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-