How did UK, from the first nation to industralize, fall behind in economic growth?

[fr-rein]

The key reason why UK fell behind even Germany and France (which were heavily ruined, mind you) or Italy... is the post-WWII period. Obviously, WWII made a huge blow to UK.They were left with huge debts, the country had issues in supplies and the economy was a mess. A bit of physical attacks too by bombing, though they weren't that bad. However, the real reason why UK fell... was the desire to be a superpower.

UK heavily invested in becoming superpower. They kept high taxes and restrictive measures, used Marshal plan and scraped available money to develop nuclear weapons, invest greatly in navy and military bases abroad and in general were concerned about maintaining status of Great Power. The economic burden was atrocious to UK, incurring even MORE debts on it. The question of colonies at the time wasn't solved and there was a hope that UK could still maintain control over them, having them effectively in tight sphere of influence.

This all ended in the Suez Crisis, which marked all those efforts futile and UK defacto stopped being Great Power. It lost a bid to participate in Cold War as a side, the Empire cracked down and dissolved afterwards while incurring huge economic harm on UK... you could say it is similar to dissolution of USSR in a way.

Kinda similar, but on smaller scale thing happened with Portugal and their pluricontinental concept.

Meanwhile, the world didn't stand on one place. Italy, Germany, France, Japan and even Spain later focused on building their economics, making them economic powerhouses and earning them a place in new world order. Even though France competed for the status of Great Power and did wars as well, it wasn't as heavily invested in recovering Great Power status and focused much more on the restoration of the country and investment in economic until later part of 50s. Though, I guess, France could be better off if it focused more on economics perhaps.

As a result, the infrastructure in UK was far older, the industry was falling behind, government didn't stimulate it and it meant the death for it. It wasn't ofc like economic collapse of USSR despite me remarking similarities as two economic issues were different in reasons.

Something like this. And well, at least until Brexit UK managed to find it's own spot in world economics so it wasn't that bad.

 

[Henry IX]

I think there was also a subtle problem with the assumptions about the world economy that underpinned British industrial power. During the first industrial revolution the British got rich partly off extractive practices in the colonies, particularly raw materials, combined with the ability to use the colonies (particularly India) to absorb enormous amounts of manufactured goods. After the Second World War the British manufacturing industry continued to assume that there was a dedicated market for their goods in the colonies and failed to adjust to the consumer driven markets of the western nations.

In contrast to this were nations like Germany and Japan, who manufactured goods primarily for export into the rapidly expanding economies of the industrial west. As improved export infrastructure, particularly the shipping container, drove the cost of exporting down to a tiny fraction of the previous cost and new economic methods were employed to extract commodities from non-industrialised nations at ever decreasing prices, the British were simultaneously losing their ability to exploit their colonies as directly as they were used to. The result was a perfect storm for British manufacturing with far superior consumer goods being manufactured for export in competing nations combined with the loss of a significant closed market for British goods. This led in turn to the rapid de-industrialisation of Britain throughout the second half of the 20th century.

They kept high taxes and restrictive measures, used Marshal plan and scraped available money to develop nuclear weapons, invest greatly in navy and military bases abroad and in general were concerned about maintaining status of Great Power. The economic burden was atrocious to UK, incurring even MORE debts on it

As well as government industrial policies, which diverted investment away from manufacturing towards military expenditure, there was also a systematic failure of the British system of capital exploitation.

In the devastated cities of Germany and Japan private money was invested in manufacturing infrastructure as the best way of producing profits. The result of this was new factories and improved processes in the existing ones. In comparison, the remaining free capital in Britain was often invested into the financial markets, which offered greater profits in shorter timeframes. This speculative capital drove the continual expansion of the financial services sector, particularly in London, and did generate large amounts of wealth. However, the wealth was heavily concentrated in the hands of existing capital and although the government's redistributive polices reduced the inequality in British society, this wealth was not available for industrial expansion contributing to the stagnation of the British industry. As a final irony, one of the key places British capital was exploited, via the financial markets, was in the rapid and highly profitable expansion of foreign manufacturing industries, particularly in Europe. While the profits from this investment eventually returned to Britain and help to feed the growth of the British economy more broadly, it did so at the direct expense of the British manufacturing sector.

 

[Director]

I agree with a good deal of @Henry IX 's comment above and encourage you to read it.

In the aftermath of the disastrous American Revolution, Britain picked up an overseas empire 'on the cheap' and soon recovered her trade with her former colonies. Industrialization led to railroads and telegraphy and steamships - all revolutions in communications and transport that slashed transport costs by an enormous margin (before railroads, it cost less to ship goods across the Atlantic than to move them 100 miles inland). Britain got all of those benefits, plus the ability to sell technology and equipment to the rest of the world.

However... other states began industrializing and manufacturing, with preference for home-made over foreign-bought. The cost of keeping the Empire began to rise, and when Britain looked for allies in the post-1900 world she found she was isolated. New technologies of chemicals, electrical equipment and internal combustion were developed or perfected elsewhere and Britain began, slowly, to lose her markets. There are studies claiming that education in other states (France, Germany, the US) was producing more and better scientists and technicians. Despite this, and despite the naval race with Germany, the Empire remained wealthy and powerful - a real international superpower.

WW1 forced Britain to field both a large land army and an immense fleet, as well as construct a really large number of merchant ships and escorts. Britain had been the financial power of the world - the banker nation that loaned out money to others and collected the dividends. Now all holdings were liquidated, sold or borrowed against to equip the armies. In a few short years the Empire went from a lender to a debtor nation, the financial center moved to New York (never to return) and a generation of money went to war instead of to industrial and transportation investment.

WW2 simply finished the job: India had to be promised freedom to keep them from rebellion and what investments and securities as remained were sold off to pay for the war. The parlous state of the British Armed Forces in the 1930s can be summed up as 'No Money' - a state the Victorians and Edwardians would simply not have believed.


Now, that's all my opinion. I do think Britain would have remained economically competitive without WW1, though her commanding economic position was not going to last as the US, Germany and France moved into chemicals, heavy industry and machine tools, automobiles and electrical equipment. The cost of the naval race with Germany was painful but not unbearable; it was buying a multi-million-man army from scratch and the losses of merchant ships that wrecked her finances.

 

[Kazanov]

Looking at various economic charts, it seems England and later UK was quite rich compared to most other European countries and well ahead of other nations like Sweden. It was also the first nation to industrialize. But now it seems to be poorer than countries like Sweden which industrialized much later and had basically forever Before been poorer.

Is there a good reason why UK could not keep up, did it actually hurt in the long term to be the first to industrialize, like could it have missed some key industries or gotten too dependent on its Colonial empire?

The UK is on a small island at the north of Europe, a great nation, but on a small island will never have all the resources needed to keep it up for centuries. Their most successful former colony has like 5 times their population and after ww2 their lost mostly all their relevance and colonies around the world.

Economic indicators must have context, and you cannot compare the UK on their glorious era with the UK of our days.

 

[LlywelynII]

Misplaced focus on colonial empire rather than fellow industrial markets. Outdated capital equipment compared with rebuilt economies post-WWII. British investment in foreign manufacturing.

I agree with a good deal of @Henry IX 's comment above and encourage you to read it.

Yup. The only mistake is the overly tightened timeframe.

The real question I think—especially given we're on a strategic wargame forum—is HTF did the UK blow such a monstrous lead?

Mostly, the real world isn't a grand strategic wargame. The people controlling a country aren't aiming for that country's supremacy at all costs over a span of centuries. They're mostly aiming for their own personal power (mostly synonymous with wealth) over the span of their lifetimes. The British could mostly accommodate themselves to an independent US because—to a large extent—their banks and investments continued to own it. Ditto the foreign investments Henry IX is talking about: over a long enough timeframe, they weaken the UK's relative position as a whole but given widespread legal protections for the freedom of capital they'll make the UK's upper class richer in the meantime.

Britain also didn't have the luxury of knowing what tech was going to be more or less important down the road. They lost enormous sums on American infrastructure like canals and railroads during economic downturns and once political opposition unified against the predatory excesses that made carriers most profitable. They reaped huge informational benefits from controlling the worldwide telegraphy networks but at a national level the only way to get paid for them was to cede more control; eventually, of course, everyone switched over to radio for decades before the internet made the wires important again. By that time, it was all being run by the US and their intelligence services.

Education produced greater tech in other nations.

Yup, particularly Germany's chemical industry and American consumer goods.

There were also other switchovers: from pure mechanical steam power to electricity during the Second Industrial Revolution, which benefited more newly established factories on the Continent and in the States; from coal to petroleum, which benefited the enormous reserves Standard Oil tapped in the US and then led to painful nationalizations in the Middle East. A player would know to focus on the right tech from the beginning, but the UK had no idea and just had to step on economic rake after economic rake as tech shifted.

All the foreign investment got liquidated or sunk while surviving the world wars.

Is the biggest part.

And, of course, regardless, the British upper class does still have perfectly ducky lives and continues to command the resources of much of the rest of the world... which is most of what they themselves wanted from the beginning. Post WWII, more of that wealth got shunted into health care for poor people than they would've liked, but now the NHS is part of how they can feel superior to the US and China and even toffs like Boris are on board with accommodating it.

 

[LlywelynII]

Incidentially, a lot of the same mechanics are visible in real time with the recent shift in power from the US towards the PRC.

Obvious differences, of course: the US was traditionally protectionistic but China has been even more so, restricting foreign ownership and capital flight. One thing people haven't mentioned so far was that Britain built its empire on the back of precious-metal currencies (whose outflow was the main reason for backing local drug smugglers in the First Opium War); one way the US solidified its control of the post-WWII world was pulling up that ladder behind it, forcing everyone into fiat currencies based on the dollar and its ability to purchase Middle Eastern petroleum. China's had to work a lot harder than the US did to get its currency accepted as a basis for international trade and loans, although it's still finally happening with the Belt and Road projects.

 

[Gordy]

Some of the major issues have been discussed by others but some have been missed. It is always worth remembering that the British "decline" was relative. We grew during this period and it is generally a time that Britons think of as a good era because of the liberalisation of society, the creation of safety nets such as the National Health Service and the breaking down of nonsense such as the rigid class system that had held so many back. It is simply that whilst we had a good era, it was even better for most other Western countries and we were caught and overtaken by many countries, some of which are still ahead of us.

The loss of Empire - the Empire ran at a loss but they tended to buy our products (and may not have had much choice), when various bits became independent, they often stopped buying our products - Gandhi even had a "buy British last" policy.

Failure to join what would become the EU - we joined the Brussels treaty but not the European coal & steel - we missed out on the golden era of European co-operation - this was an era when even the Italian economy was dynamic but we were on the outside. We eventially joined but the golden era was over by that point.

Trade union militancy - it may be difficult for the youngsters of the forum to comprehend but the British workforce in the 60s and 70s was notorious for going on strike and nonsensical disputes about "demarcation" i.e. a refusal to adapt to changing circumstances. Striking was known as "the English disease".

Crappy management - private companies were badly run by people who lacked imagination generally and failed to invest in innovative products. We were just producing the same old products as before but everybody else had moved on.

Very high personal taxation led to a "brain drain" to places such as the USA and Australia. The Beatles wrote "The Taxman" and the Kinks "Sunny Afternoon" as a protest against taxes. I can't think of any other era where pop stars were writing songs about taxation.

The failure to adapt and change led to Thatcher's rise to power. Some damn her for destroying the fool's paradise that they lived in. Other felt that she saved the country. I think the truth is that she was a necessary evil but her "victory" was very much a pyrrhic one that created divisions that haven't healed even thirty years later.

I would date the British renaissance to 1997, the advent of Cool Britannia and Blair's first election win. The country just felt different and the inferiority complex we had towards the likes of France and Germany was gone.

 

[Gordy]

Is the biggest part.

And, of course, regardless, the British upper class does still have perfectly ducky lives and continues to command the resources of much of the rest of the world... which is most of what they themselves wanted from the beginning. Post WWII, more of that wealth got shunted into health care for poor people than they would've liked, but now the NHS is part of how they can feel superior to the US and China and even toffs like Boris are on board with accommodating it.

I think you have misunderstood what is meant by "upper class". The upper class is basically the aristocracy that have titles, own land and live in country estates. It's essentially a continuation of feudalism. They are a small fraction of the population. I don't think I've ever met one. They are still wealthy but far less so. Inheritance taxes hit them hard and they've usually given up their country estates.

What I think you are talking about is industrialists which would be "upper middle class" in British terms. They aren't upper class because "they are in trade", don't have titles and probably never had a family estate. They are usually richer than the upper class. Upper middle class would also be understood to include some of the richer professions such as doctors and lawyers.

I'm not sure that either the upper or upper middle class are all that proud of the NHS. They tend to be Tory voting and I doubt that many of them use the NHS because they can afford private health care. However, the NHS is popular enough with everybody else that the likes of Boris have to tred carefully with it.

 

[Gordy]

Another point is that Germany's rise is inevitable once Bismark unites Germany behind Prussia. Germany was historically weak because it was so divided. LIke Britain, they were rich in coal and steel. A united Germany was always going to challenge British economic / naval might. Even before reuinification, the rump West Germany was still the most populous nation in Europe*.

* I don't count the USSR as European

 

[LlywelynII]

I think you have misunderstood ...

that other people don't necessarily follow the definitions you've made up in your head.

The aristocracy is the aristocracy. The upper class are the class above the others, which includes the wealthy moguls who own/rent the PMs.

The Tories have traditionally crapped all over the NHS; they crushed their opposition thanks to Boris's Trumpesque pivot to its support and, if they have any sense, the rest will fall into line and hold their majority for at least a decade or two.

 

[Gordy]

that other people don't necessarily follow the definitions you've made up in your head.

The aristocracy is the aristocracy. The upper class are the class above the others, which includes the wealthy moguls who own/rent the PMs.

The Tories have traditionally crapped all over the NHS; they crushed their opposition thanks to Boris's Trumpesque pivot to its support and, if they have any sense, the rest will fall into line and hold their majority for at least a decade or two.

Other people ought to be aware that if we are talking about the UK class system then following UK conventions makes sense. I wouldn't impose a British understanding of class on a discussion of American politics but I don't why vice versa makes any sense to you. These are not definitions that I have "made up". They stem from a very different understanding of how a society ought to function. Put simply, feudal lords > merchants. Of course the UK isn't really like that today but we still don't group the nouveau riche and old money together, especially not then.

As for the Tories crapping all over the NHS, there is some truth to that but the idea that Boris is a noble exception and this is some turning point in British history with regards to the NHS is utterly absurd. Funding is and always has been a major issue and is likely to remain so, even under a Labour government, if we ever see one of those again.

 

[LlywelynII]

These are not definitions that I have "made up".

Excluding billionaires like Murdoch from the "upper class" in modern Britain is pretty much made up by you. We're not discussing the Restoration, let alone the Conquest. Further, we're discussing my usage in my post, which by now you should at least be able to understand, if not necessarily agree with.

... the idea that Boris is a noble exception and this is some turning point in British history with regards to the NHS is utterly absurd.

The idea that he's being in any way noble is absurd, but the idea that he hasn't made a historical pivot towards its support is being wilfully blind to his entire takeover and successful stewardship of the Tories through the last election. (Again, absolutely true that many other toffs are not on board with his programme and are perfectly willing to shoot themselves and him and everyone else in the foot on the general principal of 'F*** the poor'. It's the major question for his administration, apart from trade deals.)

 

[Gordy]

Excluding billionaires like Murdoch from the "upper class" in modern Britain is pretty much made up by you. We're not discussing the Restoration, let alone the Conquest. Further, we're discussing my usage in my post, which by now you should at least be able to understand, if not necessarily agree with.

No, it is not. I'm not sure why you think standard British usage is somehow "something Gordy made up". You just seem to think whatever is normal in the USA is normal everywhere. Murdoch is not even British so why does he get dragged into this? If this is a usage that is restricted to me then expect to see lots of British forumites objecting. But of course that won't happen.

Nor is the period we are discussing "modern Britain". There was a major distinction between old and new money in the time being discussed. The leaders of the Conservative party tended to be from an upper class background until Thatcher came along, Churchill was the son of the Duke of Marlborough for instance. Industrialists made Britain great but they didn't lead the country, this may have some impact on policy but this is a bit outside my expertise.

The idea that he's being in any way noble is absurd, but the idea that he hasn't made a historical pivot towards its support is being wilfully blind to his entire takeover and successful stewardship of the Tories through the last election. (Again, absolutely true that many other toffs are not on board with his programme and are perfectly willing to shoot themselves and him and everyone else in the foot on the general principal of 'F*** the poor'. It's the major question for his administration, apart from trade deals.)

He has made no such pivot. He has been in power for a while now. What policies has he come up with that would lead you to conclude this?

You seem to be fixated on a cheap slogan that he had put on the side of a bus before he was leader. He has made no significant manifesto commitments beyond a vague statement about being a "one nation" Tory.

 

[Gordy]

For those who are interested in the British class system and how it impacts on society, here is a Wikipedia link to the upper class section on an article on social class in the UK https://en.wikipedia.org/wiki/Social_class_in_the_United_Kingdom#Upper_class.

I did not write or edit it despite what some might think.

 

[Herbert West]

Again, it's the UK that is the outlier here. In every other place in the civilised world, rich people without nobility are upper class. To exclude billionaires because their family exploits workers rather than villagers is stupid.

 

[Gordy]

Again, it's the UK that is the outlier here. In every other place in the civilised world, rich people without nobility are upper class. To exclude billionaires because their family exploits workers rather than villagers is stupid.

The UK may be an outlier to some extent but if we are discussing the UK then it's best to use British frames of reference. Generally I would imagine that any country that still has a monarchy and an aristocracy would be similar to the UK. Obviously, former colonies that were set up as republics and countries where the communists held power are going to be different, as would be a country like France which had its own revolution.

For the record, there are quite a few differences between the landed class and mercantile classes in the era that is being discussed. They are still present to some extent.

The landed class did not work. Other people work for them and they live off that work. That's quite different from the mercantile class who ran their businesses. The landed class would have an estate manager to do it for them.
The landed class had titles and country estates whilst the mercantile class did not.
The landed class may have held a seat in House of Lords by right of birth whilst the mercantile class would not have had this.
The landed class had governors / governesses to educate them at home whereas the mercantile class would send their kids away to boarding school.
The landed class had a country lifestyle that incorporated balls, hunting and horsey stuff whereas the mercanitile class were much more urban.
They spoke differently, the landed class spoke with a very conservative style of RP that other Britons find hilariously funny and incoporate vocabulary that the middle classes do not use (the so-called U vs non-U usage). The mercantile class initially would have had regional accents but later would have spoken RP (but not the same style).
The landed class were often close friends with the royal family who had a similar lifestyle to them whereas the mercantile class would not have socialised in those circles.
The landed class would generally have considered the mercantile class below them and would not have wanted their sons / daughters to marry them.

Britain was generally ruled by people who were the second or third sons from an upper class background (Labour politicians generally being an exception) whilst now it's more likely to be the upper middle class (Labour not really being much of an exception any more).

 

[Director]

The UK is the outlier in one specific sense: she was the first and for a time the only industrial power. As with US economic and industrial hegemony after WW2, this state of affairs does not and cannot last - the benefits are too obvious for others not to develop their own resources.

1) being first, they were able to expand into a vacuum, just as they picked up an empire largely in a power vacuum
2) eventually other nations wanted to develop their own industry and transportation and either cut into British sales or developed specific protectionist policies and tariffs
3) British hegemony over the world markets steadily eroded to 1914; her economy moved away from industry toward finance and she did not become a leader in chemicals, electrical gear and other new industries
4) Failure to adopt Chamberlain's Imperial Preference and other measures to secure her internal/colonial markets
5) Her investment capital was absorbed by wartime debt from 1914 through 1936 or so; she was unable to take advantage of the new economic vacuum (as France, Russia and Germany were hit harder than Britain) largely due to the US moving from an importing to an exporting economy, the larger US internal market coupled with generations of investment in labor-saving devices, plus the movement of finance from London to New York - just too many obstacles.
6) Britain retained powerful industry during and after WW2 but was desperately in need of investment capital and debt relief; the continued expansion of the US into overseas markets, and the breakup of the Commonwealth/colonial system, left Britain without the ability to compete

Today, Britain is still one of the largest European economies, ranked 7th (behind Germany, India and France and ahead of Italy) and is still a giant of finance. As for Brexit, I think it depends on what the knock-on effects are, and we'll have to wait at least 5-10 years to see those. I believe Britain would have been better off to stay in the EU - but, not my country so my opinion matters little.

 

[Gordy]

The UK is the outlier in one specific sense: she was the first and for a time the only industrial power. As with US economic and industrial hegemony after WW2, this state of affairs does not and cannot last - the benefits are too obvious for others not to develop their own resources.

1) being first, they were able to expand into a vacuum, just as they picked up an empire largely in a power vacuum

I can't say I agree with that. We weren't the first imperial power and we weren't the only significant power. The Spanish had a massive empire at the time when our empire consisted of a handful of struggling colonies on the east coast of what would become the USA. Imperial power predates industrialisation even if British imperial power was at its height when we were an industrial power.

2) eventually other nations wanted to develop their own industry and transportation and either cut into British sales or developed specific protectionist policies and tariffs

Generally true but it's worth noting that some nations such as Belgum, the USA and Germany (once unified) were succesful in industrialising.

Today, Britain is still one of the largest European economies, ranked 7th (behind Germany, India and France and ahead of Italy) and is still a giant of finance. As for Brexit, I think it depends on what the knock-on effects are, and we'll have to wait at least 5-10 years to see those. I believe Britain would have been better off to stay in the EU - but, not my country so my opinion matters little.

The fact that we are still considered a major economy comes down to two things.
a) a relatively large population - more or less the same as France or Italy and second only to Germany - per capita we might be behind a lot of smaller countries such as the Netherlands, Switzerland and Sweden.
b) a "recovery" (relative to the European norm) from the late Thatcher era onwards - there was stronger growth in the UK combined with sluggish growth elsewhere in Europe.

 

[Henry IX]

I have been looking into the statistics and British manufacturing paints a more complex picture than simply a long term decline.

British manufacturing during the first half of the 20th century was constrained by available labour during times of economic growth. This means that there was no way to continue expansion except through increased efficiency. During this same periods Britain's main competitors were all growing due to underutilised population. For example, even in the late 1930s German peasants were around 30% less efficient than a industrial worker (in terms of value of production), meaning that any movement of people from the agriculture to manufacture can produce economic growth. This was not really the case in Britain at the same time. This means that there was no real means for Britain to 'retain its lead' in economic terms - its economy was restrained by a fundamental factor (available labour). Hence, its lead was rapidly eroded, with very little the British could actually do to prevent this.

The belief in the decline of British manufacturing seems to have arisen from the significant de-industrialisation that occurred from the 60s -70s (which has been thoroughly explained in this thread). However, this trend has reversed since then, giving Britain an average manufacturing growth rate of about 1.6% per year (inflation adjusted) since the Second World War. This manufacturing growth has been driven by increased specialisation and significant efficiency increases (employment in manufacturing has declined massively since WWII) to the point where British manufacturing is actually superior in terms of investment growth than the rest of Western Europe.

 

[LlywelynII]

I did not write or edit it despite what some might think.

That's clear enough, since it's terribly sourced. You're a fine scholar, and I'm sure you would do a better job with a wiki page you cared about.

It's also clear, since you apparently didn't bother to read it. It states that the upper-middle-class includes the professions (as expected) and that for further details on the upper class you should see the dedicated article in which we find (amid better writing and actual sourcing)

The upper class in modern societies is the social class composed of people who hold the highest social status, usually are the wealthiest members of society, and wield the greatest political power.[1] According to this view, the upper class is generally distinguished by immense wealth which is passed on from generation to generation.[2] Prior to the 20th century, the emphasis was on aristocracy, which emphasized generations of inherited noble status, not just recent wealth.[3]

...

In England, Wales, Scotland, and Ireland, the "upper class" traditionally comprised the landed gentry and the aristocracy of noble families with hereditary titles. The vast majority of post-medieval aristocratic families originated in the merchant class and were ennobled between the 14th and 19th centuries while intermarrying with the old nobility and gentry.[5] Since the Second World War, the term has come to encompass rich and powerful members of the managerial and professional classes as well.[6]

[emphasis added]

Beyond which, again, it wasn't a matter of my misunderstanding some overly traditional Brit's post. It was you intentionally misunderstanding and mistakenly 'correcting' mine. It's an international thread in the 21st century: you're welcome to resist Americanisms or use your own peculiar definitions in your own writing, but you'd still do better to understand how other people use words and just roll with it to address the substantive points.