champions’, just as the Nazis had done before it, nurturing them in early years with favorable loans and encouraging the banking-business nexus that provided German companies with ready cash for investment.
In the case of Volkswagen, the groundwork had already been laid by 1945. Like so much of post-war West German industry, Volkswagen benefited from all the advantages of a free-market economy—notably growing demand for its products—without suffering any of the drawbacks of competition or the costs of research, development and tooling. The company had been given inexhaustible resources before 1939. Nazism, war and military occupation had all done well by it—the Allied Military Government looked kindly on Volkswagen precisely because its productive capacity had been built up before the war and could be put to work without further ado. There was no serious domestic competition for the VW Beetle when demand for mass-produced small family cars took off, and even at a fixed and low price the cars turned a profit—thanks to the Nazis, the company had no old debt to pay off.
In Britain, too, there was a ‘national champion’—the British Motor Corporation (BMC), a conglomerate of various formerly independent car manufacturers like Morris or Austin, and itself later merged with Leyland Motors to produce British Leyland (BL). As late as 1980, BL was selling its products as emblematically British: ‘Drive the flag—buy an Austin Morris’. And like the German manufacturers, British carmakers laid increasing emphasis on the overseas market. But there the similarities ended.
After the war, successive British governments urged BMC especially (they had less influence over US-owned Ford, or General Motors’ subsidiaries in the UK) to sell every car they could overseas—as part of the desperate search for foreign currency earnings to offset the country’s huge war debts (the official government export target at the end of the 1940s was 75 percent of all UK car production). The company duly and deliberately neglected quality control in favor of rapid output. The resulting shoddy quality of British cars mattered little at first. British firms had a captive market: demand both at home and in Europe exceeded available supply. And continental European manufacturers could not compete on volume: in 1949 the UK produced more passenger cars than the rest of Europe combined. But once the reputation for low quality and poor service was established, it proved impossible to shake. European buyers abandoned British cars in droves as soon as better home-produced alternatives became available
When they did decide to update their fleets and modernize their production lines, British car firms had no affiliated banks to turn to for investment cash and loans, in the German manner. Nor (unlike FIAT in Italy or Renault in France) could they count on the state to make up the shortfall. Yet under heavy political pressure from London, they built plants and distribution centers in uneconomic parts of the country—to conform to official regional policies and to appease local politicians and unions. Even after this economically irrational strategy was abandoned and some consolidization undertaken, British automobile firms remained hopelessly atomized: in 1968 British Leyland consisted of sixty different plants.
Governments actively encouraged the inefficiency of British producers. After the war, the authorities distributed scarce supplies of steel to manufacturers on the basis of their
The decline and eventual disappearance of an autonomous British automobile sector can stand for British economic experience at large. The British economy did not initially do so very badly: in 1951 Britain was still the major manufacturing center of Europe, producing twice as much as France and Germany combined. It provided full employment and it did grow, albeit more slowly than everywhere else. It suffered, however, from two crippling disadvantages, one a product of historical misfortune, the other self-imposed.
The UK’s endemic balance of payments crisis was in large measure a result of the debts racked up to pay for the six-year war against Germany and Japan, to which should be added the enormous costs of supporting an effective post-war defense establishment (8.2 percent of the national income in 1955, against a German outlay of less than half that figure). The pound—still a major unit of international transactions in the 1950s—was overvalued, which made it hard for Britain to sell enough abroad to compensate for sterling’s chronic deficit against the dollar. An island country, utterly dependent on imports of food and vital raw materials, Britain had historically compensated for this structural vulnerability by its privileged access to protected markets in the Empire and Commonwealth.
But this dependence on far-flung markets and resources, an advantage in the initial post-war years as the rest of Europe struggled to recover, became a serious liability once Europe—and especially the EEC zone—took off. The British could not compete with the US, and later Germany, in any unprotected overseas market, while British exports to Europe itself lagged ever further behind those of other European producers. British manufactured exports represented 25 percent by value of the world’s total in 1950; twenty years later they constituted just 10.8 percent. The British had lost their share of the world market, and their traditional suppliers—in Australia, New Zealand, Canada and the African colonies—were now turning to other markets as well.
In some measure the relative economic decline of Britain was thus inevitable. But Britain’s own contribution should not be underestimated. Even before World War Two, Britain’s manufacturing industry had gained a well- deserved reputation for inefficiency, for coasting on past success. It was not that the British were overpriced. Quite the contrary. As Maynard Keynes pointed out in a sardonic commentary on Britain’s post-war economic prospects: ‘The hourly wage in this country is (broadly) 2/- per hour; in the US it is 5/- per hour… Even the celebrated inefficiency of British manufacturers can scarcely (one hopes) be capable of offsetting over wide ranges of industry the whole of this initial cost-difference in their favour, though admittedly they have managed it in some important cases… The available statistics suggest that, provided we have never made the product before, we have the whole world licked on cost’.[141]
One problem was the workforce. Britain’s factories were staffed by men (and some women) who were traditionally organized into—literally—hundreds of long-established craft unions: British Leyland’s car factories in 1968 counted 246 different trade unions with whom management had separately to negotiate every detail of work rates and wages. This was an era of full employment. Indeed, the maintenance of full employment was the cardinal social objective of every British government in these years. The determination to avoid a return to the horrors of the thirties, when men and machines decayed in idleness, thus trumped any consideration of growth, productivity or efficiency. Trade unions—and especially their local representatives, the factory shop stewards— were more powerful than ever before or since. Strikes—a symptom of labour militancy and incompetent management alike—were endemic to post-war British industrial life.
Even if Britain’s trade union leadership had followed the German example and offered amicable shop-floor relations and wage restraint in return for investment, security and growth, it is unlikely that most of their employers would have taken the bait. Back in the 1930s the future Labour Prime Minister Clement Attlee had accurately identified the British economic malaise as a problem of underinvestment, lack of innovation, labour immobility and managerial mediocrity. But, once in office, there seemed little that he or his successors could do to stop the rot. Whereas German industry inherited all the advantages of the changes wrought by Nazism and war, Britain’s old-established, uncompetitive industries inherited stagnation and a deep fear of change.
Textiles, mines, shipbuilding, steel and light engineering plants would all need restructuring and retooling in the post-war decades; but just as they chose to accommodate trade unions rather than attack inefficient labour practices, so British factory managers preferred to operate in a cycle of under-investment, limited research and development, low wages and a shrinking pool of clients, rather than risk a fresh start with new products in new markets. The solution was not obvious. Keynes, once again: ‘If by some sad geographical slip the American Air Force (it is too late now to hope for much from the enemy) were to destroy every factory on the North East coast and in Lancashire (at an hour when the Directors were sitting there and no-one else) we should have nothing to fear. How else are we to regain the exuberant inexperience which is necessary, it seems, for success, I cannot surmise.’
In France, a similar heritage of managerial incompetence and inertia was overcomeby public investment and aggressive indicative planning. British governments, however, confined themselves to collective bargaining,
