The British Economy in the Twentieth Century

Published by EH.NET (November 2001)

Alan Booth, The British Economy in the Twentieth Century. Houndsmill:

Palgrave, 2001. x + 244 pp. $65.00 (hardback), ISBN: 0-333-69841-X.

Reviewed for EH.NET by Roger Middleton, Reader in the History of Political

Economy, University of Bristol, UK.

This is the author’s second attempt in recent years to produce a textbook on

modern Britain, with the first effort being jointly authored and a social as

well as an economic history (see Glynn and Booth, 1996). That volume commanded

polite notices and some positive reviews. The British Economy in the

Twentieth Century will not be so judged, being a deeply flawed exercise.

It is not that the author (Senior Lecturer in Economic and Social History,

University of Exeter, UK) does not know his audience; rather, at heart the

problem is that Dr Booth has ambitions for a monograph promulgating a strong

version of the (deeply flawed) thesis that the British economy did not fail in

the twentieth century but only a publishing contract to produce a textbook for

the British Studies Series (the general editor of which is his Exeter

colleague, Jeremy Black). This clash between academic ambition and the

constraint of this more limited canvass was always going to cause problems,

but what actually proves decisive in why I cannot recommend this volume is the

extreme polemical style here displayed. Admittedly, some might say this is

something of a hallmark of this author. When confined to the research journals

it is bearable, if tedious, but that style should have been diluted for this

project: it is hard enough for students to develop the skills necessary to

rationally sift evidence and arrive at a mature understanding of complex

literatures without authors attempting to dazzle with the powers of their

rhetoric.

Booth’s thesis can be simply stated: that over the course of the twentieth

century, a periodization much to be preferred to the usual post-1945

assessments, the British economy did not underperform, either relative to its

growth potential or the actual record of comparator economies who had much

more scope to grow through resource reallocation (principally, labor transfers

from low-productivity agriculture) and recovery from the physical destruction

of the Second World War. More particularly, he asserts that there is no

substantive evidence of persistent and serious failings in British

manufacturing, no decisive pathology of entrepreneurial failure in Britain,

this even during the golden age of super growth for the OECD (1950-73).

Moreover, on grounds of simple arithmetic, even if the manufacturing sector

did grow slowly it did not contribute to relative economic decline because the

UK-US manufacturing productivity gap was long-standing whilst, in any case,

Britain was increasingly a post-industrial, service-based economy. Booth thus

accuses the majority of British economic historians of conducting their

research with inappropriate tools (deriving from the economists’ convergence

literature), which keeps them focused on the supposed supply-side failings of

manufacturing, and of not heeding the logic of Broadberry’s (1997) thesis that

attention ought to be diverted to productivity performance in services if the

aggregate productivity record is to be understood and any realistic

end-of-century assessment made about the extent of relative economic decline.

He is particularly scathing about the national decline literature that emerged

in the 1970s, and whilst he is right to identify — like others before him

(especially, and more interestingly, Supple 1994 and Tomlinson, 1996) — the

emergence of an ideology of declinism, and to point out how the crisis of the

1970s was played for strategic purposes by both the political left and right,

he does miss a basic point which connects the economic performance story he

wants to tell with the economic policy story he ought to (but does not) tell:

that the alarmist literature of the 1970s contributed to the advent of

Thatcherism and thus the change in economic policy regime that resulted. Given

that most economists today concur that thirty years on the macro- and

microeconomic policy reforms that resulted — at minimum — better positioned

the British economy to compete in global markets, and given that he also

observes that British living standards in 1997 were 90-95 per cent of those in

France and Germany, as they had been in 1973, one is rather left wondering how

we got from there to here.

Whilst rightly skeptical about the strong claims made for a Thatcherite

productivity miracle (p. 189), his audience will feel disappointed that his

discussion of post-OPEC I British economic performance is very abbreviated: it

does not confront head on the big debate engendered by Solow’s (1987)

productivity paradox (‘You can see the computer age everywhere these days,

except in the productivity statistics’, upon which see Wadhwani, 2001) and,

arguably, it only skims the surface of the deindustrialization debate because

to go further might compromise the citadel of his thesis that British

manufacturing did not fail during the golden age. A real opportunity was

missed here to bring the story bang up to date, and indeed there are quite a

lot of omissions from his literature review: no recent Rowthorn on

deindustrialization, and thus no response to the fact that since OPEC I the US

economy has doubled manufacturing output whilst keeping stable the size of its

manufacturing labor force whereas in Britain manufacturing output has not

grown but the labor force has halved (for example, Rowthorn and Ramaswamy,

1997; Rowthorn, 2000). The 1996 Economic Journal symposium on

deindustrialization (Dixon et al., 1996) seems also unknown to him, as indeed

does Moore’s (1999) important study of Britain’s trade and the EU and much

recent work on the distributional consequences of growth and economic

restructuring since the 1970s (for example, Oxford Review of Economic

Policy, 12.1 (1996) which is devoted to inequality). We have then an

author with big ambitions but a less than complete grasp of the now huge

literature. One does welcome, however, the attention that Booth directs to how

the lowest decile of the income distribution in Britain did not share in

national economic growth over the last thirty years or so, but it is

extraordinary how this is decoupled from verdicts about overall economic

performance, noticeably of course manufacturing performance and the massive

labor shedding that we have already identified.

One detects also that for Booth the manufacturing and service sectors are

really quite distinct; that he has little patience for those anxious souls who

continue to hold that the latter’s fortunes depend upon the competitiveness

and critical mass of the former; that trend deterioration in Britain’s current

account balance of payments over the last fifteen years or so should not be a

cause for concern, notwithstanding that knowledge-based internationally traded

services account for only a fraction of total export earnings; and above all

that in the reindustrialization debate — not actually mentioned by him —

there might be any data of relevance to look back on British manufacturing

during the golden age. Moreover, such is the insulated nature of Booth’s

manufacturing sector that it does not seem to have occurred to him that many

of the supply-side problems he questions as applicable (or not) to

manufacturing might equally be characteristic of services, and after expending

so much time early on berating economic historians for not studying services

when he does actually come to that topic he has little to say.

But enough of these performance matters, and onwards to policy which is the

other part of the book, albeit largely contained in one chapter. Given that

this is where Booth’s major research interests lie I had high hopes of this

chapter, but was quickly disappointed. Indeed, from the first graph onwards my

doubts grew. Before proceeding to explain why, I must preface my comments by

saying that what follows might seem excessively personal, but only somebody

who has worked in depth with the British public finance data would have

detected the problems I am about to reveal. We start with Figure 6.1 (p. 163)

which is labeled ‘Public sector receipts and total public expenditure as a

proportion of GDP, UK, 1900-96′, and with the sources given as Feinstein

(1972, tables 4, 14), various issues of the Central Statistical Office’s blue

books and the latest issue of the Office for National Statistic’s Economic

Trends, annual supplement. Ignoring that the denominator (GDP) seems to

have been measured at factor cost rather than market prices (Feinstein’s table

4), thereby presenting the public sector as somewhat larger than is normal,

we highlight that no definition is given of what comprises public sector

receipts or expenditure. One might assume — as is the usual practice — that

we are looking here at general government as the numerator. But the pre-1965

source (Feinstein’s table 14) only records current transactions of central and

local government, whereas thereafter the official series are for general

government, which includes public sector capital formation and taxes on

capital. An alternative for the numerator, of general government expenditure

(and receipts) since 1900, was available but appears not to have been used

(Middleton 1996, table AI.1-AI.2). Yet, a little later (p. 166) Figure 6.3 is

offered. This is labeled ‘Total public expenditure by economic category as a

share of GDP, 1900-96′ and includes in its legend a category for capital

formation. The source given is his Figure 6.1, and yet we know that cannot be.

We might also observe that it is identical in all respects to Middleton (1996,

fig 3.3), save that the terminal date there is 1979 (there is an unpublished

paper which takes my public finance series through into the 1990s). This is

most curious. And then we have Figure 6.4 (p. 170), which, acknowledging the

same source, offers total public expenditure by functional category (as is

provided in Middleton 1996, table 3.2, again for 1900-79). Since Feinstein

(1972) never provided such a functional classification, the stated sources

cannot form the basis for these figures (a similar comment applies to

Economic Trends). This is all very strange and it does not inspire

confidence in the data construction exercises elsewhere in the book, and

perhaps importantly so in chapter 4 where interpolations (not detailed) have

been undertaken to construct long-run data on the changing structure of

employment and output.

Beyond this, chapter 6 on government and the economy is not an adequate survey

of the developing objectives and instruments of government policy, nor of

their policy impacts. It is also very insular (cf. Booth’s protestations that

good economic history must be comparative) and ducks the question of why the

1970s were particularly difficult for Britain. Booth concludes the chapter

that ‘The writ of government is much less powerful than conventionally

believed and policy failure is one of the less likely complaints of

twentieth-century Britain’ (p. 193). I wonder how many students will be

convinced. I suspect a greater number will be irritated by the polemic that

they have had to endure, whilst they may wonder why they are being served up a

thesis which is about to be severely mauled in the journals as Broadberry and

others reply to the misinterpretation of their works that Booth here

perpetrates.

Roger Middleton’s recent books include The British Economy since 1945:

Engaging with the Debate (Palgrave, 2000) and (with Roger E. Backhouse)

Exemplary Economists: Introducing Economists of the Twentieth Century

(2 volumes, Edward Elgar, 2000).

References:

Broadberry, S.N. (1997) The Productivity Race: British Manufacturing in

International Perspective, 1850-1990. Cambridge: Cambridge University

Press.

Dixon, H. et al. (1996) “Deindustrialisation and Britain’s Industrial

Performance since 1960,” Economic Journal, 106 (1), pp. 170-218.

Feinstein, C.H. (1972) National Income, Expenditure and Output of the

United Kingdom, 1855-1965. Cambridge: Cambridge University Press.

Glynn, S. and Booth, A.E. (1996) Modern Britain: An Economic and Social

History. London: Routledge.

Middleton, R. (1996) Government versus the Market: The Growth of the Public

Sector, Economic Management and British Economic Performance, c.1890-1979.

Cheltenham and Brookfield, VT: Edward Elgar.

Moore, L. (1999) Britain’s Trade and Economic Structure: The Impact of the

European Union. London: Routledge.

Rowthorn, R.E. (2000) “The Political Economy of Full Employment in Modern

Britain,” Oxford Bulletin of Economics and Statistics, 62 (2), pp.

139-73.

Rowthorn, R.E. and Ramaswamy, R. (1997) “Deindustrialization: Causes and

Implications,” in IMF (ed.) (1997) Staff Studies for the World Economic

Outlook. Washington, DC: IMF, pp. 61-77.

Solow, R.M. (1987), “We’d Better Watch out,” New York Times, Book

Review section, 12 July, p. 36.

Supple, B.E. (1994) “Fear of Failing: Economic History and the Decline of

Britain,” Economic History Review, 47 (3), pp. 441-58.

Tomlinson, J.D. (1996) “Inventing ‘decline’: The Falling behind of the British

Economy in the Postwar Years,” Economic History Review, 49 (4), pp.

731-57.

Wadhwani, S.B. (2001) “The ‘New Economy’: Myths and Realities,” Bank of

England Quarterly Bulletin, 41 (2), pp. 233-47.