An Avoidable Failure
One of the most disappointing features of the British economy since the Second World War has been its failure to match the growth performance of the other advanced industrialised countries. This relative decline started in the late nineteenth century when a number of European countries began to outstrip Britain.
Britain reconstructed her economy rapidly after the Second World War, and in the late 1940s was still a rich country in comparative terms. But from the early 1950s onwards Britain's growth again tended to lag behind the other industrialised countries. On this occasion, however, it became a greater source of concern, as gradually one country after another overtook her. The result was that by the late 1980s, Britain had fallen well down the international living standards league.
The inevitable consequence was that Britain's living standards fell behind those of the other advanced countries. If we take the six largest OECD countries, then in 1950 only the United States had a higher level of National Income per head. However, during the 1960s Britain was overtaken by both France and Germany. Then in the 1970s she was passed by Japan. In the late 1980s Britain was still slightly ahead of Italy, although the latter had narrowed the gap significantly over the post-war period.
Why then has Britain failed to match the growth performance of the other industrialised countries since 1945? There are two broad possibilities. The first is that Britain has had a low social capability. It refers to the ability of a country to exploit existing scientific and technological knowledge. It will be subject to a number of influences, ranging from a country's education system to the quality of its management. The other possibility, which we consider now, is that Britain has had a low growth potential. Thus Britain, it is argued, has not been able to grow as quickly as countries such as France,... [continues]
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