6 NOVEMBER 1999, Page 55

Recovering from the past

Mark Archer

FROM EMPIRE TO EUROPE by Geoffrey Owen HarperCollins, £19.99, pp. 517

One of my abiding memories, as an eight-year-old in 1968, is of my father proudly showing the family his brand-new Vauxhall Viva and of the door falling off as he opened it. A generation has now grown up never having known the utter shoddi- ness of British manufactured goods in the 1960s and '70s. Geoffrey Owen's new book should be required reading, therefore, for almost anyone under 25. Wearing its statis- tics lightly, this fascinating social history recalls an almost forgotten age of British industrial incompetence.

This indictment is too sweeping, of course, and certainly in two of the indus- tries which Owen examines — pharmaceu- ticals and chemicals — Britain has produced companies which rank with the best in the world. But in most of the other sectors he considers — textiles, shipbuild- ing, steel, paper, engineering, cars, elec- tronics and aerospace — the period between the end of the second world war and the late 1970s was a disaster: corporate productivity dived, Britain's share of world exports plummeted, and rivals in Europe, the US and Asia consistently outperformed UK businesses. What went wrong? Owen's book is original in that he implicitly dis- agrees with the 'State-We're-In' diagnoses associated with left-of-centre commenta- tors such as Will Hutton and Anthony Sampson, who blame Britain's poor indus- trial performance on class or cultural fac- tors, or on 'short-term' investment attitudes in the City.

Examining the oft-cited causes of Britain's industrial decline — short-term City financing, inadequate education and training, and poor labour relations Owen discovers that their aggregate influ- ence was slight. Labour relations were famously bad in the British car industry in the 1960s and '70s, but on the whole were no worse than elsewhere in the world, and in certain sectors (chemicals, for instance) were especially good. On education and training, research links with the universities were a positive contributor to the UK's drugs and chemicals industry; elsewhere, the UK's training and apprenticeship sys- tem emerges as no worse than those of its US or European peers, the exception being Germany's historical excellence in preci- sion engineering. Indeed, both the UK and Europe missed out on the postwar micro- electronic boom, but this was because no single European country could compete with the stimulus to semi-conductor research provided by the US Defense Department's massive development bud- get. Thirdly, Owen fords that lack of long- term funding from the City was never an issue in any of the industries he examines. Indeed, in some cases the opposite may have been to blame. Competition for capi- tal and the efficient allocation of it to pro- ductive businesses — financial disciplines associated with Britain's industrial revival since the 1980s — may have been inhibited by City finance being too forthcoming in the immediate postwar years. The postwar industrial climate was never going to be an auspicious one for Britain, bound to witness a faster rate of 'catch up' from rapidly industrialising powers in Europe and Asia. A major cause of our rel- ative underperformance, Owen argues, stemmed from the policy response of the postwar political consensus. Rather than foster competition, whether through trade liberalisation or by attacking cartels at home, successive governments feather- bedded underperforming British compa- nies for the sake of full employment and social peace. The policy reached its apogee under Wilson's Labour government, when the 'Big is Best' mentality resulted in the nationalisation of British Steel and British Leyland, commercial disasters subject to continuous political interference.

The contrast with the more competitive policies pursued on the Continent was exemplified by the decision of Attlee's gov- ernment not to join the European Coal and Steel Community in 1950 because of a dis- taste for the economic liberalism promoted by right-wing governments in France and Germany. How times change! By not join- ing the Common Market at the outset, Owen argues, Britain made its second big mistake and failed to share in the revival of European trade. Turn this on its head, however, and one could argue that, had it joined, Britain would still be saddled with the type of high-cost manufacturing indus- tries which are now the bane of its Euro- pean neighbours.

Instead, as Owen clearly delineates, the effect of the 'Thatcher shock' on British industry was a radical break with the past, enabling productivity and the nation's share of world trade in previously mori- bund sectors such as paper, consumer elec- tronics and cars to rise at a faster rate than at any time since the war. Highlighting the competitive impact of privatisation and labour law reforms, Owen possibly over- looks the equally profound changes wrought by financial deregulation and the abolition of exchange controls, which allowed capital, particularly from foreign investment, once again to flow freely for its most productive use.

From Empire to Europe has been Geof- frey Owen's single big project since he retired as editor of the Financial Times in 1991. It has been worth the wait. Intelli- gent, important, in celebrating Britain's recovery from the past it also carries a sub- tle warning about the future.