Niall Ferguson

Into the Fire?

From Empire to Europe: The Decline and Revival of British Industry since the Second World War

By

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Readers aged over twenty-five will remember what it was like. The gruesome flared suits made from synthetic fibres. The Morris Marinas and Hillman Imps, cars which only started fifty per cent of the time. The fatalistic managements and the bloody-minded shop stewards. ‘Whaddawewan?’ ‘Tenpercent!’ ‘Whendawewannit?’ ‘NOW!’

Britain in the 1970s appeared to be trapped in the screenplay of I’m All Right, Jack. The only thing which seemed to change was the prices, which kept going higher, and the hair, which kept getting longer. Such were the grisly symptoms of British decline.

Yet, only three decades earlier, this had been the country which withstood the worst that Nazi Germany could throw at it. Indeed, a century before, Britain’s had been the world’s biggest industrial economy. What had gone wrong? And what has happened since the 1970s to improve at least some aspects of Britain’s economic performance? These are the questions posed and answered in Geoffrey Owen’s lucid and illuminating book.

The question of British decline has long preoccupied academics from disciplines as diverse as economics and English literature. Sociologists like Geoffrey Ingham blamed the City for neglecting investment in manufacturing. Martin Wiener blamed British public schools for exalting pre-industrial values and sneering at employment in ‘trade’. Most recently, and least plausibly, Will Hutton argued that our constitution was to blame.

Like Hutton, Geoffrey Owen is a former journalist. But in addition to editing the Financial Times, he also did stints at the Industrial Reorganisation Corporation – set up by Harold Wilson to encourage mergers in industry – and at British Leyland. It is only in recent years that he has become Director of Business Policy at the Centre of Economic Performance, a department of the London School of Economics.

Owen’s explanation of our industrial ‘decline and revival’ is at once scholarly and rooted in the realities of post-1945 business life. He attacks the problem sector by sector, beginning with textiles and shipbuilding (notorious laggards) and ending with pharmaceuticals, a rare case of more or less uninterrupted success. He then goes through the list of ‘usual suspects’: the financial system, education, the trade unions and the government itself. Only the more dogmatic Europhobes of the Conservative fringe will find his conclusion paradoxical: that the real causes of Britain’s postwar problems were, on the one hand, the socialist inclinations of government, and on the other, Britain’s reluctance to embrace West European integration.

It was not the banks, the public schools, or even the dear old bolshy unions that undermined British competitiveness. It was the corporatist legacy of wartime, which prioritised jobs above productivity, combined with our self-exclusion from the burgeoning European market. What saved the day, Owen concludes, was the combination of Thatcherism and Europe. The former delivered a short, sharp shock, in the form of disinflation, liberalisation and privatisation. The latter opened the door to the kind of market Britain had failed to find in her former colonies.

Saved by Thatcher and Europe? From the vantage point of the 1999 Tory Party conference, this might sound heretical. But if one looks back to The Lady’s own pro-European policy in office – particularly her decision to sign the Single European Act – it seems more persuasive.

Owen dismisses the old notion that British decline set in around 1870, showing that it was really only after the World Wars that a serious differential opened up between Britain and her Continental neighbours, and also Japan. True, the US had zoomed ahead at the turn of the century, but this owed much to the advantage of the huge American domestic market, something Britain could not imitate.

The statistics he presents of what went wrong after the Second World War are horrific: from 24.6 per cent of world manufacturing exports in 1950 to 9.1 per cent in 1973; from 37.9 per cent of world merchant shipping launchings to 3.6 per cent; from 15.1 per cent of world steel exports to 5.2 per cent. By 1975, productivity at British Steel was less than a quarter of that at Nippon Steel.

Owen has equally telling figures for the Thatcher-Major years: take the Llanwern steel works, which between 1979 and 1995 increased output by 44 per cent while at the same time reducing the workforce by 61 per cent. Overtime and absenteeism were both sharply reduced. This may not have been much fun for the 5,729 men who lost their jobs; but it had to happen if the plant was to survive at all.

Yet it would be wrong to portray this as a number crunching book. There are some more picturesque details, like the Welsh trade unions who regarded the Port Talbot strip mill as ‘a treasure island with a permanently filled pot of gold’; or the exemplary case of J C Bamford, manufacturer of those ubiquitous mechanical diggers known as backhoe-loaders and beloved by all small boys. JCB was quick to learn that the key to international survival was to focus on a distinctive, high-quality product.

And the personalities are here too: Lord Weinstock, for example, who ‘would walk round the factory enquiring why this component could not be bought for a halfpenny less’. It was partly through such economies that the British electrical industry was resurrected.

In particular, Owen’s revisionist chapters on finance and education should be required reading for anyone taken in by Will Hutton’s Germanophile The State We’re In.

I have only one reservation, and that is the backward-looking character of Owen’s conclusion. It would be easy to gain the wrong impression from this book: that Britain could still have a broad manufacturing base, if only we had gone into the European Community sooner, and that closer European integration in future may allow further industrial revival. This is certainly the conventional big-business, FT wisdom; but it seems to me misleading. In many ways, European protectionism and subsidies have allowed the Continental economies to sustain antiquated manufacturing sectors well past their sell-by date; while the high labour costs associated with the German social welfare model are driving new investment overseas.

The essence of the Thatcher remedy was opening the British economy to global competition, not just to Europe; and in that sense Owen’s very title is suspect. In the absence of a radical reform of the EU, ‘From Empire to Europe’ may turn out to be synonymous with ‘From Frying Pan to Fire’.

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