To What Extent Has British Relative Economic Decline Since the Late

Topics: Economics, Industry, Economy Pages: 8 (2589 words) Published: February 4, 2001
INTRODUCTION

In answering the above question, I shall address myself first to examining manufacturing exports and the British position, followed by a word on the Imperial Preference which hindered British trade flows with the rest of the world. I shall go on to talk more generally about whether there has been a decline in the aggregate economy (essentially exploring the pessimistic implied in the title). Further, I shall argue that the British economy has performed well against some serious cultural and structural constraints and should not be subjected to unduly negative analysis.

I shall look finally, and briefly at the performance of the service sector with regard to its contribution to, and correlation with, the aggregate and industrial growth in output and productivity, before concluding that the service sector was the major contributing factor to the UK falling behind it counterparts. Despite this, the relatively small amount by which the economy fell behind is indicative of the over-exaggeration of the problem of British decline.

MANUFACTURING EXPORTS

Britain's share of manufacturing in fact fell dramatically over the twentieth century as can be seen from the following table and graph:

Shares of world exports of manufacturing (%)
UK USAGermany
189934.512.116.6
191331.813.719.9
192923.821.715.5
195024.626.67.0
19877.312.619.3
Source: Broadberry (1944, p.294)

The main European competitor since the Second World War has been Germany; US market share has also dropped off from its peak in the 1950s. Whether this drop is as a direct result of the fall in comparative aggregate labour productivity is the topic of some discussion. Whilst it seems that must surely have an impact, Broadberry raises three important factors which may apply instead. Those are firstly, that UK exports were inevitably, going to decline as other nations became industrialised and started to trade on the world market. Secondly, that comparative labour productivity has been different in manufacturing than the rest of the economy, with no clear correlation between the two; indeed Germany gained only a 5% productivity lead over the UK in 129 years in manufacturing, having fluctuated around an approximately equal ratio (moving from a UK/Germany ration of 1/1 in 1870 to 1/1.05 by 1989), whilst the aggregate economy figure was a more substantial and steady improvement of 1/1.16 as compared with 1/0.6 before the turn of the century. In the USA the figures for comparative labour productivity show that whilst the gap in comparative output has declined in manufacturing (UK/US ratio fell from 1/2.04 to 1/1.77 over the same period), aggregate output has improved relatively, and, indeed, overtaken (1/0.86 increased to 1/1.32 by 1989) . Thirdly, in addition to drawing this distinction, Broadberry notes that labour productivity is not the only factor affecting competitiveness on world markets; in fact those countries with a high productivity of labour have not necessarily enjoyed any such comparative advantage.

IMPERIAL PREFERENCE

The breakdown of global trade after the WWI due to protectionist policies and the Great Depression of the 1930s provoked the British into relying on their Empire links to support their ailing export industries. Between 1907 and 1951, the proportion of British exports moving along Empire trading routes had increased from 32.2% to 55% . This type of quasi-self reliance had mixed consequences; in the short run, the UK suffered much less from the depression than other countries, notably America, with the resulting bonus of higher output levels in general and a better economic performance up until the mid-1950s.

However this reliance on the Commonwealth proved a difficult institutional bond to break and led to a certain the British economy being shielded from real international competition until accession to the EEC in 1973. Readjustment problems were inevitable as efficiency in...

Bibliography: § Aldcroft, D. H. (ed.) The Development of British Industry and Foreign Competition, 1875-1914 (1968), London: Allen and Unwin
§ Broadberry, S, N, At Your Service: The Performance of British Market Services in International Perspective, 1870 - 1990 Chapter 9: Studies in Sectoral Performance, 1914-1950 (1999) Unpublished
§ Broadberry, S. N. The Long Run Growth and Productivity Performance of the United Kingdom Scottish Journal of Political Economy (1997)
§ Lee, C. 'The Service Industries ' in Floud, R. and McCloskey, D. (eds.) The Economic History of Britain Since 1700: Volume 2: 1860-1939 (1994) Cambridge: Cambridge University Press
§ Pollard, S. 'Entrepreneurship 1870-1914 ' in Floud, R. and McCloskey, D. (eds.) The Economic History of Britain Since 1700: Volume 2: 1860-1939 (1994) Cambridge: Cambridge University Press
§ Sandberg, L. Lancashire in Decline: A Study in Entrepreneurship, Technology and International Trade (1974) Columbus: Ohio State University Press
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