Capitalism, Culture and Decline in Britain

1750 -1990

W.D. Rubinstein

• Publisher: Routledge
• Year: 2002
• Print ISBN:
  9781138162877
• eBook ISBN:
  9781134958337
• Topic: History
• Subtopic: World History
• Index: History

First published in 2002.The aim of this book is to analyse and dispute a widely-held theory of
Britain's 'economic decline' since the mid-nineteenth century, and to
offer an alternative view which has important implications for our
understanding of British society and culture in the modern period.

1
The British economy since industrialisation and the ‘cultural critique’

The aim of this book is to analyse and dispute a widely-held theory of Britain’s ‘economic decline’ since the mid-nineteenth century, and to offer an alternative view which has important implications for our understanding of British society and culture in the modern period. The most common view of modern British economic history may be put concisely, but not inaccurately, as follows: Britain was the first nation to experience an industrial revolution, which began around 1760 and, by 1850, had transformed Britain into the ‘workshop of the world’, the pre-eminent industrial and manufacturing power of the time. After Britain’s short-lived mid-Victorian economic zenith (1850–70) Britain experienced a relentless period of economic decline, now lasting for over 120 years, wherein it not merely lost its industrial hegemony but was surpassed by virtually every other western nation and, recently, by many on the rim of east Asia. Moreover, this unrelieved period of relative economic contraction became steadily more severe, with each generational era witnessing, roughly speaking, a less impressive performance in relative international terms than the one before.

According to its proponents, this continuing decline has had many causes, some more acceptable and justifiable than others. It was probably inherently impossible for a comparatively small island-nation to maintain such a lead in the long run, especially after larger and more populous states like the United States and Germany industrialised. The existence of rival industrial centres almost automatically meant that Britain could no longer enjoy the same unchallenged superiority at manufacturing and exporting that it could when it was the only industrialised nation. Britain’s world-wide Empire and its involvement in two costly world wars and the Cold War virtually bankrupted her. Many fundamental institutions of the British economy, from the banking system to the trade unions, inhibited rational economic development, especially in industry and manufacturing.

Possibly the most commonly heard explanation for Britain’s economic decline is that which we will term the ‘cultural critique’. According to this argument, a key to understanding the reasons for Britain’s decline lies in the effects of British culture upon Britain’s entrepreneurship. British culture in its various manifestations and institutions was (and is) anti-industrial and anti-business. The chief mechanism for the intergenerational transmission of anti-business values is the British educational system, especially the fee-paying public schools and the universities where the sons of businessmen have, since the early Victorian period, chiefly been educated. The traditional and central aim of the public schools and the older universities—especially the former— was to produce the ‘English gentleman’, a well-rounded amateur who was ill-equipped for the rough and tumble of business life and who, in any case, regarded business life and the pursuit of profit as vulgar and distasteful activities, unsuitable for the well-bred. Many, perhaps most such gentlemanly products of the public schools joined the landed gentry, either by land purchase or marriage into older established families; most of the others spent their lives as the backbone of the governing class of the Empire and the military. More broadly, too, British culture was anti-business and anti-industrial in other important ways. It was pervasively anti-urban, both in the views presented by its central cultural figures and its governing elites who looked backward to the pre-industrial landed aristocracy and to the landed gentry as the ideal, and to rural life as inherently better than urban life. Britain’s traditions were, in many cases, hopelessly unmodernised and often bordered on feudal survivals. Although Britain was the first country to industrialise, it was among the last to retain institutions like the House of Lords and an established Church, while its legal system and educational institutions were serious obstacles to rapid economic growth. Its class structure was and is unusually rigid and wasteful of human resources. Unlike America or contemporary Japan, British culture was, generally speaking, anti-capitalist, regarding free market economics as unfair, its chief beneficiaries the despicable factoryowners and plutocrats of the age of laissez-faire, its chief victims the working class. This viewpoint was not only held by the British left—where it was and is universal—but by many British conservatives from Burke, Coleridge, and Disraeli onwards to Baldwin and Harold Macmillan. Capitalism in its laissez-faire form at any rate was also unethical and unchristian, as generations of British clergymen and secularised moralists like William Morris and R.H.Tawney have urged. This ethical critique of British capitalism has often been applied, too, to British power generally, especially in the acquisition and preservation of the Empire and Britain’s participation in many wars.

The ‘cultural critique’ thus asserts a number of central historical contentions which it would be useful to enumerate specifically. First and foremost, Britain was both the earliest country to industrialise and was a primarily industrial and manufacturing economy. Britain’s industrial decline is the most salient feature of its economic evolution since 1850, the industrial and manufacturing hegemony it enjoyed in the mid- Victorian period passing successively to Germany, the United States, and, most recently, Japan. More broadly too, Britain clearly has experienced a relative economic decline over the past 120 years and certainly in the past forty. Probably the most important reason for this decline, and certainly a very important one, is Britain’s pervasively anti-industrial and anti-business culture, especially via the education typically offered to the middle classes. The end product of this is a society rooted in the past, pre-modern and anti-modern in most respects, and ill-equipped to deal with the modern world. It is as well that we have enumerated these central contentions as specifically as possible, for the aim of this book is to demonstrate that each of them, however familiar, is wrong—and not merely wrong, but arguably the very opposite of the truth.

On the face of it, there would appear to be abundant empirical and anecdotal evidence for the seemingly unarguable proposition of Britain’s economic decline since 1870 and for cultural factors as a main cause of this decay. Of the fundamental importance of the industrial revolution most economic historians, until recently, were in complete agreement.¹ For instance, Carlo Cipolla, an eminent Italian economic historian, termed the industrial revolution the most important event in history since the neolithic revolution of c. 8000 BC (which introduced agriculture, the domestication of animals, and settled communities).² Professor Harold Perkin’s widely known interpretation of British history from 1780 to 1880, The Origins of Modern English Society (1969), has termed the industrial revolution

a revolution in men’s access to the means of life, in control over their ecological environment, in their capacity to escape from the tyranny and niggardliness of nature. At the material level it can be described as a rise in human productivity, agricultural and demographic, on such a scale that it raised, as it were, the logarithmic index of society….

[T]he Industrial Revolution was—and is—a unique phase of historical development: the one-way road which, if travelled successfully, leads from the undeveloped society’s comparative poverty, insecurity, and dependence on the bounty of nature to the comparative wealth, security and freedom of choice of the developed society. It is an irreversible revolution, in that any return to lower levels of productiveness would involve a catastrophe of such magnitude as almost certainly to bring down civilisation with it, if not totally to destroy human life itself,and one compared with which the hydrogen bomb would be but a preliminary disaster.³

This fundamental explosion of productiveness unleashed by Britain’s initial discovery and exploitation of the steam-engine, railways, steamships, mass-produced textiles, and engineering equipment between about 1770 and 1850 showed unmistakable signs of losing energy in the last decades of the nineteenth century; these disturbing signs became chronic, and perhaps irremedial, in the inter-war period. According to most economic historians who subscribe to this view of Britain’s laggard development, one can point to many major reasons for the decline which began just over a century ago. The first and perhaps most important was the failure by British businesses and entrepreneurs to invest heavily in the new technology associated with what is sometimes known as the ‘second industrial revolution’ (in the period c. 1880–1914), in electricity, chemicals and new sources of motive power like the internal combustion engine, on anything like the scale which occurred in Britain’s major rivals, especially Germany and the United States. Britain remained stubbornly attached to antiquated and increasingly uncompetitive industrial techniques. A second major reason for British decline is the other side of this coin: instead of being directed to new, productive industries and innovations, British investment increasingly went overseas, especially into developing the primary industries—minerals, rubber, jute, gold and diamonds—of the tropical Empire, or the infrastructure—railways, docks, public works, construction—in the temperate regions of the Empire settled by emigré Britons and of other countries, especially the United States and Argentina. Increasingly, wealthy Britons whose savings should more usefully have brought Britain into the modern age became rentiers and ‘coupon-clippers’ living off the profits readily available through the growth of other economies, including those which became rivals to British industry. Behind this lay a near-total failure by British finance and banking to invest in British manufacturing industry until the interwar period at the earliest.

There was also a chronic failure to adopt the new corporate structure so successful in Germany and the United States, and a reliance on relatively small family businesses, even in those areas of manufacturing industry where economies of scale were obviously the only way for a firm to prosper in the new climate; an equally chronic conservatism in the choice of industries in which business activity did continue unabated in this period, with the old staple industries of the industrial revolution—cotton and woollen manufacturing, coal mining, shipbuilding—remaining the centre-piece of British enterprise until 1914; and notoriously poor salesmanship and marketing of British exports abroad. To compound a felony, Britain’s managerial structure was also antiquated, with nepotism and the ‘old boy network’ rampant in choosing managerial appointments and with little or no promotion to senior levels of scientifically trained products of technological education, especially those lacking the right social background. Britain perversely maintained a dogmatic adherence to mid-Victorian laissez-faire long after it had become outmoded and inappropriate, with a concomitant refusal to protect British industry by national tariff barriers until the Great Depression of the 1930s, generations after Germany and the United States had achieved dynamic economic growth behind high tariff walls. There was also an equal or greater failure to create a nexus between the instrumentalities of the state, including the spheres of secondary education, the universities and research bodies, and British industry, again in contrast to more successful economies.⁴

The standard critique by economic historians of British economic performance during this period also links the failings of British entrepreneurship to an equally unfortunate series of consequences. The rate of economic growth in Britain—the level of increase of the total value of its goods and services—was consistently lower than that of its chief rivals, to the extent that while the British economy was roughly the same size as the American economy in 1870, by 1914 it had, remarkably, shrunk to only 37 per cent of the United States total (of course in the context of the fact that America’s population was over twice as great as Britain’s by this date).⁵ Rates of economic growth of the per capita gross national product, surprisingly low even during the zenith of industrialisation, fell to less than one per cent per annum on average during the years 1873–1913.⁶ Britain’s share of world manufacturing, not unexpectedly, showed a continual downward trend across virtually all indices devised by economic historians to measure trends in this area, declining on one such index from 31.8 per cent of the world’s total in 1870 to only 14.0 per cent in 1913; as a percentage of the world’s manufacturing exports Britain’s share probably declined from 37.1 per cent in 1883 to 25.4 per cent in 1913, while Germany’s rose from 17.2 to 23.0 per cent and the share of the United States from only 3.4 per cent in 1883 to 11.0 per cent in 1913.⁷ The post-Second World War era has seen an additional and, indeed, ever-speedier continuation of these historical trends. By the mid-1970s the chronic underperformance of the British economy was the subject of countless books, articles, and editorials, as well as the centre-piece of most political debate. Diagnoses of the reasons for Britain’s economic malaise ranged from the frequently heard analyses of unusually low investment rates, poor management techniques, perpetually bad employer-trade union relations, shoddy workmanship and theunavailability of servicing, leading to a terrible British reputation in the export market, and the effects of an outmoded class structure, to the baneful effects of too few producers, a narrow-minded and counterproductive civil service structure, too frequent change of government and governmental policies, too great an expenditure on defence in view of the decline of British political power, and the continuing separation of the City and the banks from manufacturing industry. The ‘cultural critique’ is also a most prominent component of this agenda of failure. The explanations for decline were legion, almost always focusing on the decline of British manufacturing industry and on the apparent failure of any post-war government, prior to the mid-1980s, successfully to reverse or even halt this deterioration.⁸ A number of international political considerations made Britain’s economic decline seem even more galling than it was. Britain’s former enemies, West Germany, Italy, and Japan, bombed to rubble in 1945, had clearly overtaken the ‘victorious power’ Britain in virtually every indicator of economic performance: Britain’s per capita income and living standards had been matched, or soon would be, by countries like Portugal, Spain, and Greece which were minor states, ‘backward’ and virtually primitive only forty years before; the world’s economic powerhouse was, increasingly, to be found in the rim of east Asia among non-European cultures. Of all the major economic powers of the world, perhaps only Britain failed (through the mid-1980s) to achieve a postwar ‘economic miracle’, a period of dramatic economic growth and evident to all observers.

Although no one denies the accuracy of these facts—though their relevance to the overall picture is more problematical, as we shall see -in fairness it must be pointed out that there has also existed, for almost as long, a tradition of scholarship among economic historians which minimises this alleged decline and argues that Britain’s manufacturing industries, especially during the key period of 1870–1914, by no means performed as badly as their critics maintain. Individual heavy industries in Britain have been examined in detail by many scholars; their verdicts about the performance of these industries in this period have often been surprisingly sanguine.⁹ Furthermore, the international context of Britain’s performance must be considered: it was simply unreasonable to expect Britain to have maintained the same lead in manufacturing in 1910, where there were half a dozen countries which had industrialised, as in 1851, when it was the only country to have ‘taken off. The relatively optimistic view of Britain’s performance in the 1870–1914 period also emphasises the unevenness of the areas of British decline—in 1914 Britain was substantially ahead of its rivals in several areas.

Elements favourable both to the pessimistic view of Britain’s performance in this period and to the optimists’ rejoinder may be seenin Table 1.1, which compares the rate of growth of overall industrial production in six major European countries and the United States between 1815 and 1913, and then the output of coal and pig-iron, raw cotton consumption, merchant ships registered, and length of railway lines opened—all basic determinants of nineteenth-century industrial development—among these major states.

Most of these statistics point in the same direction, and two central points emerge from examining them. Table 1.1 (i) indicates the rate of growth of overall industrial production: it should be emphasised that what is measured here are rates of growth, not absolute industrial strength (that is, not how much more Britain produced than Italy, but how fast they grew). With these statistics the greater the numerical gap between the indices of industrial production, the higher the growth rate. Comparing 1870 with 1913, it will be seen that Britain, France, and Italy had almost identical growth rates, but Germany, Austria- Hungary, and Russia grew considerably more rapidly. Comparing 1900 with 1913 every country grew more rapidly than did Britain.

The tables which measure the volume of particular commodities also show a distinct pattern, or, rather, two patterns. In 1850, coincident with Britain’s industrial zenith, with virtually every item considered here it is a case of England first and the rest nowhere: no country in history with the conceivable exception of the United States for the first ten years after the end of the Second World War ever enjoyed so nearhegemonic an industrial dominance as did mid- Victorian Britain. In most of these yardsticks of industrial predominance, indeed, Britain produced more than all the other major European powers combined.

By 1870, and unarguably by 1913, a very different picture had emerged. Among European states, in pig-iron output, a crucial measurement of industrial power, Germany now exceeded Britain’s level of production by 60 per cent; similarly Germany very nearly caught up with Britain in coal output. If production in chemicals—not given here—is taken into account, Germany had probably surpassed Britain as the leading European power in many indices of economic development. Yet, as will be seen, it is simply wrong to see this picture as unrelievedly dark. Britain’s raw cotton consumption—the basis for the oldest of staple indu...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Tables
• Preface
• 1: The British economy since industrialisation and the ‘cultural critique’
• 2: British culture and economic performance
• 3: Education, the ‘gentleman’, and British entrepreneurship
• 4: Elites and the evolution of the British economy
• Notes