‘From Empire to Europe’, and then where?

‘From Empire to Europe: The Decline and Revival of British Industry since the Second World War, Geoffrey Owen, Harper Collins, 2000.

This is another book I read last year: a history that more than most has contemporary relevance.  It charts the story of British manufacturing from the end of the Second World War to the end of the century.  The majority consists of ten chapters on the experience of separate industries, from textiles and steel to cars and pharmaceuticals.  Not all are stories of failure.

Two early chapters present the historical background and four at the end review differing explanations for Britain’s relative decline.

The book was first published in 1999 and screams ‘BREXIT’ – as a history of the future of Britain outside the EU, or so it might too easily be concluded.  In fact, given the relative starting positions of Britain and the rest of Europe, then and now, the mistake of standing outside of the rest the continent now looks more obviously stupid and will more quickly be seen to be so.  If it isn’t already.

After the war ended it was expected that in due course Germany would resume its pre-war role of supplying Europe with manufactures; Britain could concentrate on the rest of the world with which it already traded.  The Labour Government decided against joining the European Coal and Steel Community (ECSC) and ceding sovereignty over its two most important industries, while the left of the Labour Party complained of the economic liberalism on the Continent it said led to social injustice.  Foreign  Secretary, Ernest Bevin, insisted that Britain was ‘not just another European country.’  Some economists at the Board of Trade favoured membership of the ECSC on the grounds of exposure to European competition, but this was a minority view.

The Tory Government from 1951 broadly followed its predecessor, rejecting a second opportunity to join the ECSC or taking part in negotiations to create the Common Market.  European integration was, in the words of another author quoted, ‘at best irrelevant to Britain’s economic self-interest and at worst a political nuisance which had to be tolerated, if only in public, because of the Americans.’

Again and again, Owen records the effect of being outside the European market.  In textiles small and medium-sized firms from Italy and Germany benefited ‘to a far greater extent than the British industry from the expansion of intra-European trade in the 1950s and 1960s . . . where the long-standing bias towards non-European export markets proved to be a serious disadvantage’ (p57)

When eventually Britain did join the Common Market, it found that its European competitors ‘instead of scale and standardisation . . . had put more emphasis on design and technical innovation . . . imports from the Continent rose sharply in the second half of the 1970s, and the British textile industry, having neglected European markets in the 1950s and 1960s, was not well equipped to respond.’ (p77)

In shipbuilding ‘the export trade was regarded as marginal and unpredictable’ and ‘a marketing strategy geared to the requirements of domestic owners was becoming obsolete’. (p97 & 100). In steel, ‘traditionally the most nationalistic of all major industries . . .  European steel-makers needed a market as large and competitive as that of the US’, and ‘while recognising that the smaller domestic market-imposed limits on how far British steel-makers could go in the American direction . . .’ there were barriers to this being achieved within Britain.

On the other hand, while ‘there was a long tradition of price-fixing in French steel, and the industry had bee oriented almost entirely to the domestic market the effect of the European Coal and Steel Community (which was opposed by most French steel makers) was to break down the parochialism of the industry and force it to plan for a wider European market.’ (p 148, 127 & 130).

In the paper industry, joining the Common Market ‘would have exposed it ‘at an earlier stage to competition in a large dynamic market; ‘modernisation and rationalisation which occurred in the 1980s and 1990s might have occurred earlier’ and it would ‘have provided export opportunities’ which might also ‘have started earlier.’ (p170)

In relation to the engineering industry Owen writes that, after the war, ‘when the continental economies were in disarray and the need for hard currency was urgent’, when standing aside might been seen as explicable, ‘the neglect of Continental Europe . . . after its recovery in the 1950s . . . was to prove a serious error.’ Seemingly strongly placed in the early 1960s, low economic growth and lack of involvement in intra-European trade meant that ‘an increasing number of British manufacturers were falling behind their Continental counterparts in the scale of their production.’   The failure to Europeanise in the 10–15 years after the war meant that for many firms it was too late when they did.

A similar experience les behind the decline of the British motor industry: ‘the decline of Leyland has to be seen as an avoidable disaster, largely attributable to the failure to Europeanise the business in the 1950s and 1960s.’ (p249). The ‘low priority’ given by British firms to Continental Europe meant that they did not join ‘homogenous, fast-expanding and highly competitive mass market enabled companies such as Renault, Volkswagen and Fiat to narrow the productivity gap with American manufactures . . .’ (p250)

Owen points out that European industry was itself not always successful and notes its failure in computers and semiconductors.  Of the former he says that ‘European industry might have done better if governments, instead of nurturing and protecting national champions, had concentrated on widening the market for computers . . . As it was, nationalistic, producer-oriented policies, discriminating in favour of chosen domestic suppliers, exacerbated Europe’s most serious weakness vis-à-vis the US, the small size of the market.’ (p270)

Owen makes clear that lack of orientation to a European market was sometimes a mistake not just made by the British, and that failure was not simply a result of lack of access to that market.  Other strategic mistakes were made. Half a century later it would therefore be an identical mistake to see market restrictions only on a continental scale as the problem, when many industries now have global markets and global production.

So, Renault is partnered with Nissan and Mitsubishi; Volkswagen includes Audi, Bentley, Bugatti, Porsche, SEAT, Škoda plus others and has an alliance with Ford, while Fiat is now part of Stellantis, which includes Chrysler, Jeep, Peugeot, and Citroën.  Britain has a small luxury car market with volume production owned by foreign companies.

Owen tells a similar story about chemicals, noting however that the success of ICI by the end of the period covered was despite the factors that harmed the development of British companies in other industries.

Others were also successful, such as pharmaceuticals, which Owen says was due, among other things, to its ‘openness to foreign investment.’ (p372). This ensured that ‘British-owned firms were forced to compete against the world leaders and learn from them.’ (p387)

In the last chapters he looks at common explanations for the decline of British industry after the war, including the nature and dominance of the financial system; the quality of training, education and culture; poor industrial relations, and Government policy.

On the first, he says that ‘the financial system on its own does not have a decisive influence on which countries succeed in particular industries, although it may play a supporting role.’ (p403).  He does not believe culture or education factors were decisive either, and although he notes that ‘there is no doubt that some British companies were badly managed in the 1950s and 1960s . . . there was significant improvement in the 1980s and 1990s.’ (p 422)

On Government policy ‘the decision to opt out of European integration was the biggest missed opportunity of the 1945–60 period, more important than any mistakes in macro-economic policy.  Indeed, it is hard to argue that Britain suffered from uniquely incompetent macro-economic management during these years.’  (p 450) Britain became a member of the EEC ‘fifteen years too late.’  He concludes on an optimistic note, telling us that ‘by the end of the 1990s Britain had found a role for itself as a medium-sized industrial nation, well integrated into the world market.’  (p 461)

Everyone loves a happy ending so maybe it’s as well the book hasn’t had another edition.  The ‘unique incompetence’ of British Government economic policy that didn’t exist after the war looks as if it has arrived.  But not only the government, the informed commentariat look as if they think this policy should persist, or, more charitably, be persevered with.

In today’s ‘Financial Times’ (6 January) Robert Shrimsley records the view that ‘Tories are wondering what happened to the Brexit they promised’, as if they got ‘the house red’ rather than the ‘vintage claret’.  He recommends that ‘whether one sees Brexit as fabulous or foolhardy, it is absurd not to take the wins that are available.’   

Unfortunately, the wins he seems to champion do not seem to be up to very much and also have downsides. His recommendation, therefore, is to continue better with a failed policy that will do nothing much more than deliver failure.  He, like Kier Starmer – the so-called leader of the opposition – can no more think of going back into the EU than Tory Eurosceptics could previously stop dreaming of leaving it.

The book tells a sorry tale of British failure to appreciate where the world was going and what its place in this changing world was to be.  It has happened again with Brexit.  Deciding to persevere is what’s called déjà vu all over again. 

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