World War II: British Aftermath and Recovery

British World War II economic recovery
Figure 1.--Here London boys from a council estate use an old bus in a junkyards as play ground. The press caption read, "Bus boys: This old bus is busted, but it's still wheeling merrily along in the imagination of these London kids. The've made a noisy playground of the old double-decker, retired to a scrap yard after years of service." Britain's despite beginning the War as the most prosperous country bin Europe lagged in the post-War economic recovery. Despite continued rationing and years of lagging economic performance, British voters continued to support politicans promoting socialist, Keynesian economic policies.

World War I significantly damaged the British economy and financial system. Eveb so, in the inter-War era, British living standards were higher than on the Continent, including all the Western European countries (Belgium, France, Germany, the Netherlands, and Italy). British living standard was lower than America, but higher than the Continent. After the War, Britain was slower to recover from the War. War-time rationing continued into the early 1950s. The last rationing ended about the time of Queen Elizabeth's Coronation (1953). And after recovery from the War, British living standards had fallen behind those on the Continent. It is not entirely clear why Britain which was at the turn of the 20th century the world economic leader and major financial center managed to win both world wars, but did so poorly after World War II. BHritain had borrowed enormmous sons to finance the War, but payments to America, the primary debtor, were only partiallyb paid. There was of course considerable war damage, but Germany was even more damaged. A major event after VE Day was the election of Clemet Attlee's Labour Governmrnt committed to extensive and costly social reforms.

Europe in Ruins

When the Germans surendered (May 7), Europe was starving and in ruins. There were refgugees scattered all mover the Continent. The Axis countries were shattered by the fighting and strategic bombing, but enense damage also occurred in the occupied countries and the NAZIs had conscripted millions for slave and forced labor. Britain was in a much better state comparatively. Most of the British people had a roof over their heads, albeit perhaps not their own roof. The population were not under-nourished, although the diet was very limited. Manyb items such as butter eggs, meat, sugar, fruit, vegetables were in sjort supply. Nor had the the population been displaced to the exten that many other Europeans had been. The evacuated children were largely back with their parents by 1942.

British War Finances

Britain at the turn-of-the 20th century was the richest power in Europe with a vast Empire that helped feed the national treasury. Londom was the center of world finance. Loans from America helped bank role the British war effort. British finances had been weakened by the vast cost of World War I. The Great Depression further weakended the country's finncial position. While Germany lost World War I, it did not pay a substantial part of the reparations. Most of the German payments were money borrowed from America. And the Germans could finance the War by looting the occupied countries. Britain could not do this. And the costs of the War were rapidly depelting the British trasury. Britain to continue the War needed to import food and raw material in addition to armaments made in America. American Neutrality Laws placed this on a "cash and carry" basis. Britain after the fall of France (June 1940) found itself the only country still ar war with Germany. The Battle of Britain (July-Septmber 1940) had prevented invasion, but Britain now had to fight the Germanswho had much of the resources of Western and Central Europe at his disposal and as aesult easily able to finance the War. At the samr time, Britain's financial capability to finance the War was rapidly declining, both reserves and the ability to borrow money. Britain facing bankruptsy turned to the United States. Prime Minister Churcvhill wrote to President Roosevelt (December 1940). President Roosevelt's answer was Lend Lease (March 1941). This in esence was the American commitment to bank role the British war effort. It was in essence a declaration of economic war against NAZI Germany. Hitler and the NAZIs recognized it as such. It mean that Britain could conduct the War indefinitely. (Hitler has his own plan to put Germany in a comprble position--Operastion Barbasrossa, the invasion of the Soviet Union. Yhe Japabese had a similar lan, seizing the Southern Resource Area.) Even with Lend Lease, World War II placed tremendous demands on the British people, Britain would finance the War throiugh donestic taxation and borrowing, both domestic and foreign. Britain borrowed £15.2 billion during the War--a staggering sum at the time. [Sayers, p. 193.] Foreign assetts were sold off in an Imperisal fire sale. The Government intoduced the National Savings Certificates. (Comparable to American War Bonds.) Normally Britain would pay for imports with the export of manufactured goods. But with the economy on a war footing, manufacturing was concereted to war production. Unlike NAZI Germany, Britain in 1940 began waging total war. Production of consumer goods for domestic consumption or export were cut back to the bare minimum. The War would leave Britain with a huge war debt. Britain would end the War as the greatest debtor nation in world history.

Anglo-American Wartime Technical Cooperation

German ineffiency in coordinating with Allies stands in sharp contrast to the close copperation between Britain and America. President Roosevelt began mobilizing the Arsenal of Democracy, the vast American economy well before America went to war. Very extensive cooperation in weapons development and production also began btween Britain and American before American entered the War. Lend Lease not only helped keep Britain in the War, but equipped the Allies with weapons and equipment that amazed the Allies as well as the Axis. The production of Liberty Ships meant that the Allies ended the war with more merchant tonnage than they began the War. Production methods were to developed for mass producung radars and other equipment that once required involved production techniques. Major weapons like the P-51 Mustangs were the result of a combined Anglo-American effort. The Manhattan Project to build the atomic Bomb was a joint Anglo-American project. Britain transferred a great deal of technology to America during the War because America had the industrial capcity to actually produce weaponry. After the War, American companies proved more adroit than British companies in using that technology for commercial production. A factor here was British Government policy which rather than promote private industry, significantly increased taxes which limited the ability of companies to innovate and expand production.

General Election (July 1945)

A major event after VE Day was the British General Election (July 5). There was no requirement that Britain hold an election after VE Day. This was a decision that Prime-minister Churchill made. He thought after 10 years, the time for an election had come. After all, the fight agajnst the Axis had been to preserve democracy. His advisers argued against it. They understood that the British people were in a mood for change. They advised Churchill to hold off from an immediate general elction so that the Government would have time to implement moderate conservative reforms. Churchill was intent, however, on an elction to show that the defeat of the Axis was a triumph for democracy. We suspect that dispite the assessment of advisers, he expected that his war time popularity would ensure a Conservtive Party victory. The result was not released for several weeks because of postponed voting in some constituencies and the delays on counting overseas ballots, especially the servicemen overseas (July 26). Britain because of the World War II emergency had gone over 10 years without a General Election. It was the first General Election to be held since 1935. The major parties (Conservatives, Labour, and Liberal) agreed to a coaltion government. Elections were suspended during the War and a National (unity) Government was formed by the major parties. The results shocked many. Prime-minister Churchill was enormously popular as a war leader. But the British people wanted change--meaning a peace benefit. British workers were convinced that socialism offered a more prosperous future than capitalism. They voted for Labour which promised fundamental social reforms. Labour was a socialist party. "Socialist and proud of it," was a Party slogan. They ran on a platform of significantly changing the British capitalist economy. Labour depicted capitalim as evil and convinced much of the British public who wanted change after a decade of austerity. It was a shatering electoral victory. Labour won nearly twice as many seats (393) as the Conservatives (197). Churchill used the term National Government, but he ran essentially with the support of the Conservatives. The Labour MPs selected their leader Clement Attlee as the new prime-minister. Churchill ran a poor campaign. He charged that Atlee would require a Gestapo-esque body to implement his program. Labour Party pledges included full employment, free universal health care, and a cradle-to-grave welfare state. This was basically a massive resistribution of income. The idea that a healthy capitalist economy was needed to pay for the cost of the new welfare system simply did not occur to men like Atlee who were intent on remaking British society. Labour's campaign slogan was 'Let us face the future.' This meant transforming Britain from a capitalist to a socialist state. A Labour tract read, ".It is intolerable that in the second half of the twentieth century the power to decide whether men and women have work or be unemployed and whether our children will have decent prospects or flounder in a dead-end, should rest with these small groups of monopolists. All the talk about the util­isation of science and about planning is meaningless unless the big concentrations of industry and financial power be­come the property of the people." Labour's plans included nationlizung major industries (mining, fuel and power, transport, and iron and steel). Labour also ntionalized the Bank of England. Except for the Soviet Union, whose economic failures, were not yet known, there had been no socialist contries. And the promoses of Labour (socialist) politicns were very aluring. King George offered Churchill the Order of the Garter, a dejected Churchill commented, "Why should I accept from my sovereign the Order of the Garter when his subjects have just given me the Order of the Boot?"

Grey Britain: Rationing and Shortages

Britain was a grey place after the War. Many of the children returning home from overseas evacuations, most America, were shocked. The war damage was a fraction of what Germany suffered, but the Luftwaffe's bombing was still substantial and it would take years to be replaced with new construction. Rationing had for 6 years affected British life afecting the dinner table and how people dressed. It not only crimped the way the British celebrated, but normal every day life. People did not go hungry, but the foods people most wanted (suggar, milk, butter, eggs, and meat), itens needed to make tasty meals were hard to get. Basic commodities like butter, meat, tea and coal were still rationed in 1950. Bread was other wheat products now freely available, but the de-rationing of sweets and chocolates in 1949 had to be reversed because demand could not be met. The continuance of rationing encouraged people to produce their own food in back gardens and allotments as they had done during the War. The ratiining also affected nutrition. You see incidents like Switerland taking in 'delicate' children to improve their health with good food anf fresh air. Clothing was also rationed making fashionable dressing impossible. Princess Elizabeth even had to get creative for her wedding dress (1947). Despite the rationing, there were severe shortages of most popular consumer products. This meant the continution of the wartime ‘make-do-and-mend’ culture. The austerity and bureaucracy of British post-war found its way into George Orwell’s classic novel Nineteen Eighty-Four (1949).


Housing was another serious problem Britain faced after the War. Many workers beefore the War lived in substandard housing without running water.The Luftwaffe had not seriously damaged British war industries during the War, they had destroyed large numbers of homes in London and other major cities. During the War, labor and materil shortages made it impossible to address the problem. The new Labour Government's answer to the problem not just to build new housing, but to tear down slum housing and move people to newly counstructed urban council flats or out of the cities entirely. To accomplish its goals, Labour passed the New Towns Act (1946). The result was expanding towns around London. A good example was Harlow. They were to take London's overspill population. They also began to create new industrial centres. Peterlee in the north (county Durham) is a good example. The new towns effort was just beginning by 1950 and it was not going well. The local authorities lacked the needed resources to deal with the housing shortage. Nearly half the population living in these new cities had to be accomodated in private rental housing. One source described these accomodations as commonly 'dingy rooms or bedsits with little privacy, comfort or warmth'. Less than a third of the houses in these new citiues were owner occupied. The vast majority of buildings were unmodernized designs and construction, built of brick or stone. There were almost no high rise buildings. Concrete tended to be used mostly for military structures. This only began changing rapidly in the late 1950s and 1960s.

Environmental Issues

Britain was the world's most most urbanised and industrialised country in the world. America of course had a larger industrial base, but it was more spread out than in Britain where infustry was largely concentrated in the industrial Midlands. And British cities where coal was used not only for indutry, but home heating had a serious air quality problem. Britain was as a result one of the most polluted--especially English cities. The heavy use of coal for both residential heating and energy resulted in terrible air quality, unhealty condiutions. It was harmful both to people and to buildings. This was not a problem with suddenly appeared. The London fog/smog was notable even at the turn-of-the 20th century. It even figured in the history of the American Boy Scouts--the story of the Unknown Scout. But conditions only worsened as industry expanded and population grew. The killer London smog of 1952 lasted 5 entire daysfive days and killed more than 4,000 people from varius heart and lung disorders. In industrial cities, factory smoke stacks not only billowed out exausts and polluted the air but also the effluent of untreated duscharge polluted the water. Mines and spoil tips scarred the landscape. Pollution was the result of Britain's industrial success. The Labour Government did not attach any great importance to pollutiin and ebvironmental quality. This was not particulary unique at the gime. What was unique was the cale of Britain's pollution problem. Labour's priority was jobs, especially industrial jobs, and manuctcuring. Britain un 1950 accounted for a quarter of world trade in manufactures. This was a gighest level in many years. This was the result of the World War II destruction on the continent, Britain's traditional competitors. They were beginning to recover, but un 1950 wre still just beginning what would become an economic miracle. Another reason was Labour's policy of prioritising export manufacturing toi generate foreihgn exchange earings. One positive feature was that birds and other wildlife were more abundant than today because there were still far more hedgerows and much less use of chemicals.

Industry: Optimistic Signs

There were some incouaging economic trends after the War. Britain was still a major world producer of ships and the leading European producer of coal, steel, cars and textiles. Important scientific advances wwere made during World War II and British cientists were at the forefront ofmany ofthiose advances. In fact British technology shared with the Americans played an important role in winning the War. Science-based industries like electronics and engineering were growing. Oil and chemical refining was also expanding. Britain was a leader in d in civilian aviation abd produced the first jet liner -- the Comet. Britain also produced successful propeller aircraft. Rolls Royce was not just a luxury car manufacturer. It was one of the most respected manufacturrs aero and motor engines. Rolls Royce had provided the engines that gave the American World War II P-51 Mustang its celebrated performance edge. The textile indutry was what had launched the industrial revolution. By the time of World War II it was having trouble competing in world markets. It was given a new leae on life by the new synthetic fibres like nylon. Leicester was as a result the center of the hosiery trade and the most prosperous city in Europe measured by per capita income.


Most Britons livd and worked in cities and towns. The industrial cities were particulrly important. In termns of land area, most of Britain's land mass was predominantly rural and agricultural. This is especilly true when Scotland is mixed in with England and Wales. Britain was not self suffiucent in food production. but the agricultural sector was still important. Britain imported about 70 percent of its food, but the 30 percent produced locally was vital. British farming was mixed with both arable and pastoral sectoirs. It was not nearly as efficent as American abd Canadian farming, but was more efficent than on the Continent. Many farmers had tractors which had for the most part replaced horses. This had not yet occurred on the Continent, except in the Soviet Union. (Here the introductioin as part of colectivization actually reduced productivity.) British farmers still employed agricultural workers, but paid then poorly. This was in part because hiugh-yield intensive methods including the use of chemicals was not yet common. Many workers lived in tied cottages. Tourist guidebooks commonly waxed eloquently about the picturesque British countryside, never mention the poverty present there. The Labour Government sought to boost farm income with the Agriculture Act (1947). he Act offered subsidies for cereal production and livestock. Rural homes even more than the urban slums lacked modern facilities like water sanitation, and electricity. Few had telephones. In many ways, rural areas were isolated from natioinal life.

Class Structure

Britain at the end of World War II was still a claa-based society. Class divisions were clearly visible and readily apparent by how people dressed as wll as their accents/dialect. Class was apparent in how people dressed. Workers wore caps, often flat caps, and clothes made for manual labor. This is where the term blue collar originated. Middle-class office workers wore suits and white collared shirt. They tended to wear hats rather than caps. There were also destions with womenm, although somewhat less obvious. Working women often wore head scarves while middle- class women usually wore hats. Class divisions were deeply inbedded in the educational system. Both opportunity and accents/diualect were affected by the system.


One of the most important changes after Worlkd War II were in the education system. Britain before the War, had a well established primary school sydstem with excellebt standards. Most schools had been built in the late-Victorian period and were adequate for the pre-War population. The schools and methods had changed little since the time they were built. Traditional teaching methods and tools like reading cards and ‘Beacon books’ were used. The system ws, however, totally unprepared for the post-War Baby Boom. Teachers oftenm had to contend with classes of nearly 50 children. The real changes came in secondary education. The cklass system was most obvious in the private school system, but also affected the state schools where most of the children were educated. The 1944 Education Act greatly expanded secondary education. Until after World War II, mist childen ended their education when they finished primary school, meaning an 8-year program at abvout 13-years of age. Labour began an important building program or new secondary schools. It was a binary system. Children took an ability test--the ‘Eleven Plus’ in primary school. (The name was due to the fact that it was adminidtered at age 11 years.) Most children went on to secondary modern schools which they finished at 15 years of age. It was a less demading academic program and the children finished school with few or no qualifications. The more academically talented who did well on the Eleven Plus quaklified for grammar schools had a longer more academically challenging oprigram. They earned qualifications, but still only a few entered university. Still only a small proportion of students ada=vanced to university studies. Most were from middle-class familieds who had been educated in private schools. Most were male.

Labour Intervenes in the Economy

The Labour Government elected at the end of the War (1945) did not just laubch the welfare state. Labour began an unprecedented intervention in the economy. This was not just Governmental regultions. Labour nationalised an important share of the ecoinomy. Yhis included the coal mines, the railways, the inland waterways, power (gas and electricity), aviation, the Bank of England, and the iron and steel industry. The British Goivernmnt by 1950 in state owned industries employed over 2 million people, not including Government employees like civil servants, teachers, fire and police, and others. The two largest state-owned induries in tems of employment were coal and rail. Coal was still of cruitical importannce to the British economy, providing the main source of heating and energy and provided most of the fuel and much of the freight for the railways. The Government encountered the difficulties of effectively running complicated industries, many of which were badly in need of modernization. Efforts to make these businesses profitable and competitive in the international market were hampered by outdated equipment and inadequate facilities. All of this could be covered over and hidden in a closed country like the Soviet Union, but Bitain had to compete in a world economy. And the nationalized industris proved not very succesful in competing with both American companies and other Western European countries on the Continent. Not only did the nationklized industrues have probklems, but Lbour's antipathy to privte industry adversely affected thir ability yo compete as well.

American Post-War Assistance

President Truman terminated Lend-Lease for all countries after the Japanese surrendered (August 21, 1945). suddenly after victory in Europe was declared. There were no consulations with the or the other allies. Truman was required to do this by the original Lend Lease legislation passed by Congress (1941). A factor here was that Britain had never paid off its World War I debt which is still outstanding and will never be paid off. Britain halted payments during the Depression and world-wide financial collapse (1932). Britain at the time owed the United Srates over $0.8 billion. President Roosevelt while trying to push the Lend Lease Bill through Congress to support Britain agreed to make Lend Lease a war measure. It was never intended as a general foreign aid program and would have not passed Congress. The United States after cutting off Lend Lease negotiated arrangements with Britin and China to continue shipments on a cash or credit basis of goods that had been earmarked for them under Lend Lease appropriations. Total expenditures under Lend Lease exceeded $50 billion. Britain and the Commonwealth received about $31 billion. The Soviets were the next major recipient, over $11 billion. The British Treasury at the time Lend Lease was terminated was virtually empty. The British economy was in shambles. Large areas of London and other cities were in fruin. Britain wanted an American recovery grant. Eventually a long-term loan was negotiated--the Anglo-American Loan. America provided very generous terms--2 percent interest with repayment over a 60-year period. There were some deferments, but Britain finally paid off the debt (2006). Britain was also a major recpient of American Marshal Plan aid (1947). A British reader tells us that "The Marshall Plan resources were largely directed to the Continent. There were shortages of building materials, as Europe had the first call." Actually Britain was the largest recipient of Marshal Plan aid, nearly $3.3 billion. This was the largest amount distributed to the various countries participating in the Plan. Some countries (Iceland and the Netherlands) got more percapita, but Britain got the largest amount, nearly 25 percent of total dispursements.

Socialist Economics and the Welfare State

Clement Attlee's Labour used their huge Parlimentary majority to fullfil their campaign promoses. They introduced major socialist policies to Britain. Attlee assumed that full employment could be achieved by the nationalization of major industries (coal, steel, utilities, and railroads) and Keynesian economic policies. They also expanded Government social services. These were steps that had been outlined in the wartime Beveridge Report. A cornerstine of the Labour program was the creation of the National Health Service. The Conservative opposition to Keynesian fiscal policy was at loud and vocal, but ineffectual as a result of Labour's control of Parliament. Taxes were sharply increased to pay for the new programs. Labour geberally dismissed the idea that higher taxes would discourage economic growth. The British public generally accepted Labour's economic policies for more than three decades. Even Conservative governments during this period did not dare attack the fundamnental economic and social structure established by Labour. Public opinion can affect politics and impact laws in a democracy, but what it cannot do is bend the iron laws of economics. And what we know now is that socialism does not work despite its political appeal. Btitain had been before World War II the most prosperous country in Europe. Under Labour, Britain fell behind its European neighbors. It even fell behind Germany which had been left a pile of rubble after the War. The result was that while the German Economic Miracle led Europe into a huge economic expansion, Britain had to continue World War II rationing into the 1950s. But even Conservative Governments did not dare attack the pillars of the welfare state erected by Labour.

Military Spending

Britain after V-E and V-J Day began to demobilize and reduce military spenhding fron war levls. The country, hoever, maintained a relativly high level of militay spending. here was both Empire issues and the Soviet menace. This was a policy pursued by Clement Attlee's Labour Government (1945-51). And Labour tradionlly opposed military spending. Britain was still spending 6.6 per cent of its GDP on defence (1950), more than any major country except the Soviet Union. The Royal Navy and the Royal Air Force were second in size and power only to the U.S. Navy and Air Force. Britain became the world’s third nuclear power when it detonated an atomic bomb off the coast of Australia (1952).


A decade of opposing the NAZIs culmiating in the War nd now the Cold War along wiyh the ise of the welfare state war left Britain with a huge debt burden, a massive regulatiory burden, and high taxation levels. The standard rate of income tax was nine shillings in the pound – more than twice the rate today. Consequently most Britons had little surplus, even so popular items had to be rationed. .

Failure to Recover

World War I significantly damaged the British economy and financial system. Even so, in the inter-War era, British living standards were higher than on the Continent, including all the Western European countries (Belgium, France, Germany, the Netherlands, and Italy). British living standard was lower than America, but higher than the Continent. Britain began rationing immediately after the declaration of War. And with the fall of France, the rationing became severe and the Goverm,ent moved the economy toward full mobilization. The commitment to the War was much more complete than that of Germany. After the War, Britain was slower to recover from the War. British War-time rationing contunied into the early 1950s. It is not generally appreciated that the rationing of food and clothes was MORE severe in the UK after the war than during the war. The last rationing ended about the time of Queen Elizabeth's Coronation (1953). And after recovery from the War, British living standards had fallen behind those on the Continent. It is not entirely clear why Britain which was at the turn of the 20th century the world economic leader and major financial center managed to win both world wars, but did so poorly after World War II. One factor was that thanks to Labour policies, thenew technologies developed during the war were mostly developed by American rather than British companies. BHritain had borrowed enormmous sums to finance the War, but payments to America, the primary debtor, were only partially paid. There was of course considerable war damage, but Germany was even more damaged. There were still areas of Birmingham and other cities where bomb rubble could still be seen after such areas had been rebuilt in West Germany. Britons continued to live in council housing without running water into the 1960s. Nationalized industries like coal and steel became incompetivie requiring enormous state subsidies. Rather than full employment, unemployment became a major social problem in Britain.


Primeminister Attlee decided to grant India independence after the War. India was granted independence (1947). India decided to pursue state socialism and pusue economic relatiojns with the Siviet Union. This was just beginning of the de-colonization program by which Britain granted independence to most of the Empire (1950s-60s). This must have reqquired considerable ecionomiv adjustment. Marxists would attribute some iof Britauin;'s economic problems to decolonization. We note, however, that the recivery of France and the Netherlands were not significantly affected. And the Nerherlands in percapita terms were more affected by the loss of the Dutch Wast Indies than Britain was affected by the loss of the Empire. We are not well acquainted with the ecionomic literatute here. Perhaps reades will know more.

Brain Drain

Somewhat related to the transfer of technology during the War was a brain drain after the War. Given that America also spoke English, British scientists and technicians could easily move to and work in America. And there was a great demand for comopetent scientists in American universities and corportations. These pdsitions were extremely enticing, both because reserarch labortories were better equipped uin America and wages were higher. British Government policies which did not promote industrial expansion helped to cause this exodus. High corporate and personal income tax levels in particular were a major factor. Corporations which could not finance modernization and inniovation had a difficult time holding on ton top scientists as did universities with low salary levels. We do not yet have any actual statistics on the dimensions of the brain drain and the time line, but British readers have mentioned it to us. We would be interested in any actual data.

Recovery on the Continent

The belief in Socialist, Kenseyan policies were also widespread among workers on the Continent. There were even strong Communist parties on the Continent (especoally Italy and France). But nowhere on the continent did the Socialists have massive majorities in parliaments like that voters gave Labour in Britain. The economic engine on the Continent was Germany and here American influence helped generate a free market response to recovery which led to the German Economic Miracle. There was also an Italian Economic Miracle. Italy before the War was a country far behind Britain. In the post-War era, Italy rapidly closed the economic gap between it and a stagnating Britain. Other countries such as the Netherlands pursued prudent fiscal policies and moderate social reforms until the 1960s when the recovered and growing economies could adequately finance them.

Industrial Plant

Britain was wear the industrial revolution began. This was one reason that Britain became so wealthy ahd a world power. It also meant that even by the late-19th centurty, countries which bindusrtriaized laterv than Britain built more modern industrial facilities )especially Britain ahnd Germany). A profitable company is often loath to adipt new technology because it means that its existing plant and operations are made obsolete. This was essentially the problem faced by the American rust belt in the 1970s. Governments can incourage modernizatuion through industrial, fiscal, and tax policy. Profitable companies can finance modernization and innovation. Increasing taxes which reduces profitability impairs the ability of companies to modernize. In Britain this problem was confounded by the Goverment's nationalization program which include coal and steel companies. Coal and steel was at the time the back bone of an industrial economy. The Labour Government was primarily concerned with employment and wages. As a result, the competitive position of these induistries declined. A British reader writes, "In the 1970's I worked in a manufacturing company that was using machines brought from America duruing World war II and I know that other plants were operating pre-War machinery." Very little investmernt was made in the mines and mills. There was also underinvestment bin transport, both the nationalized rail industry and modern highways. There were few major roads like the German Autobahn or the American interstate highway system.

European Integration

One major difference betweenBritain and the other major Western European nations was that Britain did not participate in the process of European integration that lead to the Common Market (Inner-Six). This must have had an important impsct on British industry. Somewhst belatedly, Britain helped form the Outer-Seven with Sandinavian countries. Eventually Britain and these countries decided to join the Common Market, although President DeGualle delayed Britain's entry.

Britain's Recovery

Only as Britain gradually fell further abnd further behind the Continent did people in Britain began to ask questions. Finally Conservative politicans began gaining some sucess with defending capitalism. Margaret Thatcher became Prime Minister in 1979 and what some called neo-liberalism became mainstream. It was in fact a full throated embrace of capitalism.

Reader Comments

A British reader writes, "The rate of recovery from nothing is going to be faster compared to the improvement where the country has a transport and manufacturing infastructure. Britain had to re-tool to start making domestic rather than War related products. Although we had this infrastructure, it was antiquated, but deemed serviceable. Raw materials were short, and again, like the food went to the mainland. [HBC note: I believe our reader is expressing the general British attitude as to what happened. I am not entirely sure that the statistics bare this out. Britain was by far the largest recipient of both Lend Lease and Marshal Plan aid.] I didn't go to France or Germany until 1960. I was struck by the modern looking cities. They of course were largely new, replacing what had been rubble. Parts of London still had old bomb sites. It was great because most of them were car parks! We really didn't get off our butts until Harold MacMillan came along. My view is simplistic, but basically, Britain had to make do until Europe caught up. They had the momentum and did perhaps overtake us once they were on their feet. Parts of Europe of course - The Eastern Bloc were in dire trouble until the Wall came down. Then West Germany went into economic reverse to pay for the development of East Germany. The Eurozone is now paying for the new poorer members such as Greece and Poland."


Sayers, R.S. "Financial Policy, 1939-45" in Sir Keith Hancock, ed. History of the Second World War: United Kingdom Civil Series (London: H.M. Stationary Office, 1956).


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Created: 4:18 AM 6/15/2010
Last updated: 7:55 AM 8/20/2018