speri.comment: the political economy blog

What happened to British decline?

The discourse may have changed, but the problems remain

Wyn Grant, Professor of Politics, University of Warwick

Wyn GrantThere was once a whole academic cottage industry devoted to British relative decline.  Indeed, there was a sufficiently large literature to allow me to teach a course on the general issue of decline.   Andrew Gamble published four editions of a book entitled Britain in Decline.  However, the term has now largely disappeared from academic and political discourse.   There might be reference to ‘competitiveness’ or to ‘rebalancing’ the economy, but not to decline.

In part, the discourse succumbed to a constructivist critique, encapsulated in the book edited by Richard English and Michael Kenny in 2000 entitled Rethinking British Decline.  In effect, this marked the end-point of the debate.   The political class had constructed a narrative of decline because it suited a variety of political purposes.   For the right, it offered a basis for a critique of ineffective state intervention (and hence a case for a more market-oriented economy), a supposedly anti-industrial  culture and a civil service that supinely accepted the inevitability of managing rather than combatting decline.  It thus provided a starting point for Thatcherism.   For social democrats, it allowed them to construct a case for a British developmental state.   For neo-Marxists, it allowed them to analyse the distinctive pathologies of the British state and the absence of a proper bourgeois revolution, leading to the perpetuation of aristocratic norms and values within the commercial class.

One of the paradoxes of the debate was that it took off at the end of the 1950s and the beginning of the 1960s when Britain was experiencing one of its fastest periods of post-war growth.  Not only were the people of Britain becoming increasingly prosperous and enjoying higher standards of personal consumption, but the social democratic state was providing them with new social housing, better education, health and other public services.   Of course, Britain was performing poorly on a number of economic indicators compared to countries such as France and Germany.   But it is only in the current recession that economic growth has been accompanied by a decline in real wages.

Part of the explanation of this paradox was that the debate was not just about relative economic decline, but about a realisation of the absolute decline of British influence in the world, reflected in what the late Jim Bulpitt used to describe as the ‘post-Suez malaise’, a term he often used in conversation, lectures and even exam questions, but never in print.  It referred to the shock of the realisation that Britain was no longer a great power capable of acting independently of the United States.   The military adventures of the Blair years may to some degree have counteracted this view by creating the impression that Britain was still capable of punching above its weight in military terms, albeit as a loyal American ally.

The story of decline is in many ways one of de-industrialisation and the emergence of a more service-oriented economy.   My own home town of Leamington once claimed to be the ‘brake and clutch capital’ of Britain, with over 6000 people employed by Automotive Products and over a thousand more working at the Ford foundry, now the site of a supermarket.   Leamington is currently ‘Silicon Spa’ and the home of the computer games industry and enjoys very low unemployment.   Places in northern England and Scotland have been less fortunate and the destruction of heavy industries was an underlying narrative in the Scottish referendum debate.   The Thatcher government was blamed and undoubtedly de-industrialisation occurred more rapidly than it would otherwise have done under its watch.   Nevertheless, the forces of globalisation, and in particular the removal of protectionist barriers from uncompetitive British industry, would have led to a similar outcome in the long run even under different political scenarios.

Nevertheless, themes discussed in the decline debate remain relevant today.   The British economy still has problems of sufficient skill formation.  The financialisation of the economy has intensified and remains a concern, given that it would be difficult to socialise the effects of another crash.   Housing remains scarce and expensive and the economy is prone to housing bubbles, especially in London.

Above all, the UK has a recurrent productivity problem.   At times, it has looked as if the problem had gone away.  The Thatcher government made progress, albeit in part through a batting average effect.   In other words, if you have an economy with a number of poorly performing firms (of which there were many in Britain) and these firms are then forced out of business, overall levels of productivity are automatically enhanced, just as if tail-order batsmen did not count in cricket.  The long boom also produced a misplaced confidence that the economy had achieved sustained growth and was overcoming its structural problems.

With the recession, however, the productivity problem has returned with a vengeance.  Between 2011 and 2012 Quarter 3 total factor productivity fell by 3.4%.  The August 2014 edition of the National Institute Review states: ‘The productivity performance remains abysmal.  With output per hour worked still around four and a half per cent below the pre-crisis peak, we expect pre-crisis productivity levels to be regained only in the latter half of 2017.’

The National Institute refers to the ‘continuing puzzle about the causes of poor productivity performance’.   Many explanations have been advanced and I am not qualified to adjudicate between them, given that economists cannot themselves agree.    There does seem to have been some labour hoarding and under-utilisation and I think that, given skill shortages in the economy, this has persisted more than some commentators allow.  Declines in real wages have allowed firms to keep on less productive workers.  When labour is cheap and readily available, there is not much incentive to invest to improve the capital-labour ratio.   Risk aversion by the banks may also have kept zombie firms in existence in a way that did not happen in the early 1980s, as well as reducing the number of high productivity entrants.

In a conference held at Queens’ College Cambridge in September 2014 on ‘The Future of British Politics’ to mark the retirement of Andrew Gamble, he remarked that the fact that fourth edition of his iconic work Britain in Decline published in 1994 was the last one was not entirely accidental.  The framing of the economic and other challenges facing Britain in terms of declinism has come to be viewed as a particular construction of reality.  This doesn’t of course mean that problems of poor performance do not remain.

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