29 November 2021
Two Hundred Years of Muddling Through
The surprising story of Britain’s economy from boom to bust and back again
2021, Little,Brown Book Group, 352 pages,
Reviewer: Rosemary Connell
The author asserts that path dependency, the route taken to arrive somewhere, is just as important as the destination. Examples from history include the QUERTY keyboard which despite its current drawbacks is still the industry standard. Hysteresis effects persist well after the original driving force has gone.
The author canters through the roller-coaster of the last two hundred years of British economic history illustrating the changing structure of the economy, the changing powers of pressure groups and the successes and failures of governments. He reminds us of turbulent times with pandemics (the Black Death, Spanish flu,) and the highs and lows of interest rates ( 17% in 1979), taxation (83% income tax in 1974), and inflation (over 22% in 1975).
Centuries of a largely agrarian economy vanished with the Industrial Revolution. Productivity and standards of living rose. The population and production moved from homes in the country to crowded towns. Increased coal production was needed to power mills. Canal traffic rose and railways boomed.
With the rise of the entrepreneur, the landed gentry became less influential. Despite productivity increases the working class benefited little. The great reform act of 1832 changed the structure of the House of Commons and ended the dominance of the aristocracy.
Faster shipping times and better communications contributed to increased globalisation. London became the home of global finance. Imperialism and gunboat diplomacy flourished. With a laissez- faire government, Britain was the wealthiest country in the world in c1900 but it was not to last. Others caught up and America went ahead. British investment in manufacturing and education lagged and craft and trades unions flourished.
The 1914-1918 war transformed the economy. Gone were the days when free trade, the gold standard and balanced budgets were crucial to the flourishing economy and, as the author points out, politicians didn’t meddle. During WW1 the state intervened demanding munitions, nationalising industries and introducing rationing. Export markets were lost, the gold standard and the stock exchange were suspended, Spanish flu killed over 200,000 people. There was a general strike in 1926 and the election of 1929 was fought largely on macroeconomics and democracy.
The author points to vested interests being a powerful force in hampering economic progress. For example, politicians tried to manufacture pre-election booms which led to stop -go episodes. Union power prevented economic progress. Later the trade unions were reformed by Thatcher and this eventually led to an economic revival.
Entry into the EU restored free trade, provided a bigger, more competitive market and put restraints on governments’ abilities to subsidise industries. The Bank of England was given independence over interest rates. The financial storm of 2008 was weathered with the help of these structures.
Then came Brexit. This damaged economic confidence, sterling fell and the well-documented problems ensued. The global pandemic followed leading to falling economic growth and structural shifts in the heavily indebted economy.
The question as to where we should go from here is left unclear.
This is a carefully researched and interesting book. It is well worth reading to see where we are now starting from and what highs and lows Britain has experienced over the last 200 years.