Government and Economies in the Postwar World: Economic Policies and Comparative Performance, 1945-85

By Andrew Graham; Anthony Seldon | Go to book overview

Chapter fourteen

Benefits of backwardness and costs of continuity

Charles Feinstein

Explanations for differences in productivity growth

A commonplace of studies of postwar performance has been the notion of virtuous and vicious circles. At one extreme, Japan exemplified the former. High rates of growth of productivity made possible low rates of change in unit labour costs and prices, and this created a highly competitive position in international trade. Rapid growth of exports meant strong demand and profitable expansion, and at the same time ensured a healthy surplus on current account, so that it was never necessary for the authorities to constrain the level of activity because of balance of payments problems. Swift and profitable expansion generated both the demand for increased capacity and the supply of finance to fund high levels of investment. This, in turn, promoted rapid modernization of the stock of capital, and so completed the circle by stimulating further improvements in productivity. Britain, at the other extreme, suffered repeatedly from comparatively low rates of growth of productivity, inability to compete in international markets, frequent balance of payments crises, and low levels of investment. Export-led growth characterized Japan and also Germany, France, and Italy, but always eluded Britain.

While there was a broad consensus regarding the nature of the disparity, there was very little agreement on the crucial issue of how the process had started. Why had one country entered the virtuous circle while another hurtled round in a vicious orbit? By the early 1950s the more rapid growth rates achieved by so many of Britain's competitors could no longer be attributed simply to their recovery to pre-war peak levels of output. From then onwards a stream of explanations poured forth to account for Britain's persistently low position in a proliferation of international league tables. Among the factors to which her relatively slow growth was attributed were an adversarial two-party electoral system, an inefficient civil service, a divisive class structure, cultural hostility to industrialization, the hegemonic power of the City over industry, failure to join the Common Market, insufficient education and training, excessive taxation, too much govern-

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Government and Economies in the Postwar World: Economic Policies and Comparative Performance, 1945-85
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Acknowledgements ix
  • Figures x
  • Tables xi
  • Chapter One - Introduction 1
  • Part I 7
  • Chapter Two - The International Environment 9
  • Chapter Three - The United Kingdom 30
  • Chapter Four - France 54
  • Chapter Five - West Germany 79
  • Chapter Six - Italy 104
  • Chapter Seven - Spain 125
  • Guide to Further Reading 153
  • Chapter Eight - Scandinavia 154
  • Chapter Nine - Eastern Europe 179
  • Chapter Ten - The Soviet Union 205
  • Chapter Eleven - The United States 225
  • Guide to Further Reading 252
  • Chapter Twelve - Japan 253
  • Part II 271
  • Chapter Thirteen - Comparative Economic Performance of the Oecd Countries, 1950-87: a Summary of the Evidence 273
  • References 283
  • Chapter Fourteen - Benefits of Backwardness and Costs of Continuity 284
  • References 293
  • Chapter Fifteen - Economic Policies and Traditions 294
  • References 302
  • Chapter Sixteen - The Meaning of Hard Work 303
  • References 313
  • Chapter Seventeen - Political Institutions and Economic Performance 315
  • References 322
  • Index 323
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