WUE TU eee OA of Modern Britain pe Maturity, 1860-1939 +f VN $ y iy 4 aN Taro @ ay // ONY a 7 N 2 ; i , hall shine ii] | hy Edited by Roderick Floud and Paul Johnson‘The Cambridge Economic History of Modern Britain Volume I Economic Matty, 1860-1959 ‘ue Cambridge Exmamic Hiewry (J Node Britain provides a readable and com prohensive survey of the economic history of Britain since indnsalisation ‘hesedon the mos up-to date esearch into the subject Rocerck Fond ana Paul Jahnson hve assemble team of ify leading scholars from around the world Toprocice et of whumes Which ere aoth «Incl lextoook for undergraduate ‘and postgredaate stagents and an authoritative guide fo the subject. The text [38 paticloe attention tothe explanation of quantitative ana Uheory-hosed galt, but all forms of historical rseotch are used to prov a comprehen se account ofthe development of the Britsh economy. Volume I covers the ‘peri. 1700-1860 when Bein Ted Une world ia Uke process of iacstriaise a, Volume Il examines the peti 1860-1939 when British economic power 1 1K eight. The focus of volume Its 1939-2000, when Britain scfusted 10 @ disine in manafecturing, en expansion of the service economy and repositioning of external economic activity towards Europe. The books prside ‘an inelusble guide for undergreciae and postgreduae sudents in histor, economics ane other social sciences. RODERICE FLoUD & VkeChancellor of Loncon Metropoitan Univers, 2 Fel of the Brith Academy. an Academician of the Saal Sconces and 2 Flow of the City and ile» of London Institue, tks pubations inch 4 Inadactn to Quant Mevhods fr Bicorians and (ith D. MeCloskey Te rom cory Cf Brain since 170, PART JOHNSON is Profesor of Economic Hitory at tne Loudan School of ‘omomles and an Academician of the Social Sciness. He hes authored or ited seven boots and ctr fy articles and chapters on various aspects of the conamic. social and fega! history of modern Briain, andon the ecbaamics of ageing nd pensions. Publications include Saving and Spnding: The Wrens {las Economy i Bain 70-109 Aging and Economic Wofore an Old Age From cia tos Mader (Cebie ey Oaine © Code Ue a 208(CarcdeHnsOnine © Canidae Ps 28The Cambridge Economic History of Modern Britain Volume II: Economic Maturity, 1860-1939 Edited by Roderick Floud gud Menypatian trey and Panl Johnson aco Swat Eos eS ‘CAMBRIDGE UNIVERSITY PRESS (Cebie ey Oaine © Code Ue a 208‘he Pie Butlding. Trumpington See. Camldge Unie Kingdom, ‘he Edinburgh Bulding, Cambridge ca 2Ru, UK 440 Wes eh Sct es Yorke NY 0024254, USA 4277 Willanswwen Road Porteous, VIC 3207, australia fu de alan 12, 29004 Madr, Spain Dock House, The Waterton, cape Teen 00%, South Ati Lupsfowwcambridge ore (2 cambrge University Press 2008 “his book in copyright. subject wm samumry excepcion die othe provisons of elevan collet cen agreements ‘ip reproduction of any part ay ake place without the waiten perieion of Cambie Univerty eee Fist published 2005 “Third printing 2005 Printed in the United Kingdows at the University Pres, Cambridge ‘ypeeeSwift 95825 pe and Formata item Ee [| Acai ee for Ps en fram te Beto ry Isa osm so007 5 Is8N 057152776 (Cored: Hives; Cnac © Conky Vests Ds 208To Louisa and Oriana (Cored: Hives; Cnac © Conky Vests Ds 208(CarcdeHnsOnine © Canidae Ps 28Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter & Chapter 9 Chapter 10 Chapter 11 Contents ist of figures be sit (Ftables xd ist of contributors xv Preface ait Longrun growth NICHOLAS CRAFTS Poptlation and regional development 25 Human capital and skills 56 Manufacturing and technological change | GARY B. MAGEE. “The service sector 99 MARK THOMAS Agriculture, 1860-194 133, ‘Trade, 1870-1939: from globalisation to ‘Sragmentation 16 Foreiga investment, accumulation and Empire, 1860-1914 150 [Enterprise and management 227 Domestic finance, 1860-1914 253 Pb, COTTRELL Living standards, 1860-1939 | | (Cebie ey Oaine © Code Ue a 208tents Chapter 12 Chapter 13 Chapter ut Chapter 15 Chapter 16 Chapter 17 ‘The British economy between the wars 314 BARRY BICHENGREEN Unemployment and the labour market, 1870-1939 344 cumoTay J, RaTTON British industry inthe interwar years 1) SUB BOWDEN AND DAVID Mf, HIGGINS Industral and commercial finance in the intersar years IT DUNCAN M. ROSS Scotland, 1860-1939: growth and poverty |] CLIVE HE, LEE Government and the economy, 1860-1939 456 Reforences 490 Index 527 (Cebie ey Oaine © Code Ue a 208Figures 21 Longrun tends in mortality and fertility in England and Wales, 15805-19905 | 8 [Examples of regional variations in the time paths for ‘marital fertility (ig) and muptiality (mi, Scotland, 1861-1931, England and Wales, 1851-1931 20 23 Trends in selected annual agespecific mortality rates 15-19, 25-34, 55-64), England and Wales, 188-1910 2 24 Approximate trends in the childhood mortality rate [ages 0-4) and the ratio of infant fage 0 in completed years) {0 early childhood mortality (ages 1-4), England and Wales, 50s t0 19405 33 25 Posti911 trends in social class mortality differentials among adult males (aged 15-64) in England and Wales measured by thr randardisedt mortality ratio (SMR) 6 26 timate of life expectancy at birth for England and Wales ana are towns, 1801-1901 ” 217 Number of births and deaths in, and emigrants from, [gland and Wales per year before the Ftse World War 39 28 Age distibation ofthe British popalation in Tijear age groups, 1851-1951 " 5a Social savings m 52 Consumer expenditaré on pessonal services, 1900-38 m 5.3 The shave ot primary. Secondary ad tetany Sector in curput and empleyment, 1851-1938 126 61 Gop and livestock output in the UK, 2867-1958 7146 62 Grain and cattle and milk ostput inthe UK. 1867-1914 187 63 Nominal and volume indicators of UK agrcularal oatpt 1867-194 uw 74 Balance of payments as percentage of GNP, 1870-1939 18 72 Wheat and beet prices US and UK, 1850-1514 166 73 Pattems of word trade settlement 1910 mB 74 Gmracton of world trade, 1929-33 185, 8 Bish savings and investment rate, 1880-1918 198 112 Unemployment adjusted wage tend, 1970-1913 m (Cebie ey Oaine © Code Ue a 208nsf figures 121 Per capita GDP for eight European countries and the UK, v9n-44 122 Postwar growth and the wartime setback, 1913, 1920 and 1927 123 Exports as a share of GNP in Britain and Europe, 1920 and 1927 224 Unemployment rate in industry in Britain and Europe, 192-37 1255 Industrial production in Britain and Barope, 1922-37 126 Central bank discount rates, 1921-37 129 Volume of British and European exports, 1921-36 128 Volume of British and European imports, 1921-36 129 Industral production of gold and nomgold countries, 15-26 131 Unemployment rate, 1870-1939 132 The probability of leaving unemployment, 1929 133 The real wage and employment, 1923-38; whole economy and manufacturing sector 134 The competing claims model 15 Wage rates and the cost of living, 1918-38 “UL Value of exports at constant prices, 1920-38 16.1 Index of population growth, Scotland and England and Wales, 1851-2001 "162 Major Scottish regions 163 Employment in rural regions in Scotland, by employment sector, 1851-1951 164 Employment in central belt of Scotland, by employment sector, 1851-1951 165 Distribution of taxable incomes, Scotland and England and aes, 1949/50 YP. Bifieiency-equity tradeoffs) (Cebie ey Oaine © Code Ue a 208 a7 Ebay 25 a8 = a a 25 26 1 nu un 381 m7 an an in anTables ‘1 Levels and rates of growth of real GDP)person, 1870, 1913 and 1938 112 Structural change and relative productivity levels, 1BAH1973 11, speets of economie growth in the long run, 1780-1973 114 Growth accounting estimates, 1760-1973, 115 Growth of GDP and TFP: alternative estimates, 1856-1913 1L6 Labour productivity and TFP growth in manufacturing, 171913 and 1924/37 117 Contributions to manufacturing labour productivity growth 2.1 Examples of definitions of social classes used by the Regisrar General 22 Destinations of British emigrants other than Europe, 1853-1930 23 Population grcwth and migration, England and Wales, rig 24 Employment and the labour force, UK, 1920-38 25 Age distribution of male labour force, 1901, 1931 and 1951 26 Wages of agricultural labourers, 1867-2907 27 Emplayment growth in Greater Landon, Lancashire and. Ciydeside, 1841-1911 3.1 Educational enrolment rates per 1,000 population under age 20, 1870-1951, 112 Average years of schooling of the male labour force in England and Wales, 1871-1951 33 Apprentices a5 a percentage of persons engaged in Great ‘Britain, Germany and the United States, 1880-1952 $34 Professionals in Great Britain, the United States and Germany, 1880-1991 35 Qualified accountants in the United Kingdom, Germany and ‘he United States, 1882-1961 136 Proportion of industrial managers who were graduates in industrial companies, Great Britain, the United States, and Germany, 1928-51 (Cebie ey Oaine © Code Ue a 208 6 u B 9 9 3 29 " 31 32 39sss f tables 127 Research and development expenditure in manufacturing in Great Britain, Germany and the United States, 1924-59 ‘38 Comparative USJUK and GermangilIk labour productivity Jevels by sector, 1869Y71 t0 1950 39 Sectoral shares of employment in the United States, the United Kingdom and Germany, 1870-1950 ‘100 Stocks of vocationally qualified pessons as a percentage of ‘employees, by sector and skill level in the United Kingdom, ‘he United States and Germany, 1910-50 ‘311 Relative vocational skill levels, 1910-50 41 Manufacturing’ place in the economy, 1856-1913 42 Output and fied capital growth in manufactaring, 187-19 43 Gross reproducible capital, employment and capital per werker in manufactaring. 1869-1919 44 Sectoral composition of manufacturing in 1907 and 1924 45 National shares of world manufacturing oueput, 1850-1928 46 Industral growth in leading manufacturing coxntries, 1870-1913 47 National shares of world trade in manufacturing exports, 181-1929 48 Growth of manufactured exports in selected countries, 17-1913 49 Main exports (excluding reexports) ofthe United Kingtom (share of total). 1881-1913, 410 Labour productivity in manufacturing in the UK, USA and Germany, 1869-1925 411 Total factor productivity growth in manufacturing in the UK USA and Germany, 1873-1925 412 Major inventions by country of origin, 1776-1925 413 Foreign patents granted in the USA by country of origin, 1883-1929 51 A taxonomy of services (including numbers employed, ‘England and Wales), 1851-1931 5.2 Industrial classification of service workers, UK, 1861-1958 53 Growth of railay services, 1850-1938 54 The distribution of consumption expenditures on market services, 1900-13 and 1920-38 55 Domestic service in England and Wales, 1851-1931 56 Relative productivity growth by sector, 1851-1938 57 Labour and rotal factor productivity growth by sector, 1856-1928 58 Labour and tofal factor productivity growth within the service sector, 1924-37 61 Wheat imports into che UK (Cebie ey Oaine © Code Ue a 208 100 101 103 fay cry ut a0 usst feabes 62 Meat imports and domestic meat supply in the UK, 151-194 663 Mean wheat yields in England, 17906 to 1900s 64 Indexes of grain, live meat and dairy product prices, and sents per acre 1570/4-1910)14 65 Trend of agricultural rents, 1850-2914 66 Agricultural outpat in the United Kinglom, by product, vaTL-19d 67 Labour productivity in UK agriculture, 1871-1911 658 Total factor productivity in UK agriculture, ¢,1871~ cin 669 Distribution of factor costs on sixty-wo English farms, 6.1892 610 Rate of return on farmers’ capital on sixtyour English farms, ¢, 1892 "71 dbitain and world trade in manufactures, 1899-1937, 81 UK rates of savings and investment. 1830-1914 52 Realised rates of retum to home and overseas railway securities, 1870-1913 83 Realise rates of return, aggregate indices, selected subsperiods, 1870-1913 84 Some conjectures on the gains from imperialism in 1870 and 1913 5 Average annual defence expenditures, 1860-1912 1.1 Measures of living standards for Britain and other countries, 1870 22 Trends in nominal and real wages, 1856-1938 1.3 Annual fulltime nominal wage earnings, 1481-1938 {U4 Life expectancy and infant mortality: England and Wales, vas-1922 “5 Trends in height, weight and body mass in Fngland and Wales, 1849-1939 1116 Measures of living standards for Britain and other countries, 1913 17 Numbers receiving poor relief in England and Wales, 1850-1939 “a8 Poverty rates and causes of poverty, 1899-1914 1119 Poverty rates and causes of poverty, 1923-37 12.1 Output per worker, 1913-50 122 Annual average rate of growth of net non-tesidential capital stock per person employed and total factor ‘productivity, 1913-50 131 Regional unemployment rates, 1913-36, 132 The duration of unemplayment, 1929-28 (wholly ‘mempleyed only) ut 9 vn rs aaa 8 a 156 138 16 1m 198 199 as 2 1m i 286 am a5 a7 355 (Cebie ey Oaine © Code Ue a 208sss f tables 19.3 Benefit to wage ratios for claimants to insurance benefits, 1937 134 Unemployment in four economic eras, 187]91 t0 47)6s ‘41 Net output by sector, 1907-35. “142 Consumers’ expenuliture at constant prices, 1920-38 “42 Merger activity in British manufacturing industey, 1920-26 ‘a Comparative USIUK output per employee in manufacturing and the whole economy, 1870-1938 1145 Comparative labour productivity by industry, 19357 146 Ratio of actual to potential electricity coasumption in ‘manufacturing, 1924 and 1920 147 International comparison of private car taxation, smidas205 151 Percentage of overdraft secured by collateral, 19305 152 Midland Bank advances to industrial groups and areas, aos 16.1 The distribution of taxable income, 1949150 162 Income generated per 1,000 population, 1949/50 {7 Functions of the state ‘72 Summary indicators of public sector size, selected years, 1860-1939 173 General government expenuditare and revenue as a percentage of GDP in OECD countries, selected years, ¢, 1870-1937 (Cebie ey Oaine © Code Ue a 208 338 am 375 376 378 385 an 43 as i in " asContributors ponuey Rares i Reader in Economie History af the London School of Economics SUB BOWDEN i Professor of Economics atthe University of Sheffield GEORGE R, ROYER K Professor of Labor Economics at the School of Industrial and Labor Relations, Cornell University STEPHEN BROADBERRY S Professor of Feonomic History at the Univer sity of Warwick Pb. COTTRELL & Professor of Financial History at the University of| leicester NICHOLAS CRAFTS i Professor of Economic History at the London School of Economies MICHAEL BDELSTEIN is Professor of Economics at Queen's College and the Gradtate School at City University of New York BARRY BICHENGREEN K Professor of Economics and Political Science at the Univesity of Califia at Berkeley RODERICK FLOUD is ViesChancellor of London Metropolitan University C. KNICK HARLEY IS Professor of Economics at the University of Western Ontario THMOTHY J. HATTON is Professor of Beonomics at the University of Essex DAVID M. BIGGINS i Lecturer in Economics at the University of Sheffield PAUL JOHNSO¥ is Professor of Economic History atthe London School ‘of Economics CLIVE H. LEE IS Professor of Historical Eeonomies at the University of ‘Aberdeen GARY B, MAGEE i Senior Lectarer in Economics at the University of Melbourne (Cebie ey Oaine © Code Ue a 208ssf continutors ROGER MIDDLETON is Reader in the History of Political Feonomy at the Univesity of Bristol Tow NICHOLAS is Visiting Assistant Profissor, Strategy and Interna: ‘ional Management Group, MIT Sloan School of Management DUNCAN Mt, ROSS is Lecturer in Bconomic History at the University of Glasgow MARK THOMAS Is Associate Professor of History at the University of Virginia MICHAEL TORNER i Profissor of Economic History at the University of Hull ROBERT WOODS Professor of Geography at the University of Liverpool (Cebie ey Oaine © Code Ue a 208Preface 1n their gloomier moments, academies are prone to predict the demise of their subject As the tastes of students change. a6 the economy wanes and wanes, af the number of academic jobs fldctuates and the average aye of academics increases, soit is easy fa discern a longterm decline in the attractiveness of any subject. ‘Economic historians, above all, oyght to be wary of such speculation. After all if there is one single thing which is taught by study of the subject of economic history, itis that change is continuous and usually slow. As economists put it, ‘change is at the margin’ it proceeds by tiny increments or decrements and the end, or even the direction, is rarely t0 be seen by those who are living through the changes, But changeis always ‘with us, a lesson which needs to be learned by each generation. It should be leamed particilarly by thase eminent economic commentators who, at each stage of the business cyele, confidently predict that that stage, \whether of boon or bust, will o on forever. But it must be leamed alsa by those who predict that an academic subject is in terminal decline. On the evidence of the three volumes of The Cambridge conor History of Modern Brita, reports ofthe death of economic history are clearly pre= _matare and probably mistaken. The volumes demonstrate a vibrant sub+ ject, reaching out into new areas of research and using nev techniques to explore new and old problems. Feonomie history, as rewaled in these ‘payes, is a true interdisciplinary subject, a point emphasised also by the contributors to Living Beonoe and Social History (Hadson 2001] which was published to celebrate the 75ch anniversary of the Economie History Society, the guardian of the subject in the United Kingdom, As Pat Hudson emphasises, the subject has certainly changed. The ro- ‘und phrases of Bphraim Lipson, the beautifully crafted analyses of Jolin Clapham, have given way to equations. to the quantitative analysis of bizarre sources such as human skeletal remains and to the increasing emphasis on the study of national economic histories within their global fmivironment, Yer the essence ofthe subject remains: in the words Which are used each Sunday to advertise the News cf he Worl, ‘all human life is here. Economic histry is about the behaviour of human beings in an ‘uncertain world, 25 they struggle to earn a living as they decide when to shave a child, a6 they band together in a common cause or, all t00 often, fall out and resort to confliet or war (Cebie ey Oaine © Code Ue a 208Price “The economic history of modern Britain, the subject ofthese volumes, ‘has seen all these and billions more human acts, collective and individwal, ‘In most cases, economic history is about collective behaviour. There are ‘few “great men’ (and even fewer “great women’ in British economic his- ory, Mainly because economic change can very rarely be atribated (0 2 single person, Even if, on occasion, economic historians identify one per Son as an inventor who has changed the world, other historians will ast- ally jump in to claim the credit for another, or atthe extreme wil claim ‘that, counterfactually, the invention really did not make much differ fence. This alone is enough to Keep the subject changing. But also, because ‘we cannot directly observe collective behaviour or deseribe myriad ind vidual acts, the subject has to theorise as well as describe. Only through theory can we hope to make sense of the economie past. Some academic subjects, in such circumstances, turn in on themselves and allow theary to predominate. Often, they become the preserve of the fayoured few, writing and publishing for each other, theorising in increasingly arcane language, New technologies of acaleme, the email and the working paper, abet these tendencies as the results of research are circulated within an inner circle and only emerge, months or years Jater, to inform a wider audience, “he Cambridge Econsmic Hitory cf Modem Brite by contrast, belongs to a tradition which believes that research and scholarship have no purpose if they are not used, if they are not disseminated as soon as possible to a8 wide an audience as possible, In other words, its editors and authors ‘have a mission to explain. This certainly does not obviate the use of the ‘most ingenious and complex techniques to tease out the mysteries of the ‘past it does demand, however, that che techniques and the resalts that stem from them are explained clearly, concisely and in language which anyone interested in the topic can understand, This was the aspiration ‘which Lay, for example, behind The Beonomic History of Britain since 1700 [Floud and McCloskey 1981, 1994) and it still animates these volumes. ‘They belong to an academic tradition exemplified by Lord Rutherford, the great Cambridge scientist, who believed {in somewhat antiquated parlance) that "The good scientist should be able to explain his results to the charlady in his lab, “These volumes, therefore, axe textbooks, in the hest sense of books ‘which explain thelr subject. They are written by leading researchers, raven from many countries around the world, who have themselves re- cently contributed to our understanding of British economic history, ste ally with pleasure, they accept the obligation to tell students and others ‘with an interest in their subjects about the results of academic enquizy by themselves and others in the fleld, Its not always possible, of coms, { be sure ofthe background knowledge which each reader will possess, -most of the techniques and technical terms have been explained as they (Cebie ey Oaine © Code Ue a 208Preface are used in the chapters witch follow, but some readers - if they are ‘puzzled ~ may need to consult a dictionary or a dictionary of economics, All authors need critics, phrase which seems limpidly clear to one ‘person may baffie another and only an informed critic can help the au thor to express comples notions in 2 comprehensible way. For this reason, all the drafts of the chapters which follow were discussed, not only by the ‘editors, but by all the other authors within each volume and by 2 number of invited commentators who gathered tagether at a conference held in London Guildhall University, The editors are grateful to those commen- {afors: Martin Daunton, Tim Leunig. Richard Smith, Emmett Sullivan, Barry Supple, Rick Trainor and Peter Wardley, Our grateful thanks go also to the Eeonomic and Soeial Research Council, the British Academy, {he Gatsby Foundation and Cambridge University Press for their support far the conference and the produetion of these volumes. Richard Fisher, ‘Elizabeth Howard and Helen Barton at Cambridge University Press have encouraged us throdghout the process of publication and we have also hhad the invaluable support of an. exemplary research assistant, Claudia Edwards, Roderick Floud and Paul Johnson (Cebie ey Oaine © Code Ue a 208(CarcdeHnsOnine © Canidae Ps 281— Long-run growth NICHOLAS CRAFTS contents bert hover ot roth Reyer om grt economics ‘poh accourtngperpec= bo vetvanbunin a thd theta economy succeed? Postscript: market falure or government ‘aire? INTRODUCTION “This chapter reviews UK economic growth performance from mid Victorian times to the end of the interwar period, It aims to place this experience in the context both of initial British preeminence and subse ‘quent relative economic decline and of new ideas in growth economics, A ‘growth accounting framework is used to establish the proximate sources of growth and to compare UK experience with that of Germany and the United States. Against this background, special attention is given to 10 controversies, namely, whether the British economy ‘failed’ in the late Vietorian and Edwardian period and whether the interwar period and, es ‘pecially the 1930s, awa successful regeneration ofthe economy's grosth ‘potential. Finally. in $0 far asthe UK underperformed during these years, it is important fo examine the incentive structures Which informed de- cisions to invest and to innovate and the roles played by market andjor ‘goverment failure. Cntndge Hate Once © Cece Urey Pe.2008‘Nicholas Crafts AN_OVERVIEW OF GROWTH Britain was the fast industrial nation but by the end of the twentieth century had become just another OECD! economy with an income level below that of Noreh America, most of western Europe and parts of East Asia, This relative economic decline is sometimes regarded 28 a continu: ous process that started around 1890 and had already alarmed contempo- raries in the late nineteenth century as Germany and the United States emerged as powerful economic rivals Its dimensions are, however, not {ll anderstood by many commentators. This section seis out a basic ‘quantitative framework within which debates about UK growth perfor -mance can be placed. “Table 1 reports estimates of income levels and grewth rates of real CDP per person for westem European economies and for Japan and the United States in the period 1870-1938, The units of measurement are “purchasing power adjusted’ dollars of 1990 so that account has been taken of differences in internal price levels in the assessment of the rela tive standing of different countees, While these estimates are subject t0 number of health warnings in terms of both the imperfect nature of the ‘underlying economic data and the difficulties of solving the “index num- ber problems’ of tracking real output through time, the broad pleture in ‘Table 1.1 is reliable enough to make the following points, First, the UK ‘was a clear leader in terms of income per head in 7870 but was overtaken by the USA around the start of the twentieth century and by Switzerland in the interwar period. Nevertheles, the UK continued through to the end of the 19305 (0 have an income level well ahead of that of both ‘France and Germany ~ cvertaking by these continental Earopean rivals tok place during the “golden age’ of European growth after the Second id War. Second, over the whole period 1870-1938 several European countries were catching up through faster growth that enabled them to seduce the income gap with the UK; these included Denmark, Germany and Sweden, while the majority of European eountries had faster growth sates than did the UX. Third, in general, growth rates in these years were _modest relative fo the achievements of the ‘golden age’ of the 1950s and "1960s when growth of per capita income between 3 and 6 per cent per year Was the rule and they were also somewhat below the late twentieth- ‘century experience of these countries (Maddison 2001) ‘Table 1.2 reports on productiity rather than real income per person, ere the data are more problematic and the table is restricted to compar. ‘sons with Germany and the United States where the data are relatively 400d, The table reports both labour productivity and total factor pro ‘ductivity (FP), The former is defined as output per worker whereas the > The Oxaniatin or Soasomic Cooperation and Dewopment a group of ledingdee- spel ato Cntndge Hate Once © Cece Urey Pe.2008Leong sro 1670 193 1958 UK aa uk aa Seinetind aa Nsheronds 253 Standard 4568 5451 gr U7 Belgien 42 ene 72 Stern 2202 Netheands 09ers 5.28 Deva 2003 Denk siz Gumary 516 ceary gis Gemary 3833 Bekiua 435 Face 1816 Face 385 Sweden ans usta 1685s 5485 Farce 486 velar ATS Sweden 5095 Nowy a3 Sweden 654 elne 28 Firand 3590 ty 149 tly 2s Asis 3559 ony 1482 Nemay 250) tay 5318 Spain 138 Spin 2288 ln 38 Frtons 1 Firing am Gece 2678 Pongal Gee 192 Sin 202 Greece 215 Roma 124 Pomel 1568 Japan 751 pan 1585 pan 29 usa asus soo ens ToS 1s UK 7K or] Nsfefords 98 Sted 18 Bekur 1 Bek ' Swhuedond 18 ends 10 evar 18 Deon 18 cemary 18 Geary 12 Face 14 face 19 velar 10 Sweden 13 Sweden 1s webs 1 ty 13 tity onvay 13 ory Sin 12 Spain Filan 14 Frans Pongal 1 Greece Greece 13 Potugl apa 15 pan ust 18 Usk ‘Sawa HOT Cntndge Hate Once © Cece Urey Pe.2008[Nicholas Crafts nglomest sons _Labourprouctity a7 UE Geary USA Germany UU GemaniUK WSU er descshue 22s DST 69585 ut eduiy 2428 HB SDSS Seniess $4714] sa sar 163 cor ion 1m0 009505 ton 616 5) ist jeiohue “8 MSDS OSD Seviees 44177632 HS TOTS nT eimai nossa uw jeiohue 62299) S2 ssa veuty 445582 Sh wos sn 111 Seviess 495519 SOS 887200 3) we imo tooo sts 7S t88 13850 ject 5) S182 HDB éwiy 455 TSB SB Seis 48453856) wos m2 1102 we ion t009 _1000 eso 721581 veces 29 2B dy 4184S Sees 8345S GATS 1B cor 190019 ono mp 1525062 oyna lar av pocrapa Fete poe ede angaons ow yar UE RTe emit oa coments a latter isa weighted average of output per worker and output per tait of capital and, if well measured, will veflect differences in technology and in the efficiency with which labour and capital were used, TFP estimates are a very important way of benchmarking a country’s productivity per formance. Unfortunately, in this period they are not altogether reliable, especially for Germany. The economywide comparisons of labour produc tivity in Table 1.2 are not too sucprising given the estimates reported in ‘Table 1.1, The United States took the lead before the First World War, dnad a sizeable lead in 2937 when its labour productivity exceeded that of the UK ty almost a third and extended this to tworthirds by 1950. Gecmany narrossed the gap appreciably between 1871 and 1911 bust re ‘mained distinctly behind the UK in 1937 and did not avertake che UK ‘until the 1960s, Cntndge Hate Once © Cece Urey Pe.2008Leong sro At the whole economy level, the level of TEP in Germany relative to the UK Slowed a broadly similar path to that of labour productivity, ‘with regand co the United States things were a lite different a6 the UK retained its lead until after the First World War and there was only a small American lead in 1937, After the Second World War, however, a large TEP gap was apparent but even so this was appreciably lower than that in labour productivity. Throughout the twentieth century the American economy operated at 4 much greater level of capital intensity than the UK AL che sectoral level, the pictare is more complex. The USA already ‘had a substantial Jead ever the UK in labour productivity in industry in “L871, this had grown substantially by 1950 but then the UK eaught up a bit. In agriculture and services, American labour productivity was below that in the UK in 1870 but by 1911 this deficit had been tuned into a small lead which was also sustained chrogh 1997 and then extended after the Second World War, although productivity gaps in these sectors ‘were always much Jower than in industry. bnerestingly, the United States dd no¢ extend its TEP lead in industry between 1871 and 19 and the subsequent gains made relative tothe UK before 1929 were not sustained ducing the 19305 but by 1950 the gap was much wider cham in 1871, In services the UK TEP level was not overtaken by the United States until the 19408, ‘Turning to Germany, where TEP and labour productivity comparisons are fainly similar, the most notable feature is the contrast between agei- culture and industry. In industey, Germany overtook the UK in the early twentieth century and had established a lead of over 20 per cent bY 11911 which was not, however, maintained between the wars bur as re established during the golden age after the Second World War, In agri culture, however, Germany persistently lagged far behind British levels of labour productivity. In services, Germany reduced Britain's lead during he early part ofthe period but did not surpass British productivity levels ‘until che 1960s, ‘Table 1,2 also displays estimates ofthe sectoral composition of employ- -ment, Here the striking feature is that in 2871 che UK had a much smaller agricultural and a good deal larger industrial sector than either of the bother two countries, Indeed, the UK was a major outlier in nineteenth: century Europe with regard fo the small size of its agricultural sector ‘which derived bath from an early embrace of capitalist farming and from Sreetrade policies, Over time, these discrepancies in economic structure ‘Were considerably reduced. as Table 1.2 shows “Two important points follow from this, 2s Broadberry (1998) has stressed. First, American overtaking of Britain was based to 2 consider- able extent on relative trends in productivity in services combined with a large shift of labour into chat sector rather than simply resulting from the development of higher labour productivity in industry. Second, the Cntndge Hate Once © Cece Urey Pe.20086 [Nicholas Crafts io tarts Depa 650) ami «Set ABRT «SAO 12022 abe gouh (pa) 1 1a 22 Fa “gout pa) ee tie apectary fe m0 43S allem) Ei 96 " 0 Pay ere (8) 36 nn) 100 Secon ext (8) 5s un . avy?) an 0s 22 Nemeceinlinvseenya0e@) 48 SEAL u 145 acter emplaeert() 35 7a u SoS explanation for Germany's relatively weak performane® in real gross do- -mestic product (GDP) per person and overall labour productivity (aotwith: standing its industrial challenge to Britain is seen to have resulted Largely ‘fom a relatively large and lowproductivity agriculture. Protectionist German trade polices are seen to have been costly in these terms. ‘Table 1.3 pats growth after 1870 in the context of experience during ‘he exter industrial revolution period. The feature that stands out in this table is that Britain was new a fasegrowing economy prior to the Second World War, Indeed, from today’s vantage point. the economy of the industrial revolution period can be seen a having relatively limited _groseth potential. This assessment is informed by several aspects reported in Table 13. Industrial revolution Britain was an economy which had very ‘modest levels of investment in human and physical capital Despite fa ‘mous breakthroughs in textiles technology and more generally in the use of steam power, IEP growth in the classical period of the indastrialrevo- lation was unimpressive by postirst World War standards; the economy ‘was characterised by weak technological capabilities and by substantial disincentives to innovative activity judged by later rather than contem- porary standards (Crafts 1995). To sustain its early lead into and through the i titieth century, Britain would have had to progress very consid- erably beyond its industrial revolution capabilities. In fact, by the late nineteenthjearly twentieth century considerable strides had been made in this direction (see chapters 3. and 4 below). A higher proportion of GDP was devoted to capital accurnulation while rapid expansion of edu «ational prevision represented a big step forward in investment in people |Sanderson 1999) and the first industrial research and development Iab- oratories were set up (Edgerton and Horrocks 1994). It should be noted, however, that all of these growth-promoting efforts were distinctly mod: fst relative to what wodld come along after the Second World War and Cntndge Hate Once © Cece Urey Pe.2008Leong sro that, as we shall see, they did not entirely match the progress made in other countries, In every respect, the “golden age’ economy after 1945 had 2 much higher growth potential chan had been che case either during the indus- ‘ial revolution or in the early twentieth century. Many more resources ‘wore devoted to physical investment, human capital formation and re. search and development {R&D} while TEP geewth was far in excess of ear lier times. The third quarter of the twentieth century was undoubtedly the period when economic decline relative to other European economies ‘Was. its most pronounced (Crafts 2002). Table 1.3 reminds us that this ‘was not because absolute growth performance in the UK had diminished bur rather because ocher countries had adapted becter to the enhanced opportunities after the Second World War, KEY IDEAS FROM GROWTH ECONOMICS ‘Fer many years the traditional neoclassical economic grossth model ruled {he ost. This viewed the sources of economie growth 2s being growth in the physical capital stock and the labotr force and improvements in tech- nology Which raised the productivity of these factor inputs. This model ‘has to key assumptions, iss, capital accumulation is subject to dimin- ishing retums. Second, technological progress is exogenous and univer. sally available ~ in a famous phrase it is ‘manna from heaven”. These assumptions are fundamental to ro wellknotwa long-run predictions of {the neoclassical model, namely, that policy and institutions do not infle- fence the rate of steadystate growth and that all countries converge to the same income level with initially poorer countries growing fester as they eliminate initial shortfalls of capital per worker, A variant on the neo- slassical model isthe soalled AugmentedSolew model which embodies a broader concept of capital including both physical and human capital bur comes to the same conclusions albeit with less severely diminishing setums fo investment, Although some insights from this model found favour and an em- pirical technique derived from i, growth accounting, has been widely ‘used in economic history, it Is probably fair to say that the pure neo slassical model has generally been regarded by economic historians a ‘unhelpful in most circumstances. In particular, the notions of universal {echnology and longzun income convergence have probably seemed fa- {ifched to historians accustomed to thinking in terms of, say, the new institutional économie history with its emphasis on the importance of institutions and political economy considerations to grovth outcomes. Moreover, this model cannot really cope with the leading economy being wrtaken and. after al, this is atthe heart of Britain’ relative economic decline, Cntndge Hate Once © Cece Urey Pe.2008[Nicholas Crafts Recent developments in growth economics offer more attractive fea tures. These include the acceptance that institutions and policy ean pro- -mote divergence in growth outcomes and, associated with this, the recog. nition that eatchap is not automatic, The central ideas concer the ‘microeconomic foundations of growth and the concept of endogenous 210M. These have come together most fruitfully in models that ane lyse the role of endogenous innovation in the growth process, Le, that consider the rate of technological advance fo be influenced by economic incentives, In effect, these models drop the assumption that technology, and the efficiency with which iis used, are universal, Carefully deployed, (hese ideas can inform a reappraisal of controversies surrounding British _groseth performance, Endogenous growth occurs when longeun grcwth outcomes are de- {ermined by economic forces. This requires either that a mechanism is found to eliminate diminishing rerams to capital accumulation or that the rate of technological progress is responsive to additional innovative effort without being undermined by diminishing returns fo R&D, In such «a8es, good (bad} policy can permanently raise lower] the growth rate of income per head, in the former case by leading to a higher investment rate and in the latter case by encouraging more resources into inncvative activity, “The hypothesis of endogenous growth is highly controversial. The evie ‘dence does not support the claim that there are nonediminishing returns to investment in either narrow or broad capital. Second, the jury is still ‘out om the claim thatthe steady-state growth rate of the leading economy ‘an be increased by mare R&D, but the experience of the late Twentieth century is not very encouraging. For this reason, models that embody ‘endogenous innovation do not all have this property jones 1985, 1999). [Evidence of the impact af incentive structures on the rate of innovation is plentifal; for example, it is clear that the ability to appropriate returas, -market size and demand gresth al influence innovative effort Jaffe 1988) and there is strong evidence for postwar Britain that intensification of competitive pressures on firms stimulates innovation (Aghion eta. 2002) “The theoretical investigation of endogenous innovation has the potential to yield important insights into failures to exploit technological opportu nities to che Folland thus into long-run divergence of income levels and growth rates, Broadly speaking, new growth economics suggests that there are two important aspeets ofthe incentive structures that influence decisions ta {innovate and invest which matter for growth outcomes, namely their im ‘act om expected returns and on agency problems (Aghion and Hewitt "1998), Thus, institutions and policies that reduce the supply price of cap- ital or research inputs or reduce fears of expropriation can imerease in nnovative effort, speed up technology transfer and enhance the chances of rapid catchup growth, Since effective and timely adoption of new Cntndge Hate Once © Cece Urey Pe.2008Leong sro technologies tends to be costiy to managers of fins in terms of the ef {ort required, it is also important that they are incentivised to work hard ‘on behalf of the avners - when this is not the case we speak of perfor -mance being jeopardised by principalagent problems. Unless there are large extemal shareholders who can internalise the benefits of effective ‘monitoring of management, strong (though less than perfect) product -marker competition tends ta be important in anderpinaing productivity ‘performance (Nickell 196) ‘Finally, these ideas resonate with economic historians’ discussions of ‘he international diffusion of technology. in particular, there is an obvie ‘us connection with the idea of social capability used by Abramovitz and ‘David (1996 and see below). But ir should also be noted that in another de- ‘parture from the assumption that technology is universal these authors stress the importance also of ‘technological congruence” in catching up or falling behind. Here che point is that che costetfectiveness of a tech nology may vary across countries where market size or cost conditions or availabilty of complementary factors of production are not the same and thus decisions whether or not fo adopt it based on profitanaximisetion can differ A_GROWTH ACCOUNTING PERSPECTIVE Growth accounting is a useful technique, much employed by economic ‘historians, with which to examine longsun growth. Iris well explained and put in the context of modern growth theory in Barro (1999), Despite ‘problems that are discussed below, it provides a method of benchmarking _g10wth performance and the estimates of TF that result from its use are an important diagnostic in international comparisons. Growth account ing was central to the highly influential interpretation of the longran development of the British economy by Matthews?! a. 1982), Growth accounting seeks ro attribute grovth to is proximate sources in terms of factor inputs and TEP, TEP is the weighted average of the ‘growth of productivity of the individual factor inputs. The basic formula ‘sed in growth accounting isthe following: ayy. AMINE POLL +a | There the growth sate (A¥/) of output () is accounted for in terms of the contribution of the capital stock (AK/S) times the elasticity of output with respect fo capital, the contsbution ofthe labour force (24) times the elasticity of output with respect to labour (9) and the ‘growth of TEP (A.A). In practice, a and B are approximated by the shares of profits and wages, zespectiely in national income, and TEP is found as a reside ‘al when estimates of al the other componeats have been entered into Cntndge Hate Once © Cece Urey Pe.20080 [Nicholas Crafts he formula. Capital stocks are estimated using the perpetual inventory -method of adding up past investment flows and assuming a lifetime for capital assets, while labour inputs are usually measured in hours worked adjusted for the educational composition of the labor force. This for ‘mula would be exactly right if as in traditional neoclassical groseth the: ory, the economy could be thought of as an agregate Cobb-Douglas production function, Y — AICP operating under conditions of perfect competition and constant returns to scale, The parameter A would re ‘lect the state of technology and TEP growth would measure exogenous fechnological change manna from heaven’, Caution is required, hosiewr, before assoming that residual TFP _grosith zeally measures the contribution of technological change to eco nomic growth. Technological change may be less than TEP growth if {here are scale economies or improvements in the efficiency with which resources are used, or if improvements in the quality of fictors of pro: duction are underestimated. for example owing (© unmeasured oman capital accurmulation (Abramowitz 1995}, By contrast, ifthe elasticity of| substitution between factors of production is less than 1 andl technolog cal progress has a (Hicksian} laboursaving bias, as many analysts think is often the case, then conventional TEP growth underestimates the contr- bution of technological change and the mismeasurement increases with {he growth in the capital to labour ratio, the degree of labour-saving bias, and the inelasticityof substitution (Rodrik 199%) Since faster technological change raises the steadytate rate of growth of the capital stock in 2 traditional neoclassical growth model, part of ts impact on growth compared with the counterfactual of no technological change shows up in capital's measured contribution, The advent of en- Mdogenous grosth theory strengthens this kind of reason to believe that the contribution of technological change exceeds TEP grossth, Thus, in models which envisage endogenoas innotation driving growth through expanding varieties of capital inpats,a fraction ofthe contribution of the _groseth in Varieties of capital facilitated by R&D accrues to capital and is ‘not measured by TEP, The tndermeasarement will be greater the larger 4s the endogenous component in technological progress (Rarro 1999, ‘Table 14 reports a growth accounting decomposition of the sources of growth for the British economy from the onset of the industrial rev ‘lution to the end of the interwar period, These estimates are quite ‘rude in that labour quality is not accounted for ia Labour's contsibue tion but is part of the TEP residual (although an indication is given of {the possible contribution of education} and prior to 1873 labour input is measured by numbers of workers rather than hours Worked, The over. all picture is one of accelerating grevith from the mid-eighteenth to the :midnineteeath century based an increased comtibutions from all three sources of growth, After L873 growth was slower and all three sources of ‘growth, notably including TEP grovth, show decreased contributions. In Cntndge Hate Once © Cece Urey Pe.2008Leong sro w Cuput youth Capllcoriuton _Labourcortibuion TP youth Etvation 1-205 955 20 rmo-est 17 1 20 wee " WIS 8 955 " ws _ 28 235 220 u Ths kgncara yon accusing ciaisyrdch ep ya — aR poligioea = Oem Asbo {Shasta cabacie= ees Cmhfoearernit ran 0\ Acute carafe tea eames ‘edbensetiluns herr nied fom tt guineas by ann ier meen ‘Sirgronsanso nae shecmulon dang kone ey ge wa 3) ol Sayers slog '253 isp ce caer San Sodas bd net 92 Mao 86 a Semen thant a he interwar period capital’s contibution was relatively weak while after {he Second World War hours worked per member of the labour force fell sharply and gretth was based especially on much stronger TEP growth. le deed, perhaps the most striking feature of Table 14 is how much greater ‘was the contribution of TEP growth after the Second World War than in the industrial revolution or at any time in the nineteenth century. “This contrast probably does reflect real changes in the contribution. of technological change fo grcwth, but may well exaggerate the magnitude. 1c seems likely that the bias of nineteenthwentury technological change ‘was more Jabour saving than that in the twentieth century and together ‘with much faster growth in the capital to labour ratio in the latter period {his may well mean that the conventional (Cobb-Douglas) assumptions imposed in growth accounting understate technological change before as opposed fo after postSecond World War (Abramowitz 1993). The slew. ddewa in TEP growth in the later nineteenth and early twentieth centuries deserves a closer look (see below, DID VICTORIAN BRITAIN FAIL? “The heading of this section is also the title of a famous article writen bby McCloskey. In i he claimed that in the proFirst World War period the sith economy was “growing as rapidly as permitted by the growth ofits resources and the effective exploitation ofthe available technology’ 1990: 451), This conclusion was based on three very neoclassical arguments, Fist, using the insights of a traditional growth model, it was argued that devoting more resources to home investment would ave ran into diminishing returns. Second, it was claimed that the technical chotees ‘made by British firms were efficient and that the highly compecitive Cntndge Hate Once © Cece Urey Pe.20082 [Nicholas Crafts ‘market environment ensured chat there would he no serious and per: sistent errors at the industry level while the capital market operated to equalise returns to diferent types of investment at the margin. Third, it ‘as maintained that British productivity groseth could not have been any ‘higher which in effect rules out the possiblity that the UK could have anticipated the American move to faster technological change “This assessment has, of course, proved highly controwssial and al legations that a number of serious falures inhibited economic growth continue, One of the most celebrated of these claims has been “en: ‘repreneurial falure’, perhaps the bestknown proponent being Landes (2.969) who recently reasserted his view as follows: ‘one is inclined to define the British disease as a case of hard tardiness, entrepreneurial constipation’ (Landes 1998: 455). Another welllmotn hypothesis is that the capital market unduly favoured foreign investment and had insti tutional failures that undermined the flotation of new businesses and slowed down structural change in the economy (Kennedy 1987). Yet ane bother criticism is that the British education system exhibited a number of weaknesses and that technical training was lacking both om the shop ‘oor and in the boardroom with adverse effects on technological progress [Sandesson 1988}. Finally, overreliance on ‘selfregulating’ markets and a regrettable lack of state intervention aimed at modernisation of the ecom omy was the charge levelled by Elbaum and Lazonick (1986), “These arguments are reexamined below (and in more detail in chapter 4) in the light both of the subsequent accumulation of evidence and of new ideas from growth economics. Before this, however, it is nec essary 10 confront the suggestion that there was a elimacteric in British ‘growth puor to the First World War, The notion of a climacteric is of a Sharp reduction in trend growth and, 26 proposed by Feinstein tol {1983}, a cessation of TEP growth between 1899 and 1913, It is this hy- ‘pothesis chat will be addressed here rather than the earlier literature on an alleged climacteric in the 1870s, a survey of which can be found in Seul 1985) It should be accepted that the existence or otherwise of a climacteric 4s not decisive with regard to the growth failure hypothesis, For example, if 1¢38 argued that technological revolutions come along at discrete n+ tewvas then a growth slowdown accompanied by a hiatus in TEP growth in between the first steam and Stee!) and second (electricity and cars) “industrial evolutions’ may be quite understandable and not indicative of undexperformance Phelpsrewen and Handfieldones 1952). On the other hand, 2 constant trend growth rate could represent 2 fallure if op- ‘portunities for faster technological change were taken tsp more vigorously {in other countries whose growth consequently accelerated a8 was noted by Crafts et ol, (1989), Nevertheless, on balance, establishing that there ‘was a dimacteric in TEP growth would strengthen the hand of those arguing for a growth failure, So was there a late Victorian(B4wardian limacteric?| Cntndge Hate Once © Cece Urey Pe.2008Leong sro Outcome pendtwe _Conpeonise ——_Ealced oF Ww 18 13 19 w 12318 2 2 14 tee woT 17 12 12 1 iris 17 14 16 w es oe 31 " " ies 22 13 uw u 1 1055-75 " " 182-3 14 1 90599 " 1 ino 02 D 173 " 1" hes 13 12 ies 98 1 " 1 isilocahal ken ange nd ass Panunieweel ‘Table 1.5 displays the statistical evidence from which a post1899 clic -macteric was inferred, Feinstein et al. emphasised the so-alled compro mise meastre of GDP which is a geometric mean of the expenditure, income and outpat measures. Using this estimate, real GDP grovth fell ‘rom 2.1 percent per Year in 1873-99 10 L4 per cent per year in 1899-1913 ‘while TEP growth fell fram 0:7 per cent per Year fo 0. per cent {1983 “175, Ir this were interpreted as 2 change in tend, chen suggestions that the economy experienced a growth failure in the years before the First, World War would attain greater credibility. However, Table 15 reveals that (here are difficulties with the climacteric hypothesis. First, itis apparent that there are problems with the data since if these were perfect there should be no discrepancy between the expenditure, income and output -measures of GDP. The redaction in TEP growth after 1899 is muich less in the output than the income series, Solomou and Weale (1991) argued in favour of weighting the variants according to reliability rather than equally asin the compromise series and their results, also shown in Table 115, educe the impact of the post1899 slowdawn, Second, the 1899-1907 business cycle stands out a 2 period of relatively weak TEP growth in a columns of Table 15 with che years following 1907 showing a bounce hack. Almost all the differences are statistically insignificant ~ the only exception is that growth in the cycle of the 1890s is found to have been Cntndge Hate Once © Cece Urey Pe.2008 a1" [Nicholas Crafts ‘squsually strong ~ and the 1899-1013 grew isnot unusually weak re ative fo the period 28 2 whole (Crafts eal, 1989) A more sophisticated Statistical model estimated by the same authors zesulted in a decline in ‘wend growth after 1899 but oni of about 0.1 percentage points per year? “the claim that the UK suffered a serious climacteric in its economic _srwth in the period 1899-1913 seems highly doubtil. This doesnot, of course, dispose of arguments that the UK experienced a growth fallire in the sense that grosth could have been higher and, in particular, that the UK shoold not have fallen so far behind the United States in the early twentieth century, McCloskey argument that British growth could not have been any faster is best undlerstond in the framework of a traditional neoclassical svowth model. n this ase the steadpstategrvith rate is exogenous and ‘with a Cobb-Douglas production function equals avy. LL+(A A) fla} ‘hat isthe growth rate is determined by the growth of the labour force and of TF. In this model, MeCloskey’ assertion was that these could not ‘have been increased, “The plausibility of this claim would be enhanced if the UK could be shown to have levels of TEP and human capital per worker at least a6 _griat a5 chose in other leading economies, This seems to have been the ‘ase at the evel ofthe economy 26 a whole as is shewn in Table 1.2 and in shapter 3 below, Faster TEP growth in Germany in the period 1871-1911 could be seen 2$ catching tp from inital backwardness rather than British failure. And Thomas (1988) noted that there was litle opporte: nity to increase output by reallocating resources across sectors since the structure of factor endowments, especially skill labour, was a binding constraint, (Quantitative research at the microeconomic level has generally sup- ‘ported the suggestion thar when British managers did not adopt Ameri ‘an methods their decisions were rational in British conditions in which Jabour as less expensive, natural resources were more expensive and demand was ess standardised than in the United States. As Pollard concluded: “British industry was an open, highly competitive world. [Entrepreneurial failure would imply the simultaneous failure of thou sands of individuals... plus the failures of thousands more who were eagerly avalting to take their places if they failed. Such a development ‘iy valid eae GDP eres das aotcnatai nt ot ats agente teat staboney ‘Tat doer i fact seem be the cae aad the baie concepaoa ofthe ecouny at 008 ‘whee shod cause the ecomy bey depart om bu ten cet a peoasing trend wteh undies he feinstinet sf 1883) metal pray seczpe ears St tee Toa tga some Clon av hn pane upod Ey Cray and Cay ie, Cntndge Hate Once © Cece Urey Pe.2008