (seeTable 12,p. 147), of industrial production (seeTable 13, p. 147), of labour productivity (seeTable 14, p. 148), Britain’s share in world trade in manufactured goods (seeTable 15, p. 149) – all of these statistics make depressing reading when compared with the achievements of other countries, in particular the founder members of the European Economic Community (EEC), Britain’s partners in the European Free Trade Association (EFTA), and Japan. Only the USA has a comparable record of relative failure but that can be no source of comfort to Britain in so far as the absolute level of the American standard of living is so much higher. Then there has been the problem of the balance of payments, together with the progressive weakening of sterling as an international currency (seeTable 16, p. 149). In historical terms this is a phenomenon which had its origins in the period following the First World War. The reduced invisible income from abroad due to the loss of overseas assets and the depressed level of international trade combined with the difficulties of Britain’s staple export industries to produce a weakened balance-of-payments situation in the 1920s (seeTable 5, p. 142). However, the real warning of things to come appeared in the following decade when Britain, with the level of domestic economic activity recovering from the trough of depression, recorded current account payments deficits in a number of years (1931, 1932, 1934, 1936–8).2 In much of the post-1945 era the pursuit of’full employment policies’ has meant that instead of there being a chronic insufficiency of effective demand there has been a tendency for the growth of imports to outstrip the growth of exports. This has led to a debilitating balance-of-payments constraint as successive governments have been obliged to intervene at depressingly regular intervals to restrain the level of domestic economic activity in order to ease the problem of the foreign balance -the so-called ‘stop-go’ cycle (see below, pp. 117–18). Economic Growth in the UK, 1900–76 (percentage increase per annum) https://www.niso.org/standards/z39-96/ns/oasis-exchange/table"> GDP GDP perman Employed Labour Force Capital Stock (excl. dwellings) 1900–13 1·0 0·0 1·0 1·9 1922–38 2·3 1·1 1·2 1·1 1950–60 2·6 2·2 0·4 2·8 1960–70 2·8 2·5 0·3 4·3 1970–6 1·6 1·4 0·2 3·8 Source: A. R. Prest and D. J. Coppock (eds), The U.K. Economy: A Manual of Applied Economics (7th edn, 1978), table 1.12, p.48. Table reproduced by permission of Weidenfeld & Nicolson Ltd. Annual Growth Rates of Real Gross Domestic Product 1955–73 (per cent per annum) https://www.niso.org/standards/z39-96/ns/oasis-exchange/table"> 1955–60 1960–4 1964–9 1969–73 UK 2·5 3·1 2·5 3·0 France 4·8 6·0 5·9 6·1 West Germany 6·4 5·1 4·6 4·5 Italy 5·4 5·5 5·6 4·1 EECa 5·3 5·4 5·3 5·0
= France, West Germany, Italy, Belgium and the Netherlands.
Source: D. T. Jones, ‘Output, employment and labour productivity in Europe since 1955’, National Institute Economic Review, no. 77 (August 1976), p. 80. Annual Growth Rates of Gross National Product 1960–70 (per cent per annum) https://www.niso.org/standards/z39-96/ns/oasis-exchange/table"> 1960–5 1965–8 1965–70 UK 3·4 2·3 2·4 France 5·8 4·5 5·4 West Germany 5·0 3·2 4·4 Italy 5·2 6·0 6·3 Belgium 5·1 3·3 4·2 Netherlands 5·0 4·9 4·7 Norway 5·4 4·6 4·4 USA 4·8 4·7 3·7 Source: OECD, The Outlook for Economic Growth (Paris, 1970) Growth of Industrial Production 1957–76 https://www.niso.org/standards/z39-96/ns/oasis-exchange/table"> Annual growth of industrial production 1957–76 (%) Total growth of industrial production 1957–76 (%) UK 2·27 57·8 France 5·03 151·2 West Germany 4·93 146·6 Italy 6·41 219·6 Belgium 3·88 106·2 Netherlands 6·08 201·6 Luxembourg 1·84 53·2 EEC (the Six) 5·32 160·4 Source: Prest and Coppock (eds), The U.K. Economy, table 4.3, p. 174. Table reproduced by permission of Weidenfeld & Nicolson Ltd. Output Per Person Employed in EEC Countries: Average Annual Rates of Increase 1955–73 https://www.niso.org/standards/z39-96/ns/oasis-exchange/table"> Manufacturing GDP 1955–60 1960–4 1964–9 1969–73 1955–60 1960–4 1964–9 1969–73 UK 2·2 3·2 3·4 4·5 1·8 2·2 2·5 2·8 Average for EEC(5 countries) 4·6 4·8 5·9 4·6 4·5 5·1 5·3 4·6 Source: Jones, ‘Output, employment and labour productivity’, pp. 76–82. UK Share in World Trade in Manufactures 1955–76 (percentages) https://www.niso.org/standards/z39-96/ns/oasis-exchange/table"> 1955 19·8 1973 9·4 1960 16·5 1974 8·8 1965 13·9 1975 9·3 1970 10·8 1976 8·7 Source: C. J. F. Brown and T. D. Sheriff, ‘De-industrialisation: a background paper’, in F. Blackaby (ed.), De-industrialisation (1979), table 10.8, p. 246 (derived from National Institute Economic Review, Statistical Appendix,table 22 and IMF,Balance of Payments Yearbook). Table reproduced by permission of Heinemann Educational Books. Trends in the UK Balance of Payments, Annual Averages for Selected Periods 1955–77 (£ million) https://www.niso.org/standards/z39-96/ns/oasis-exchange/table"> 1955–60 1961–4 1965–7 1968–71 1972–7 Visible Balance –94 –213 –218 –142 –2,763 Invisible Balance +230 +182 +206 +627 +1,591 Current Account Balance +136 –31 –75 +484 –1,171 Balance of long-term capital –189 –139 –137 –101 +537 Basic Balance (Current Account Balance + Balance of long–term capital) –53 –170 –212 +383 –634 Source: Prest and Coppock (eds),The U.K. Economy, table 3.2, p. 122. Table reproduced by permission of Weidenfeld ' Nicolson Ltd.