American Anti-Colonialism, and the Liquidation of the British Empire.
It could even be argued that the real cause behind Britain’s decline goes as far back as the Industrial Revolution. “The Industrial Revolution itself was not of unqualified advantage to Britain when measured in the long-term. While the arrival of steam power, of the factory system, railways, and later, electricity, enable the British to overcome natural, physical obstacles to higher productivity, and therefore increased the country’s wealth and strength, such inventions were soon to help the United States, Germany, Japan, Russia even more, because the natural, physical obstacles to the development of their landlocked potentials were much greater. What industrialization did was to equalize countries’ chances to exploit their indigenous resources and, over time, to take away some of the advantages hitherto enjoyed by small, peripheral, maritime-cum-commercial states such as Britain and the Netherlands, giving them instead to the great land-based powers.”18
This could be put another way. The early British industrial lead was a happy accident, due to geography and certain broad economic and technological trends rather than other reasons. Given this, “the only possible way in which this lead could have been preserved against nations with superior populations and resources was by keeping ahead technically – as Britain still does, even today, against India, China and Indonesia. But this technical advantage could only be preserved by constant research and training, which the country’s educational structure did not provide. It would also have needed a high rate of replacing obsolescent plant; yet in fact the proportion of Gross National Product invested inside Britain fell behind that of its competitors.”19 Having seen these possibilities close, the long-term decline was inevitable.
If this is the basic long-term trend, it is important to emphasise that the loss of primacy did not immediately affect all sectors of the British economy. The ship-building industry, for example, benefited from the steady expansion of global commerce, as did shipping itself. So, too, did the various services of the City of London, which were, literally ‘cosmopolitan’ in their activities, since they aspired to be bankers, insurers, investors and commodity-dealers to the whole world. The growth in the economies and trade of other countries in the second half of the nineteenth century meant even more business for the City, and the massive rise in earnings from such ‘invisible’ services more than compensated for the otherwise alarming increase in the balance-of- payments deficit on ‘visible’ trade.
Crudely speaking, “while many British industries were suffering from greater foreign competition, the City of London was in its hey-day in the decades before 1914, funding and arranging and insuring and shipping – and thus profiting from the growth in the trade of foreign countries.”20 This important sector of the economy strongly opposed all efforts to reintroduce protective tariffs and other tools of the enclosed and combative world of mercantilism; moreover it could not share in the alarmism shown elsewhere in the country.
“Quite apart from such vested interests which were not suffering decline, it would be wrong to suggest that economic crisis was at hand almost before the 1860s were over: it is only with the benefit of hindsight that one can point to the mid-century decades as the zenith of Britain’s relative position in the world economy.
