Capitalism, Culture and Decline in Britain 1750-1990 
by W.D. Rubinstein.
Routledge, 182 pp., £25, April 1993, 0 415 03718 2
Show More
British Multinational Banking 
by Geoffrey Jones.
Oxford, 511 pp., £48, March 1993, 0 19 820273 3
Show More
Going for Broke: How Banking Mismanagement in the Eighties Lost Thousands of Billions of Pounds 
by Russell Taylor.
Simon and Schuster, 384 pp., £17.50, April 1993, 0 671 71128 8
Show More
Show More

Britain emerged from the war still unquestionably a great power, its Prime Ministers Churchill and Attlee considered the equals in negotiations for the post-war settlement, of America’s Presidents Roosevelt and Truman and Soviet dictator Stalin at the Yalta and Potsdam Conferences of 1945.

By any rational and objective criteria ... Britain’s economy has never performed more strongly in its history than during the past twenty years.

Britain’s residual links in the former Empire and the Middle East unquestionably stood it in good stead, as did the reputation of the City for total probity and of British bankers for traditional honesty and gentlemanly behaviour.

Another ... very distinctive feature in British habits of thought is the attempt to be comprehensively accurate and even-handed in assessing the world. British commentary on events is notably marked by its great fairness and pains to achieve great accuracy ... The Times – long the world’s newspaper of record.

Those cheering sentiments would have raised few eyebrows in the immediate post-war years. Up to the Suez fiasco they were to a large extent the conventional wisdom. Since then, however, most comment on ‘the state of Britain’ question has been so derogatory that today they seem decidedly quaint. One might guess them to be the outpourings of some slightly deranged politician of the Far Right ranting against Maastricht or dismiss them as the post-prandial ruminations of the sort of men who select the English cricket team or oversee the starting arrangements for the Grand National.

In fact, they were written by W.D. Rubinstein, who is no Blimp and is far from deranged. He is an American who is currently a professor at an Australian university. He was once the research associate of Professor Harold Perkin, and has himself produced well-researched and well-received books and articles. As one would expect, Capitalism, Culture and Decline in Britain 1750-1990 is well-written, is vigorously but courteously argued, and contains an abundance of interesting information.

The aim of his book, Rubinstein tells us, ‘is to analyse and dispute a widely-held theory of Britain’s economic decline and to put forward an alternative view’. The theory he wishes to explode is the so-called ‘cultural critique’ which attributes Britain’s economic decline to an ‘anti-industrial culture’ that was allegedly inculcated by the English public schools in the Victorian and succeeding ages. This anti-industrial culture, so the cultural critique runs, turned people who would otherwise have become thrusting industrialists and innovative businessmen away from industry and commerce, and encouraged them to look instead to the land, the Empire, the Civil Service or the professions. As a result there was a haemorrhage of talent from industry, the English entrepreneurial spirit was stifled and Britain’s economic growth was stunted.

Rubinstein lists the main planks of the ‘cultural critique’: Britain was the earliest country to industrialise and was a primarily industrial and manufacturing economy; the main feature of her economic history since 1850 has been decline; indeed, she has experienced relative economic decline for more than a century and especially since the last war; the most important reason for this decline is an anti-industrial and anti-business culture; in consequence, British society is rooted in the past and cannot come to grips with the modern world. In Rubinstein’s belief all these contentions are wrong – ‘and not merely wrong, but arguably the very opposite of the truth’.

Rubinstein’s revisionist thesis is that

Britain’s was never fundamentally an industrial and manufacturing economy; rather, it was always, even at the height of the industrial revolution, essentially a commercial, financial and service-based economy whose comparative advantage always lay with commerce and finance. Britain’s apparent industrial decline was simply a working out of this process, a working out which became increasingly evident from about 1890, and which was, manifestly, coincidental with a continuing rise in the average standard of living in Britain rather than with a decline.

Hence, in Rubinstein’s view, the relative decline of British industry does not imply a decline in the overall performance of the British economy. The cultural critique is not merely misconceived: it seeks to explain something that never took place. If the book’s central thrust is correct – if, that is to say, Britain was never primarily an industrial country, and its economy has not declined since the 19th century – then, as Rubinstein claims, ‘it is no exaggeration to suggest that the whole evolution of modern Britain will appear significantly different.’

Prior to the later 18th century Rubinstein’s argument causes no difficulty. Britain was predominantly an agricultural and financial/commercial country. Bishop Berkeley wondered in 1735 whether ‘credit be not the principal advantage that England hath over France ... [and] over every other country in Europe’.* The years of the French Revolutionary and Napoleonic Wars present a little more of a problem. Britain was certainly the banker of the various coalitions, heavily subsidising the armies of her allies. Yet between 1788 and 1811 British pig-iron production multiplied by five. By the latter year more than 30 per cent of the British labour force was employed in manufacturing, mining and industry, and Britain’s industrial strength was a vital element in the alliance. Napoleon himself would probably have agreed with Rubinstein – he famously derided us as a nation of shopkeepers. Had he been right, he would probably have escaped defeat.

All the same it is on the next hundred years that Rubinstein’s argument stands or falls. He himself has no doubts: Britain was and continued to be a nation of shopkeepers. Britain’s economy, he writes, ‘was always, even during the period 1815-70, primarily a commercial/financial-oriented economy whose comparative advantage always lay in these areas and did so increasingly after 1870’.

Although Rubinstein does not claim that the Industrial Revolution is a myth and spares us the pedantry of suggesting that the concept is a misnomer, he does not himself much use the term, and those historians who have attempted to downgrade the importance of industrialisation in Britain and to stress the slowness of its growth gain his approval. Not surprisingly perhaps. The best way, after all, of denying a decline is to minimise the original rise. Yet, as Professor Patrick O’Brien points out in one of the essays in a very valuable collection, the rate of industrialisation in Britain was ‘unprecedented’ and was perceived as ‘rapid and astonishing particularly [by] observers from the mainland of Europe’. He concludes that ‘the evidence that we now have that something profound happened in Britain between circa 1750 and circa 1825 surely overwhelms the disparagement that attends attempts to dim its colours and place it in one of history’s minor galleries.’

Between 1760 and 1840 the percentage of those working in agriculture and manufacturing respectively halved and doubled. By 1861 nearly 44 per cent of the labour force was employed in manufacturing, mining, industry, and by 1873 more than one-third was employed in manufacturing alone. In 1880 Britain’s share of world manufacturing output was almost as high as those of the United States and Germany combined. Ten years later her energy consumption equalled the combined total of Germany, France, Austria-Hungary, Russia, Japan and Italy. All this does not look like just shopkeeping.

Of course London was the world’s financial capital. In 1833 Nathan Rothschild told a Committee on the Bank of England Charter that England was ‘the place of settlement for the whole world’; by the end of the century sterling financed two-thirds of world trade. And Britain was also the world’s greatest trading nation – largely because British goods accounted for a remarkable share of that trade. Britain, in the phrase of the time, was the workshop of the world. In 1880, it has been estimated, she was – proportionate to population – twice as industrialised as the United States and three times as industrialised as France or Germany; as late as 1938 she was still the second most industrialised country in the world. If the British economy was not fundamentally an industrial one it looks as though no such economy has ever existed. Certainly when, in the 19th century, other European countries set about catching Britain up they aimed to emulate her in industry not finance.

On the face of it, therefore, Professor Rubinstein needs strong evidence to deny that Britain’s was ‘the first industrial economy’ (Peter Mathias) or that there was a ‘transformation of the British economy to an industry state’ (Phyllis Deane). The evidence he relies on comes from income-tax returns: ‘The totals for London and the Home Counties may be taken as convenient shorthand or metaphors for commercial and financial-based incomes generated by the British middle classes, while the totals for Lancashire and Yorkshire may be taken as their equivalent for industrial and manufacturing incomes.’

Rubinstein’s indefatigable researches have established that in the Napoleonic period the income generated by the middle classes based in London totalled nearly 50 per cent of the national middle-class income. After a decline in the early Victorian age he finds that this percentage rose again in the later Victorian and Edwardian ages and in 1914 was virtually as high as it had been at the time of Waterloo. In contrast the share of Lancashire and Yorkshire rose from just under 10 per cent of the national total in 1812-13 to just over 22 per cent in 1865-6 and then declined to about 19 per cent before the First World War.

Professor Rubinstein concedes that London contained significant manufacturing industries. But that considerably understates its position. In the early 19th century London was the most important engineering centre in Britain and was easily the biggest centre of manufacturing in the whole country. Moreover, people do not necessarily pay taxes where their money is earned, and much of the tax paid in London may have been on income generated elsewhere.

So Rubinstein’s ‘shorthands or metaphors’ may be inaccurate transcripts of what happened; but even if his figures are taken at face value what do they prove? The overwhelming dominance of London in politics, the professions and the economy? There was nothing new about that. That middle-class people preferred to live in London rather than in the North? That, too, is not startling. That they preferred to earn their living in the professions or in banking rather than in industry? That would, paradoxically, lend some credence to the cultural critique that Rubinstein is concerned to demolish. That bankers and other employers in the financial services paid themselves and some of their staff more than industrial employers elsewhere? That, too, is a familiar phenomenon. Had the United States had an income tax in the late 19th century – it was not introduced until 1913 – the percentage paid in New York might well have eclipsed the percentage paid in Pittsburgh, Detroit and other centres of industry.

In any case Rubinstein’s evidence, though interesting in itself, seems fairly trivial when set against the other features of the British economy in the 19th century (which are largely ignored in this book), in particular its palpable industrial strength. In denying that Britain’s was ever ‘fundamentally’ an industrial and manufacturing economy and claiming that it was always ‘essentially’ a commercial, financial and service-based one, Rubinstein never makes clear exactly what he means by ‘fundamentally’ and ‘essentially’. As well as being, to my mind, factually wrong, his contention is based on a greatly exaggerated dichotomy between industry, on the one hand, and finance and commerce, on the other. As Geoffrey Jones points out in his clear, sober and authoritative history of British multinational banking, the strength of those banks in the 19th century rested on British economic and political pre-eminence. Their core market was British business, whose requirements they serviced. Those who worked in finance and commerce were not operating in a vacuum, they were operating under conditions of British industrial supremacy. And when, pace Professor Rubinstein, the British economy began to decline, so did the banks. ‘The growth of American and, later, Japanese multinational banking,’ writes Professor Jones, ‘reflected the size of their economies, their relative importance in the world economy, and the strength of their currencies. The competitive advantages of British multinational banks in the 19th century,’ Jones continues, ‘had similarly rested on the importance of their home economy’, whereas the growing weakness of the British economy in the 20th century reduced the demand for their services. Russell Taylor forcibly makes the same point.

Professor Rubinstein’s argument is nearly always serious and absorbing and based on detailed and original research, but occasionally he falls well below his usual level. Thus, in an attempt to show that good prose-writing in the last hundred and fifty years has been moving in the direction of greater clarity, cogency and simplicity, he compares a passage from Our Mutual Friend, in which Dickens gives an amusing description of the Veneering family, Mr Podsnap and others in the Veneering dining room, with an account of a bad railway collision at Harrow in l952 and finds the 20th-century passage more cogent, lucid and precise. He might have added that it was more factual. One’s confidence in Rubinstein’s literary judgment is not enhanced by his remark that Dickens’s style was ‘not that dissimilar to Carlyle’s’.

Again, and more central to his main case, he says that ‘it is difficult to believe that there is not some underlying sexual undertone to the widespread preference for manufacturing rather than the services, manufacturing industry being virile and related inter alia to military prowess, the services being seen as effete and non-productive, although they generate far more revenue.’ Like most old-fashioned people, probably, I find it quite easy not to believe in any such sub-Freudianisms. I even have some trouble with Ludovic Kennedy’s theory that Christie, the multiple sex-killer, was influenced by the phallic factory chimneys opposite his childhood bedroom in Halifax and then adjacent to 10 Rillington Place, where he murdered and buried his victims. But the professor would surely acknowledge Christie to have been a rather special case.

In his aversion to manufacturing industry, Rubinstein seems to be echoing official propaganda of the Eighties, when the damage the Government had done to manufacturing led it to extol the importance of the service industries. There are indications too, perhaps, that this book was influenced by what some of the credulous thought to be an economic miracle in that decade. If so, Professor Rubinstein has had the time to make most of the necessary corrections, now that the faithful have been disappointed and the miracle, like most miracles, has turned to dust.

Whatever the reason, Rubinstein seems unable to grasp the importance of manufacturing to the British economy, either in the past or in the present and future. That importance lies not in the employment that manufacturing provides but in its capacity for expanding output. Over 70 per cent of world trade is in manufacturing. If a developed country can not compete in that field, it is plainly in dire trouble. At the end of the war, after noting the importance of manufacturing for Britain’s ability to pay her way, Keynes regretted ‘the celebrated inefficiency of British manufacturers’: the only hope, he thought, was for ‘the American Air Force (it is now too late to hope for much from the enemy) by some sad geographic slip 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)’.

Keynes’s foresight was better informed than Rubinstein’s hindsight. According to Jones, manufactured goods amounted to only 20 per cent of imports in 1951. Thirty years later, that figure was over 60 per cent, and in 1983 Britain had her first ever manufacturing deficit. Even at the bottom of the current slump we have an enormous deficit on our balance of payments. Our manufacturing decline is a heavy shackle on growth, yet the phrase ‘balance of payments’ does not, I think, appear in Rubinstein’s book.

Rubinstein’s main argument is based on two very faulty assumptions. The first – that Britain’s economy was never ‘fundamentally’ industrial – has already been discussed. The second is that the British are particularly good at services. This second assumption, at least so far as banking is concerned, would scarcely survive a reading of Professor Jones’s excellent history; it would probably be killed stone dead by even a cursory glance at Russell Taylor’s Going for Broke, which is subtitled ‘How Banking Mismanagement in the Eighties Lost Thousands of Billions of Pounds’. Going for Broke occasionally exasperates because of its lack of organisation – fragments of autobiography are chaotically interspersed with chunks of banking history, amusing snippets of banking lore, and an account of recent banking misdeeds – but it is always lively, and Taylor has a good tale to tell. Naturally he is scathing about the British (and foreign) banks’ lavishing of money on Robert Maxwell twenty years after the Board of Trade had stigmatised him as unfit to run a public company; hundreds of non-bankers could have told them he was a crook. But Taylor’s book makes clear that this sort of misjudgment is what one should expect from the banking fraternity. The only consolation that Rubinstein or anybody else could get from Taylor is that British banks were exceeded in greed and incompetence by their American counterparts. Similarly, an account of Lloyds and the British insurance industry during the last few years would be unlikely to lend much succour to Rubinstein’s case.

He adduces Britain’s high incidence of home ownership and her high and rising standard of living since the 19th century, and particularly since 1960, as proof that the British economy has not declined. But while it is socially very valuable that so many people here own their own houses – a far higher proportion than in Germany or the United States – the diversion of so much capital into housing when it might have been much more productively employed in industry is less a sign of economic success than a possible cause of economic failure. As to rising living standards, nobody has ever suggested that the economic decline of Britain has been absolute; it has been relative to what has happened in comparable countries. It would be highly surprising if the standard of living had not improved. Professor Rubinstein has forgotten Harold Perkin’s remark about the ‘double helix of economic decline and rising prosperity’. The two things are far from incompatible. This is why, while our standard of living has risen, Britain, which used to be the richest country in Europe, now ranks 14th.

Rubinstein is aware of this difficulty and attempts to meet it by claiming that the figures are wrong and, in any case, ‘largely irrelevant to accurate analysis of a country’s economic state of health’. He may have part of a point there: often the situation does not seem quite so bad as the statistics indicate, though that may be the result of Perkin’s double helix. However, he then ruins his case by saving that living standards are at least as high here anywhere else. Either Rubinstein has not left Australia lately or his eyes are even less trust-worthy than the statistics.

Although Rubinstein does not succeed in altering our view of ‘the whole evolution of modern Britain’ by substituting success for decline, the failure of his main onslaught on the cultural critique makes the rest of his attack on it more, not less, interesting: the fact of decline that there still is something requiring explanation. One defect of the cultural critique is that it confined the gentrification of industrialists and entrepreneurs in both time and space. Thus its leading exponent, Martin Wiener, in his English Culture and the Decline of the Industrial Spirit 1850-1980, quotes Cobden’s dismay in 1863: ‘we have the spirit of feudalism rife and rampant in the midst of the antagonistic development of the age of Watt, Arkwright and Stephenson! Nay, feudalism is everyday more and more in the ascendant in political and social life.’ Wiener comments that ‘as capitalists became landed gentlemen, JPs and men of breeding, the radical ideal of active capital was submerged in the conservative ideal of passive property, and the urge to enterprise faded beneath the preference for stability.’

In fact, the ideal of ‘active capital’ and of ‘passive property’ have often gone together. Not his sons or his grandsons but the great cotton spinner, Richard Arkwright himself, dabbled in what Cobden called ‘feudalism’. In 1811, he bought a landed estate for the then vast sum of £240,000, the equivalent of 60 per cent of the annual fixed investment in the entire cotton industry at the time. Such entrepreneurial and industrial hankering after ‘feudalism’ has never been confined to England. It was present in France and Germany, and in the United States Commodore Vanderbilt, a hyperactive follower of the ideal of active capital, built himself an enormous château and his granddaughter married into the Churchill family, while two Astors became peers.

Professor Rubinstein has far more detailed and effective criticisms of the cultural critique. Far from being anti-entrepreneurial, Britain’s intellectuals were less alienated than their Continental fellows, and her high culture was less hostile to business life than that of any other country. (The fact that it was not pro-industrial would not worry Rubinstein.) Much the same is true of politicians. Except in the early Thirties and the early Eighties, at both of which times it was impotent, the Labour Party has never been seriously socialist, and apart from imposing high taxation it has done little to impede British business.

As Rubinstein points out, Britain has produced far more than its share of eminent scientists. British education, therefore, can not have been wholly inimical to science. In defending the public schools against the ‘cultural critique’ Rubinstein is at his best. He shows that they could not have had the damaging effect on the entrepreneurial spirit that Wiener and others have alleged since not enough middle-class boys went to them. Certainly, too few sons of businessmen attended to make any real difference, and most of those who did followed their fathers’ careers.

Yet Rubinstein may have taken his exoneration of the public schools a little too far. Churchill’s scientific guru, Professor Lindeman, would certainly have thought so. ‘For some obscure reason it is considered in many intellectual circles,’ he said in 1954, ‘that technological competence is not really on a par socially or intellectually with a knowledge of the older subjects ... Arts men, whose knowledge of the rudiments of technology is not even up to the standard of 1066 and All That ... seem to consider it quite natural and normal not to know how soda is made or how electricity is produced provided they learned something – which they have usually forgotten – about the mistresses of Charles II or the divagations of Alcibiades.’

With Rubinstein having inflicted severe damage on the cultural critique but having left hardly a scratch on the orthodoxy of Britain’s economic decline, we are left without any explanation – or rather explanations – of that decline. Two partial ones may be briefly offered. Almost certainly Britain relied too much on the entrepreneurial spirit. Rubinstein stresses that it was rational for people to go into finance or commerce, for it was there that comparative advantage lay. In his classical scheme of things, if everyone pursues his or her self-interest, we end up with the best possible outcome. For those not blessed with that simple faith, what was rational for the individual was not necessarily rational or best for the country. Britain suffered from too much reliance on laissez-faire.

The second explanation would be equally an anathema to Rubinstein. Churchill himself outlined it in 1954. ‘We have suffered in Great Britain,’ he said at MIT,

by the lack of colleges of university rank in which engineering and allied subjects are taught. Industrial production depends on technology, and it is because the Americans, like the pre-war Germans, have realised this and created institutions for the advanced training of large numbers of high-grade engineers to translate the advances of pure science into industrial technique, it is for that reason that their output per head and consequent standard of life are so high. It is surprising that England, which was the first country to be industrialised, has nothing of comparable stature.

Maybe Churchill, like Keynes, was a better guide to the future than Professor Rubinstein is to the past.

Send Letters To:

The Editor
London Review of Books,
28 Little Russell Street
London, WC1A 2HN

letters@lrb.co.uk

Please include name, address, and a telephone number.

Read anywhere with the London Review of Books app, available now from the App Store for Apple devices, Google Play for Android devices and Amazon for your Kindle Fire.

Sign up to our newsletter

For highlights from the latest issue, our archive and the blog, as well as news, events and exclusive promotions.

Newsletter Preferences