Nick Crafts (born 1948), who is a very senior and respected economic historian at the University of Warwick, has published a new paper on the postwar British productivity failure. It examines why productive grew at a slower rate in the UK than in similar Western European countries in the three decades after 1945, which were, of course, a period when the UK remained, for various reasons, outside of the EEC.
Abstract: British productivity growth disappointed during the early postwar period. This reflected inadequate investment in equipment and skills but also entailed inefficient use of inputs. Weak management, dysfunctional industrial relations, and badly-designed economic policy were all implicated. The policy framework was partly the result of seeking low unemployment through wage restraint by appeasement of organized labour. A key aspect was weak competition. This exacerbated corporategovernance
and industrial-relations problems in the British ‘variety of capitalism’ which sustained
low effort bargains and managerial incompetence. Other varieties of capitalism were better placed to achieve fast growth but were infeasible for Britain given its history.
Keywords: competition; productivity; relative economic decline; varieties of capitalism
In my view, the most interesting and policy-relevant part of this paper appears at the very end. Prof. Crafts has effectively “buried the lede” by tucking this information down near the end, where he writes that the main features of the postwar period of British economic history were
ineffective competition policy, nationalization, and protectionism including remaining outside the EEC. This exacerbated problems of corporate governance and industrial relations inherent in the British ‘variety of capitalism’ as the economic rents that were generated helped to sustain low effort bargains and managerial incompetence.
(Bolding added by AS)
This paper builds on Craft’s earlier estimate (2016) that joining the EEC raised the level of UK GDP by about 8 to 10 per cent through increasing the volume of trade and strengthening competition. You can also read his short piece on what history says about Brexit here.
The Past Speaks 