edgerton

19

A Nation Lost

… when American and Japanese companies invest in Europe, we are their first choice. Britain no longer has an overmanned, inefficient, backward manufacturing sector, but modern, dynamic industries.
Margaret Thatcher’s last House of Commons contribution as prime minister, 19901
Free trade is the greatest force for prosperity and peaceful cooperation … I would like to see the European Community – embracing … the former Communist countries to its East – agree to develop an Atlantic free trade area with the United States.
Margaret Thatcher, speech at The Hague, 19922
While UK Ltd had certainly existed, UK plc very quickly did not. As a phrase, ‘UK plc’ suggested a tough-minded approach to the nation, a nation competing economically with other nations. Its duty was to export, its beating heart was manufacturing industry. However, the idea of a national economy, the economic nation, became ever less important from the late 1980s. A new kind of economy emerged in which there was no longer any concern for national champions, for the ownership even of firms operating within the UK, or the balance of payments. From the 1990s talk of any problem in productivity had become much more muted, though some, such as the future Labour chancellor Gordon Brown, saw low productivity as a continuing British problem.
In one sense there was a return to the cosmopolitanism and free trade of the Edwardian years. But there was a profound difference. At the beginning of the century a small measure of democracy, strong national sovereignty and integration into the world market could be combined in the British case at least. In 1914 British capital owned the infrastructure, the banks, the ships, the communications of half the world; it was flush with the incomes of these investments. But in 2000 London was not a centre for the export of capital, but a tax haven attracting it. The United Kingdom was, to an extent not known before, owned by foreigners – the big City institutions, the service companies, the infrastructure operators, the car makers, even the chocolate makers were now owned abroad. Global capitalism was unleashed into the United Kingdom, but British capitalism itself suffered. What had been unleashed was not British entrepreneurial genius, but that of foreigners. What Mrs Thatcher and above all her successors did was to change the country and the economy, but not its relative economic standing in the world. Now the question arose for the United Kingdom as for any other nation – was it possible to combine democracy, national sovereignty and integration into the new world economy?3

Figure 19.1: Percentage of UK stock market owned by foreign capital, by value, 1963–2000
Source: ONS, Ownership of UK Quoted Shares: 2010 (ONS, 2012), figure 3.

Figure 19.2: Real GDP, logged, 1948–99 (£ billion)
Source: ONS, Long-term profile of Gross Domestic Product (GDP) in the UK, release August 2013.
Of all this, politics could take only passing cognisance, by invoking clichéd terms such as ‘globalization’ and ‘neo-liberalism’. The terms ‘entrepreneurship’ and ‘innovation’ were bandied around, implying a transformation in the supply side of the British economy. The economy was now ‘post-industrial’, a creative or ‘knowledge’ economy. Thus a powerful contrast was implied between the post-war settlement, social democracy, consensus, Keynesianism, welfarism and the new neo-liberalism. But what had changed the most was not the capacity of the state to manage the economy or the welfare budget, which grew, but all the things that welfare and Keynesian analysis, or monetarism, did not deign to discuss – the instruments of industrial policy, trade, trade union legislation, taxation and much else. Nor did ‘neo-liberalism’ as a notion speak to the realities of a transformed economy. It sometimes meant little more than the free market, at others (rather oddly) a rationalizing, technocratic state.4 What had changed above all assumptions about the nature of a national economy, the nationality of capital and indeed even of machines.
A NEW BRITISH CAPITALISM?
The late 1980s, and especially the 1990s, saw a change in elite self-understanding. For many, Thatcher had saved the country, reversed the decline, made Britain great again. This revivalism was as unfounded as the declinism of earlier years. There might have been a minor temporary small change in relative performance with respect to the richer parts of Europe, but the relative decline with respect to the rest of the world continued. The rate of growth of the economy was not greatly changed by the liberalization and globalization since the 1980s. To be sure, from the depths of the early 1980s, the rate of growth was slightly higher than the post-war average, but never enough to make up for the effect of the depression. Growth from the late 1980s was at a lower rate than that in the long boom of the 1950s and 1960s (See figure 19.2). To put it another way, the average rate of growth of the economy was higher and steadier in the years 1948–79 than between 1979 and 2000. Looking at the United Kingdom comparatively shows that in 2000 it still lagged behind the European leaders in labour productivity. Compared to France and Germany, GDP per hour worked was in these countries 20 per cent higher in 2000 than in the UK.5 If the problem the United Kingdom had was poor growth, and low labour productivity, the changes of the 1980s and 1990s did little to change this.
If the problem to be solved was a weakness in the balance of payments, as many had suggested in the 1970s and before, the record since 1979 was catastrophic. Before the 1970s the British economy was in fact generally in surplus on the current account, while in the last decades of the twentieth century it was generally in deep deficit. In particular, to take the net figures, the United Kingdom went, from the early 1980s, into a permanent and very large trade deficit in manufactures. None of this was a matter of concern; in itself it was a marker of a change in economic thinking and practice. In nationalist political economy the balance of payments was talked of as if it were a national profit and loss account. In the new internationalist political economy, it was merely a record of the net flow of one kind of money, necessarily balanced by inward flows in the capital account.
Finally, if the problem was unemployment – ‘Labour isn’t working’ was the nice, ambiguous slogan the Conservatives used on a 1978 poster – the record was disastrous. Not only did it climb to nearly 4 million, it did not return to 1970s levels until the twenty-first century. Unemployment was one cause of a heroin and crack cocaine use explosion from the 1980s onwards – heroin and cocaine had been in much more limited use in the 1960s and 1970s, concentrated among students. Unemployment, and the new hard drug epidemic among the young unemployed, among other factors, drove a relentless increase in crime, which peaked in the early 1990s.6 Drugs and criminality were very much more significant in the late 1980s and 1990s than during the supposedly lax and permissive 1960s and 1970s. The prison population surged by more than 20 per cent from the early 1990s to 2000 – ‘prison works’ was the policy. By the end of the century there were roughly half as many prisoners as there were hospital beds.
One unexpected development was a remarkable expansion in financial services which radically changed the nature of the elite, and of the capital city. It was the product of the liberalization of many activities especially in and around the London Stock Exchange. Stock Exchange membership had been limited to UK firms, which were restricted to particular activities, and charged cartelized prices. In 1983 the decision was taken to introduce a wholly new regime all at once in 1986 – hence the name, ‘Big Bang’. In this case deregulation, unlike in most other cases, really did lead to new business on a huge scale, to huge increases in employment as well. There was a much larger change in the City, which grew as a centre for the trading of offshore dollars and other financial transactions on a global scale. The City sold itself as an exporter of ‘financial services’.7 But it was not British-owned businesses which prospered, but giant foreign banks which moved in, taking over small enterprises, and transforming the culture of the City from a leisurely, gentlemanly one to something distinctively meritocratic and money-driven and American. It operated within the EEC, as well as within a wider global economy. The power of the City was not a left-over, but something new and not particularly British.
The Big Bang, and other developments, transformed London. The City rebuilt the city. It had been a city in decline: its population had been falling since the war, reaching a trough in 1981. Its expansion as a financial centre was a key factor in driving up population, and indeed diversifying it. The financial sector spread from the City eastwards, into those parts of London which had been the home to the docks. The London that had traded things became the London that traded money. Trading in money yielded huge salaries for a few. At the very top end of the City, young men (typically) could earn not simply a lot more than their fathers, but could imagine earning in a year what their fathers earned in a lifetime as, say, a bank manager.
One important change not noticed was the displacement of national elites, old and new, by a new cosmopolitan elite. In the first Sunday Times Rich List, that of 1989, its publication in itself a notable indicator of a change in the treatment of wealth in the public sphere, the richest were British. In the top ten, the British rich with interests primarily in the United Kingdom were the queen, the duke of Westminster, the Sainsbury family, Sir John Moores, the Vestey family and Sir James Goldsmith. Two others, including Garfield Weston of Associated British Foods, were rich through British interests. A decade later most of these were still in the top twenty. But of that top twenty fewer than half were British with mainly British interests, of which only one was a manufacturer, Sir Anthony Bamford of JCB. The United Kingdom was now the residence of rich people from around the world, with interests largely outside the United Kingdom, for example, the steel magnate Lakshmi Mittal, who did not own British steel mills. It was far removed from the kind of capital the Thatcherites dreamed of – a dynamic British capitalism, perhaps even manufacturing capital.
We can get a sense of the profound changes in the direction of capital by returning to the London Stock Exchange. This market in shares boomed through the 1980s, and especially the late 1990s. The FTSE 100 index, created in 1984, and accounting for the bulk of the stock market by value, surged to a peak in December 1999. It did this because investors had come to believe in what was called the New Economy. Extraordinary price-earnings ratios resulted as investors piled into enterprises which ultimately found the laws of economic gravity all too real. The bubble burst, and the FTSE 100 did not reach these unsupported heights again for more than a decade.
Over that time the composition of the index changed. In 1984 the largest firms by capitalization on the London Stock Exchange included a number of manufacturing companies, most of whose workers were in the United Kingdom. Some, such as Imperial Chemical Industries, once without doubt British, now had half their employees abroad, some, such as BAT, a much higher proportion. But most of the others were more British than multinational in their workforces, notably GEC, an enterprise employing more than 130,000 in the UK, by far the largest manufacturer in the UK.
In 2000 the composition of the index was very different. Firstly, most of the large firms in the FTSE 100 were much less representative of economic activity within the United Kingdom. Most of the top manufacturing firms in the FTSE 100 had more employees abroad than in the United Kingdom. This was almost certainly true of the large pharmaceutical companies with headquarters in the UK like Astra-Zeneca and GlaxoSmithKline. Large overseas employment was also typical of the oil companies, some of the main banks (HSBC and Barclays), service companies such as Compass, and Serco, and even supermarkets such as Tesco. Even a company such as Rolls-Royce had perhaps a third of its employees overseas; the arms firms BAE, inheritor of the airframe and military electronics industries, had more than half its employees overseas. The national firms were things like Sainsbury, Lloyds Bank, Marks and Spencer.8
A second critical point is that the London Stock Exchange was a place where the global elite invested, not just the British elite. By the end of the twentieth century nearly 40 per cent was owned by overseas owners (see figure 19.1). Remarkably, for all the rhetorical ambition under Thatcher to create a share-owning democracy, the proportion of shares held by individuals was lower in 1989 than in 1975 and would fall even lower, down from 38 per cent in 1975 to 16 per cent in 2000.9 The controllers of British capitalism were no longer necessarily in the City of London, and if they were, they were no longer necessarily British.
A third – and this was perhaps the most critical and least understood point – was that very many of the large employers in the United Kingdom were no longer in the FTSE 100. They were often listed on foreign stock exchanges, or not listed at all. The FTSE cannot include the US and European and other investment banks in London, the foreign owners of energy infrastructure, the owners of the motor car industry and much else besides, which as we shall see came to hold a new and vitally important place in the British economy.
One should not assume that British capitalism became more successful at the global level, whatever its fate at home. Of the top fifty global companies by revenue in the recent past, only one and a half were British: the Anglo-Dutch Royal Dutch Shell and BP, both very old oil companies. In a listing by market capitalization these would also be in the top fifty with at other recent times perhaps Vodafone or HSBC. In short, the United Kingdom no longer stood out as the headquarters of more large global enterprises by size than, say, France or Germany. Internationally it is where one would expect a country of its size and wealth to be. Nationally, however, it was not. In no other major capitalist economy was there no approximation to a national major car firm, chemical firm, electrical engineering or electronic firm operating on its territory. Nor did it have any large ‘technology’ companies like Facebook or Google. Whatever it did, the programme of Thatcher, Major and Blair did not revive a decaying British national capitalism, but rather brought the benefits of international capitalism to the United Kingdom.
The opening up and expansion of the EEC was of fundamental importance. The United Kingdom joined the six, with Ireland and Denmark, in 1973. But the European Union, as the new body was called following the Treaty on European Union (the Maastricht Treaty of 1992), was very much larger than the EEC the United Kingdom joined. Greece (1981), Spain, Portugal (1986), Sweden, Finland and Austria (1992) had joined, as well as the former GDR (1990). The 1986 Single European Act, strongly supported by the Conservative government, aimed to remove all sorts of non-tariff barriers within the expanding Community, changes which came into full effect in 1992. These were transformative developments leading to a radical liberalization of European trade, in the context of more liberalized global trade. From 1992, trade within the European Union was as free as it was previously within national economies. Technical norms, specifications and all the hidden apparatus of trade and regulation were the province of the EU, an instance of a politically rather invisible change with major administrative and economic consequences. The white dominions, once so central to British trade, were now minor trading partners, but Canada, Australia and New Zealand now had a combined population comparable to that of the United Kingdom. Indeed, in terms of global heft we would do well to think of the United Kingdom at the end of the twentieth century as a large Canada rather than, say, a small United States of America.
THE NEW ECONOMY
This opening of markets was of significance in ways that grew less visible as it became the norm. For example, it would have been unthinkable in the 1950s and 1960s to have our telephones or cars or computers made abroad or by foreign companies. Now it was unthinkable to deprive the British consumer of such devices. There was a great internationalization of British life, well expressed in the case of elite football. In the 1980s it was rare but not unknown to have foreign-born players, for example the Argentine Ossie Ardiles. In the early 1990s, around 70 per cent of top English league players were English. However, by 2000 the proportion was down to fewer than half.10 Boxing Day 1999 saw Chelsea start a premier league match with an entirely foreign XI on the pitch. Among the greats of the 1990s were the Frenchmen Eric Cantona and Thierry Henry. Furthermore, the United Kingdom, once an exporter of football managers, started importing them towards the end of the 1990s, especially to the biggest teams – notably Arsène Wenger at Arsenal and Ruud Gullit and Gianluca Vialli, both player-managers at Chelsea.
Trade was no longer a matter of importing food and raw materials and exporting manufactures. It was a swirl across political (rather than economic) boundaries of everything from food to manufactures. Indeed, such was the movement of components that to speak of the nationality of a motor car made little sense. A vast service industry grew up importing, storing, distributing and retailing manufactures from abroad. The jobs they provided in, say, a warehouse, or driving a lorry, were less skilled than the average of the older manufacturing jobs and were highly routinized. The new and expanding retailers were now the largest employers of labour, not the old manufacturing firms. The retailers, and their warehouses, were, with the partial exception of food stores, emporia of foreign manufactures.

Figure 19.3: United Kingdom estimated gross value added by sector at constant prices, 1948–2000 (£m)
Source: Estimated from ONS, UK GDP(O) low level aggregates (Q2 1916 edition). Industry classification SIC2003.
In this new world, importing ports were now central once more, but this time were an invisible feature of the British economy. New importing ports for manufactures were built, such as Thames Port and Sheerness, sometimes on the sites of older industrial enterprises like oil refineries, which imported raw materials. A whole new method of importing came into being with the creation of the Channel Tunnel. This long-discussed venture came of age in the late 1980s. It was ‘high time we became involved in an industrial enterprise of this scale’ was the sentiment expressed about the Channel Tunnel by Mrs Thatcher in 1984, as long as it was privately funded. She herself was keen on a road tunnel, but it was not to be.11 Instead it was a railway tunnel, which took passenger trains, freight trains and, by special train, freight lorries too. Opened in 1994 it in effect became a major new port, handling nearly 20 million tonnes by 2000. From the point of view of the private investors the Tunnel was a costly failure. The private sector could also produce white elephants but at least this one was useable. Airports, too, became enormous places moving millions of people and increasingly goods too. By the end of the twentieth century more people were employed, about three times as many indeed, within the perimeter of Heathrow airport as had been employed within the port of London at its peak.
Another rapidly expanding sector also dealing with things was the many-faceted food supply system. By 2000 the streets of British cities had been transformed by the appearance of astonishing numbers of places to drink and eat. The selling of food – standardized branded food, though some prepared within the shops – took off, replacing all manner of older businesses. Labour intensive, profitable and expensive compared to home preparation but cheaper than formal restaurants and cafés, coffee and sandwich shops were now everywhere. Catering businesses (canteens, restaurants, coffee shops, etc.) were now employing more than food and drink retailers, each more than 1 million.12 The United Kingdom had become a land of servers, waiters and cooks, not of shopkeepers but of shop-workers.
Then there were the service industries as they are more usually thought of – the retail banks, the estate agencies, the call centres. By 2000 armies of proletarianized office workers and call-centre operatives were making a mockery of the earlier notion that white-collar work was superior in status to a manual manufacturing job. Finally, there were the public sector and publicly financed service jobs. They were far more important than a politically driven picture of the recent past would suggest. The welfare state continued to grow, and the United Kingdom was far more of a welfare state in 2000 than in 1990 or 1980.13 In both absolute and relative terms such spending was higher at the end of the twentieth century (and higher still in 2018), than it had ever been. British state expenditure has never been as welfare oriented as in 2000 (or 2018).14 Increasing welfare expenditures by the state were a significant aspect of the rise of the ‘service economy’. Benefits represented 10 per cent of GDP and health 5 per cent in 2000. State education, too, was an expanding industry. Indeed, we may reflect backwards even further – not only was welfare spending higher than at any other period at the end of the twentieth century, it was also higher with respect to other forms of state expenditure than ever before – especially defence expenditure and investment (see figure 18.1). The welfare state peaked at the moment it was supposed no longer to exist, and the moment at which it had been supposed to have existed turns out to be better described as a warfare-developmental state.
The economy continued to grow from the 1970s, if not at such a sustained pace as before. Between 1975 and 2000 total income nearly doubled. Society was affluent as never before, more devoted to consumption than ever. Superior goods, often more expensive ones, drove out inferior ones. Holidays overseas replaced a week in Blackpool or Skegness. The pet budgerigar, a little parrot from Australia, was on its way out. 3.3 million were kept as pets in 1965, and only 1 million in 2000 and falling. By contrast, the more expensive dogs increased from 4.7 million to 6.1 million and cats were overtaking, growing from 4.1 million to 8 million, between the same dates.15 On average life became very much fuller of things. The quality of food and services generally increased.
While seen from the perspective of the economic nationalist much of the discussion above would have a critical tenor, from the internationalist perspective it is a story of progress, of equalization across now disappearing economic boundaries. It was surely a good thing that efficient foreign enterprises drove out poor British ones. Didn’t the quality of football improve? What did the nationality of capital matter to workers, a left internationalist would say. British people now had access on a routine basis to the goods of Europe and to a lesser extent the world, and more goods than ever before. That made the British economy, and society, much like that of the rest of Europe, in particular, in a way it had never been before. There were other benefits. The British people were free of the huge burdens of arms spending and of the techno-nationalist delusions that led to wasting resources, which could otherwise have provided prosaic pleasures for millions. Openness to the world, to other people as well as other things, brought many benefits, and much happiness. The new internationalized economy was overall more productive than the old national one. There were indeed good reasons to believe that things could only get better.
We need, partly to complete our story, partly to illustrate further how profound the changes had been, to return to the economic activities which were at the core of British life into the 1970s: energy, food and manufacturing. In each there was an extraordinary transformation.
ENERGY AND FOOD
Returning newly nationalized manufacturing companies to the private sector or selling shareholdings in oil companies was one thing. Selling utilities, most built up by the state and state agencies from even before the 1940s, was another thing altogether. Here matters of principle were more obviously important, and measures had to be taken to prevent abuse of monopoly power. Privatization in this sector also involved another element – that of direct sale to small investors, as an attempt to create what was called a ‘share-owning democracy’. It concerned essentially two privatizations only. The first was that of British Telecom, formerly part of the Post Office, which came at the end of 1984. Just over 50 per cent was sold, for £4 billion. This was followed by the massive £7 billion privatization of British Gas in 1986. The other utilities would not be privatized until the 1990s.16
That the opening up of markets and the ending of protections for British industries were central can be clearly seen in the case of energy supply. From a national perspective one might assume that the decline in British coal mining was due to a process of modernization by which coal was replaced by more modern fuels. But coal was not a fuel of the past. At a global level its use was increasing. In the United Kingdom usage was dropping slowly. In the new energy regime coal was far from redundant, but British coal and British miners were.
Coal remained essential to electricity supply. Apart from nuclear reactors ordered in the 1970s the only new capacity came from cheap and quickly built combined-cycle gas turbine power stations, powered by North Sea gas. All the rest of the electricity supply system in place in 2000 consisted of ‘legacy assets’; the focus was on ‘sweating inherited assets’, rather than creating new ones.17 At the core were the coal-powered stations of the 1960s and 1970s. From the early 1990s the consumption of coal in these power stations fell from a position close to the peak to, by 2000, the level of around 1960.
The second great change was that coal for these stations now came from abroad, though this was barely noticed. By 2001 more coal was imported (35½ million tonnes) than was produced (32 million tonnes); the level of home production was equivalent to that of the very early nineteenth century. Coal imports were at levels similar to the coal exports of the 1930s. So large were they that they increased the overall bulk of British imports to unprecedented levels.18 By 2000 Grimsby/Immingham overtook London as the busiest port by bulk, not least because of this. It had once been one of the great coal-exporting ports. Even in the 1970s British Steel and the National Coal Board had built a new export dock for coal and steel there alongside a major oil import centre for new refineries built nearby, and for iron ore. The same story was repeated elsewhere. Hunterston, built as an iron-ore-importing facility to supply the blast furnaces at Ravenscraig, became a coal-importing port, connected by rail to both Scottish and English power stations.
Mrs Thatcher, her government and the nationalized CEGB wanted to import coal from the 1980s, but it did not happen quickly. It was only in 1993, when coal contracts had to be renewed by a newly privatized electricity industry, that the prospect for British coal became catastrophic. In the face of political pressure (the defeated miners of 1993, and miners who had worked through the strike, had more sympathy than the striking miners of 1984–5 had), a partial reprieve was engineered by the government.19 But it was only temporary, and domestic coal production continued downwards. A barely existing coal mining industry was privatized in 1994, or rather the operation of remaining mines – the huge liabilities remained in the public sector. There were now only 7,000 miners, down from 50,000 or so in 1990, and a mere one-hundredth of the employment of around 1950.
Liberalization and internationalization of energy could have destroyed British national nuclear supply as well. However, government was more concerned to protect the nuclear reactors than the coal mines. In the late 1980s privatization plans for the CEGB included one company with the nuclear ‘fleet’ and another without. Since no one wanted the nuclear part, plans were changed, and the nuclear stations remained in state ownership. The efficiency of the AGRs improved radically, because the managers were now interested in doing this, as opposed to arguing for PWRs.20 British Energy, which had only AGRs and the one PWR, and promised to build no more, was privatized in 1996; the price achieved revealed that the AGRs were valued at zero.21 The market, not rational public or expert inquiry, stopped the nuclear juggernaut.22 The state was left with the retiring Magnox stations of the 1960s and their clean-up costs. Indeed, nuclear waste management was a case of a costly last gasp of techno-nationalist enthusiasm for nuclear. In 1978 parliament (with cross-party support) approved the construction of the THORP nuclear reprocessing plant at Windscale (following a large public inquiry) – the plant was not completed until 1994 and closed in the next century, having amassed huge losses.
The national technocrats who had once had so much power were destroyed by liberalization and privatization. A singular case was state nuclear physicist Walter Marshall. He was, unusually for a British nuclear baron, an advocate of the PWR and was appointed to run the CEGB by Margaret Thatcher, who also wanted many of these US-designed reactors. He was instrumental in getting the CEGB ready for the miners’ strike. He kept the lights on and was rewarded with elevation to the House of Lords. But the government decided to break up the CEGB in order to privatize it in parts, as we have seen, and he resigned. Sir Denis Rooke, a chemical engineer of distinction, ran British Gas. Unlike Marshall, he succeeded in keeping British Gas as one, on technical grounds. But it too was later broken up. Many of the bits would end up in the hands of European companies. The electricity generator Powergen was taken over by the German E.On in 2002, National Power by RWE, again German, in the same year and Scottish Power by the Spanish Iberdrola in 2006. British Energy, which had the AGRs and the PWR, collapsed in 2004 and was effectively renationalized; it was then sold on to the French nationalized company EDF, Electricité de France.
In the case of food the dynamics of internationalization were rather different. Agriculture was under an EEC regime, the common agricultural policy, not a national one. British agriculture, as part of Common Market agriculture, was protected by a high common external tariff and supported by subsidies. As a result it did very much better than coal mining. By 2000 there were still around 200,000 farm workers, but there were hardly any coal miners left. By 2000 self-sufficiency in food diminished from its peak in the 1980s, though it was still much higher than in the 1950s. What was radically different from the 1950s was the source of imports. They now generally came from the EU. Indeed, there was a continentalization of British food tastes. With imported Mediterranean foods, from citrus to tomatoes to avocados, aubergines and courgettes, the British diet became varied and interesting. Tea consumption fell, while coffee increased, beer gave way to wine, potatoes to pasta. Where bottled mineral water had once been rare, in a country with good drinking water, pointless French and Italian mineral waters were now everywhere. Yet the United Kingdom remained a significant exporter of food, mainly to the EU. It sold grains and meat and more. The case of beef is exemplary of what would have been unthinkable in 1950. In the mid-1990s the United Kingdom was almost wholly self-sufficient in beef, with one-third of production exported. However, because of the intensive production methods which led to the BSE infections, the EEC responded with a ban of exports (partial in 1990, full in 1996), causing total exports to fall to nearly nil. There was an extraordinary massification and mass production of food, largely hidden away, a story exemplified by the rise of chicken meat to dominate meat consumption.

Figure 19.4: UK manufacturing output, 1948–2014
Source: ONS data via BBC, http://www.bbc.co.uk/news/business-35414075, accessed 29 January 2018.
MANUFACTURING
In 1980 Dr Sir Monty Finniston, a metallurgist, and a former head of British Steel, reported on the engineering profession, calling his report Engineering Our Future. It argued for the centrality of manufacturing in national terms. One of its recommendations was that ‘The national objective should be to produce as many engineers as possible.’23 Such naive techno-nationalism would by the 1990s seem risible. Manufacturing was no longer regarded as central, and there was little or no concern with the nationality of manufacturing firms.
Manufacturing did not decline; but it too was transformed. Manufacturing output was in 2000 higher than ever before, though the rate of growth from the 1970s had been low. Between 1948 and the early 1970s, output doubled. Between then and 2000, it increased only by about 10 per cent (see figure 19.4). Manufacturing became less visible not because it produced less, but because it employed many fewer people, and because it was a smaller part of the economy. There was nothing uniquely British about this development. Nearly all rich countries saw increases in manufacturing output, falls in manufacturing employment and falls in manufacturing as a proportion of GDP. However, in the 1950s and 1960s the United Kingdom was clearly a nation with an especially heavy bias towards manufacturing (comparable only to Germany). By the 1990s it was a nation with a comparatively weak manufacturing sector. It was not like Germany and Japan; it was now clearly much more like the USA or France. History is not destiny.
Most of the leading sectors of manufacturing had been rescued by nationalization in the 1970s. As in the case of utilities, many were then made very much smaller under public ownership in anticipation of privatization. British Aerospace, nationalized in 1977, was privatized in 1981 but relied on an expanding arms budget. The state-owned British Shipbuilders closed half its yards by 1982. In 1985 the profitable warship yards were sold as a group; in the meantime the remaining civil yards were sold or closed individually. British Steel also saw huge cutbacks under public ownership. Following the 1980 national steel strike, the industry was rapidly shrunk, though with huge subsidies continuing to, for example, keep Ravenscraig going. Privatization of a much smaller but profitable British Steel came in 1988; Ravenscraig, a huge plant started in the 1950s, closed in 1992. Between 1980 and 2000, British steel production was roughly constant at just over half the peak levels of 1970 or so, but employment in 2000 was one-third of what it had been in 1980.
The great cutbacks in the workforce and in plants in the nationalized British Leyland had started under Labour. The investment of the 1970s paid off in the launch of the Metro in 1980, made on a new robotic assembly line completed at Longbridge in 1979. It was launched with an extraordinary nationalist TV advertising campaign – it was ‘A British car to beat the world’, the means to fight back against the recent invasion of the United Kingdom by the Italians, Germans, Japanese and the French. The advertisement showed them repulsed by Metros landing on a beach from Second World War landing craft, with ‘Rule Britannia’ playing in the background.24 The company was sold to BAe in 1988. The Metro was its last British-designed car. Far from the invasion being repulsed, more and more imported cars came in; on top of that, foreign car companies were invited to produce in the UK such that there were soon no all-British car producers at all. While the United Kingdom became more and more motorized, that ceased to be driven by domestic car manufacturing.
Rolls-Royce and its large civil engine, the RB211, had been saved by nationalization in 1971. The engine proved to be very developable and led to many subtypes and the Trent engine, which were all to be successes. These were financed by government, who also underwrote the losses. In the mid-1980s the company became profitable. It was privatized in 1987 and continued to receive ‘launch aid’ to finance engine development. Rolls-Royce’s engines gave it nearly one-half of the world’s civil engine market, an astonishing development, unthinkable without the hundreds of millions of pounds in state support it received.
There was a powerful techno-nationalist streak in Mrs Thatcher’s thinking and certainly that of her government. This worried one thoughtful economist.25 There were in fact expensive and ambitious programmes for fifth-generation computing (the Alvey programme) and much muscular discussion about the need for new technology, a new culture and new ambitious national capitalism. ‘Information Technology’ became the new buzzword, the focus of British state-supported R&D indeed.26 However, Margaret Thatcher’s time in office disproved the persistent and silly belief that more scientists in high office means more money for research and greater enthusiasm for its results. Across government, and industry, with the exception at first of the military, research budgets were cut back. Far from releasing the innovative energies of the private sector, what happened was that companies no longer felt obliged to do research for national reasons, and national champions and their R&D programmes went by the board. She may have been a nationalist, and a scientist, but she presided over the end of significant British techno-nationalism.
As well as falling manufacturing employment the other obvious change has been that the United Kingdom became a net importer of manufactures. This was a shocking development for the former workshop of the world, but more especially for those brought up on the notion that a net positive manufacturing balance was needed to then import food and raw materials. But although the net balance went strongly negative, British manufacturing exports increased, though imports increased very much more. There was a related change these figures did not in themselves capture. The United Kingdom’s manufacturing exports now included many parts made abroad, and its imports might well include parts made in the United Kingdom. Neither the balance of trade nor the import or export quantities meant what they once did. The United Kingdom manufacturing economy barely existed as a unit – firms and factories in the United Kingdom now operated in a much larger non-national economic arena.
Motor vehicles make this very clear. For most of the twentieth century the United Kingdom was the most significant car-using and car-producing place in Europe. By 2000 production in Germany and France (both richer countries) and poorer Spain was far higher than in the United Kingdom. In the early 1970s a mostly British vehicle industry was still a net exporter. In 2000 the United Kingdom imported 1.8 million vehicles through Grimsby/Immingham, Bristol, Southampton, London and Medway and exported 1.2 million (much more than in the 1960s), with London and Southampton docks dominating.27 In 2000 imports of motor vehicles accounted for 65 per cent of home demand and 45 per cent of home demand plus exports. Production in the United Kingdom was undertaken in a largely European market where raw materials, components and finished vehicles moved freely, and in which the British economy was a net importer of components, just as it was of finished cars.
The industry within the United Kingdom was nearly all foreign-owned. The main British-owned enterprise (formerly British Leyland, renamed Rover) had been part privatized in 1984, when it was already producing Japanese-designed cars. In 1994 it was sold on to the German company BMW, which in 1999 sold it all off, except Cowley. The remainder, the historic Longbridge plant, was essentially closed, though sold on to a Chinese car company. Nissan started manufacturing in a new factory in Sunderland in 1986; within a decade it had produced a million cars and a million engines. In Swindon, Honda started producing engines in 1989 and cars in 1992. Toyota started manufacturing in 1992, with an engine plant in Deeside and a car plant in Derbyshire (100,000 each in 2012). Volkswagen bought Rolls-Royce (and Bentley) Motorcars in 1998. Ford and General Motors were long US-owned and themselves long integrated into the European operations of these companies.
The car sector was much more successful than others. In many important sectors production went abroad to a much greater extent. For example, the last major new all-British trains on British tracks appeared in the 1970s and 1980s. The Pendolinos on the west coast main line of the 1990s were merely assembled in the United Kingdom; the Eurostars for the new cross-Channel services were derived from TGVs and made abroad. 1998 saw the beginning of delivery of 250 class 66 locomotives built in Canada for General Motors of the USA, replacing British-designed and -built freight locomotives. The only things made in the United Kingdom were smaller regional trains and tube rolling stock. These are not special cases: the combined-cycle generating stations came from abroad. Indeed, the former nationalized industries, no longer forced to buy British, generally no longer did.
What is striking is not simply the small number of surviving national companies with strong places in world industrial markets and the loss of most, but that very few new large enterprises were created. Two large enterprises in engineering continued to supply the United Kingdom and to have significant export markets – J. C. Bamford in earthmoving equipment and above all Rolls-Royce, as discussed earlier.
ENTREPRENEURS?
One of the new words introduced into everyday language was entrepreneurship. It suggested a risk-taking capitalist creating new firms, replacing the staid bureaucratic businesses of the past with fresh energetic start-ups. The term ‘entrepreneur’, and the allied term ‘innovator’, came to be used quite indiscriminately to describe the owners of standard small and unadventurous firms and mere employees of large corporations, including banks. The cult of the entrepreneur, which continued to 2000 and well beyond, was not one to look too closely at economic realities.
The list of great entrepreneurs whose animal spirits were unleashed in the new dispensation of the late 1980s and 1990s is rather thin. Sir Richard Branson is a brand, and his firms, many no longer owned by him, operate aeroplanes and trains, in the latter case highly subsidized. He was nothing like as pioneering as an airline boss as Sir Freddie Laker of the 1960s and 1970s. Sir James Dyson invented a new vacuum cleaner and a public lavatory hand-drying system, no longer built in the United Kingdom, but continues to invest in development. This is not the sort of transformational success that, say, Lord Nuffield had with motor cars in the interwar years. Lord Sugar, founder of Amstrad (which once rose to the FTSE 100), made and sold computers in the 1970s and boomed in the 1980s (taking over Sinclair Research), but he was no Bill Gates. He was not even a Lord Weinstock, the chairman of GEC, a 1960s creation.28
Yet there were, as one might expect, successes, though the real ones were less visible than the promoted ones. Vodafone, formed out of Racal, launched mobile phones in the United Kingdom in the 1980s and was by 2000 the largest mobile telephone operation in the world. Psion, founded by David Potter, supplied software for Sinclair computers in the 1970s and early 1980s and then went on to make Psion organizers, whose software became the basis for the first smartphones, including those by Nokia. It too reached the FTSE 100. But the only company that was a high-tech start-up in the FTSE 100 as of 2013 was ARM holdings, designers of special chips – they employed under 2,000, licensed their technology but did not build. The company, based in Cambridge, was established in 1990 and grew out of ACORN computers, one of the pioneering computer firms of the 1970s. A telling success in the media was the expansion of the Financial Times and The Economist, which boomed in circulation, with by 2000 more copies sold overseas than in the UK and The Economist especially becoming a global rather than a British magazine.
The most celebrated case of British innovation and successful business practice since the 1980s has been without doubt the pharmaceutical industry. It boomed through the 1980s and 1990s and was responsible for increasing proportions of research and development spending. But its success was largely on the basis of drugs that pre-dated the Thatcher revolution. In the 1970s and earlier, Beecham developed new antibiotics, especially very successful semi-synthetic Penicillins, leading to Augmentin, developed in the 1970s. Sir James Black (another industrial Nobel Prize winner), working for ICI, developed the first beta blockers, Ternomil/Atenolol (1976), and for Smith, Kline & French (an American company) from their British laboratories, the first anti-ulcer H2 blockers (Tagamet, launched 1975), both huge sellers. Tagamet was followed by an even more successful British development, Zantac, launched in 1981 by Glaxo, successful as a me-too drug, essentially a patentable small variation on an existing drug; it transformed Glaxo.
Small start-ups based on ‘biotechnology’ were supposed to revolutionize this industry. However, since the launch of Celltech (strongly supported by the National Enterprise Board) in 1980, there has been ‘a dearth of outstanding successes, whether in terms of consistently profitable firms or high selling innovative drugs’ among new pharmaceutical firms.29 British research only produced three molecular-biological biologics, all brought to market by US companies. This disappointing performance cannot be pinned on the usual suspects – anti-business universities, an indifferent stock market and government – for such characterizations are not accurate for the period since 1979 (and in my view never were). Nor did the rest of Europe, with its allegedly backward capitalism and universities, do markedly worse, or better, than the United Kingdom. The core of the two significant biotech proper firms, Celltech and Cambridge Antibodies Technology, both out of the famous Laboratory of Molecular Biology at the University of Cambridge, still operate as research centres in the UK, but for multinational ‘Big Pharma’.
Despite an increase in R&D spending by multinational Big Pharma in the UK (as elsewhere), overall innovative activity in British industry in fact fell. The proportion of GDP devoted to R&D overall drifted downwards, to 1.8 per cent in 1999 – levels not seen since the 1950s, and distinctly lower than the USA, Japan, Germany and France. Even in 1981 it had been at 2.4 per cent, the same as the US or Japan, and only slightly behind Germany. Research done in business fell from 1.5 per cent of GDP, to 1.2 per cent over the same period, again leaving the United Kingdom adrift. Some of this fall was due to the relatively smaller size of manufacturing within the economy, but in manufacturing itself the proportion of R&D in output fell, and also fell relative to that of other manufacturing nations.30 It was also telling that the British subsidiaries of foreign multinationals performed higher proportions of research, and increasing proportions of the industrial research expenditure came from abroad.31 Far from unleashing British innovation, the new dispensation reduced it and made what there was more foreign-controlled.
The sinews of state innovative power also shrank. With the ending of large-scale civil development programmes, expenditure by government on R&D fell from 0.9 to 0.5 per cent of GDP by the end of the 1990s. The state’s key civil R&D organizations were reduced and privatized. The Plant Breeding Institute and the National Seed Development Organisation were sold to Unilever, and then in 1998 to the US firm Monsanto. The National Research Development Corporation, set up in 1948 to exploit public sector research, was privatized in 1992. The atomic weapons research establishment was ‘contractorized’ in 1993, and the National Physical Laboratory in 1995. In 2001 all the military laboratories, most with Edwardian origins, but with the exception of the nuclear, and the biological and chemical warfare centre at Porton Down, were put into the modishly named QinetiQ plc and were intended for the private sector. A US private equity group took a large stake in 2002, and the company was floated in 2006.
The cuts in industry and government research were severe but partly compensated for from the 1990s, especially by increases in state-funded university research. Quite unrealistic expectations were placed on this spending, which was directed in theory at generating commercially worthwhile invention. This was essentially about the appearance of doing something – research policy once again as substitute for an industrial policy as it had been in an earlier period of free trade. Research funding was a form of masterful inactivity, masquerading as action, strategy and commitment. Government got itself into an absurd position of wanting to direct research funding towards the priorities of UK plc when it did not believe in UK plc, and indeed UK plc no longer existed. Policy destroyed an entrepreneurial state, which did about all one could expect, and replaced it with an entrepreneurial culture that unleashed no serious entrepreneurs at all.
The reality was that there was no entrepreneurial culture; there was a culture of passive conformity, managerialism and imitation. Order and control were more obvious than freedom and imagination. To call the new order neo-liberalism is to flatter it, for there was little original or new, or liberal, about it. It was a culture which was increasingly global in its sameness and its lack of political contestation. But it was also a richer world. If it did not have what it claimed to have, it did not mean that in its own terms it did not work, and work well. The great thing was that it did not need entrepreneurs, or great creative energy, or novelties, or to generate great crises. To live in uninteresting times was, to many, a blessing.
THE NEW CONSENSUS
It was a time of consensus. The political figures in charge of the new era of the non-national economy were John Major and Tony Blair. John Major was a longer-serving prime minister (1990–97) than is often recalled. It was under Major that many of the paradoxical changes of the previous years would settle down into a powerful new consensus. He had been elected to parliament only in 1979. From a modest background and with no university education, he had worked in old-fashioned banking and in local politics. He rose without much trace in the government, becoming chancellor and foreign secretary, and won the 1990 leadership election as the choice of the right. He beat the Labour Party in 1992, unexpectedly but decisively, and in effect set the agenda for New Labour. It was he, not Mrs Thatcher, who finally destroyed old Labour. He brought back Michael Heseltine, the pro-European, to undo the Community Charge and later to be supremo for industry, taking up the old title of ‘president of the Board of Trade’.
Major clearly was not cut from the same cloth as the 1980s right. He was perhaps the ‘first Conservative premier to believe in race and sex equality’.32 Furthermore he was committed to the liberalization of the European economy, reduced the warfare state and brought the war in Ireland to an end. He was committed to the expansion of the European Union and the extension of the single market, which came into operation in 1992. He negotiated the Maastricht Treaty, which led to the creation of the new European Union. While he achieved opt-outs for the United Kingdom from a commitment to participate in the future European currency, the euro, and the ‘social chapter’, which guaranteed social rights, he was clearly committed to the view that the United Kingdom had to be part of the new liberal Europe. This was no small matter, as he was hounded by the emergent ‘Eurosceptic’ ‘bastards’ and much of the right-wing press, previously very loyal to the Conservative government. He suffered one significant defeat over Europe – with his chancellor he poured billions into defending the rate of sterling, which was fixed within a narrow band on entry to the European Exchange Rate Mechanism (ERM) in 1990. They were forced to allow sterling to come out of the ERM and to devalue by around 15 per cent, a change which was taken by Eurosceptics to account for the steady growth which followed the recession of the early 1990s.
Euroscepticism marked the emergence of a new politics of private wealth. Rich right-wing businessmen, setting themselves up as the heirs of Thatcher, but deeply hostile to Major and European political integration of any kind, created political parties. In 1997 a new Referendum Party, funded by Sir James Goldsmith, ran an astonishing 547 candidates. It wanted a referendum on further integration into the European Union, from a clearly Eurosceptic position, hostile to what it took to be a plan for a federal European super-state, in which Britain would be a mere province. EFTA was presented as a good, free-trading alternative.33 Goldsmith’s own position was unusual and confusing – he was hostile to political integration but a strong believer in European free trade, though one who believed that the European economies should be strongly protected against the rest of the world, in effect by a European economic union.
The Referendum Party was not the only one to emerge from one day to the next, though it put forward by far the largest set of candidates after the main parties. In the 1997 election next in the ranking of candidates was the Natural Law Party (transcendental meditationists).34 They were followed by another new party, the UK Independence Party, then led by a non-racist liberal historian of the Austro-Hungarian Empire. The Green Party trailed in the number of candidates.
Major devoted immense energies to bringing peace to Northern Ireland, an unfashionable and neglected issue. In 1993 the Provisional IRA let it be known, following overtures from the British government, that it wanted to end the conflict, which had reached stalemate on both sides and was imposing enormous costs. Working closely and intensively, and taking political risks, John Major set to work. A PIRA ceasefire came into effect in 1994. It was broken in 1996 but then restored. This work prepared the ground for the Belfast/Good Friday Agreement of 1998. Overall, the agreements were more of a defeat for the unionists – for all that they insisted on Britishness, and their loyalty to the United Kingdom and the crown, they were increasingly regarded not as models of patriotism but as an embarrassment. The nationalists, while they did not gain union with Ireland, achieved recognition of the reality of connection with Ireland, a government in which they were recognized and had authority, and a change in the ethos of the state and its machinery. A cross-community government was formed in Belfast between Sinn Féin, the political wing of the Provisional IRA, and the more radical of the two unionist parties, the DUP.
In 1989 the Berlin Wall, and the whole Iron Curtain, came down, and the communist regimes in Eastern Europe collapsed. The USSR itself began to disintegrate and, following an attempted 1991 coup to retain it, came to an end; the Soviet Communist Party was dissolved. This was a world-historic victory for capitalism, and John Major’s government cashed in a peace dividend. It was under John Major that the cost of the armed forces were substantially cut in real terms, from 4 to 2.6 per cent of GDP. Total personnel in the armed services was cut by one-third between 1990 and 2000, to around 200,000 men and women, lower than at any point in the twentieth century. Service personnel abroad were cut from around 100,000 to 50,000 or so, largely by halving the size of the forces in Germany from around 70,000 to 30,000. Both education and NHS expenditure increased in real terms (though only a little as a percentage of GDP). The warfare state was now marginal; the welfare state a very much larger and continuing spending commitment.
There was much talk of a new world order, one with just one superpower. Thus the Iraqi invasion of Kuwait in 1990 was reversed by a US-led coalition, which sent huge bodies of troops into the Gulf. On the coat-tails of the US forces, John Major took British forces into combat, and in the very places the United Kingdom had retired from in the 1970s, when they had withdrawn from ‘East of Suez’. A total of 45,000 British service men and women were deployed in naval and air forces and the 1st Armoured Division. That war, short and decisive as it was, would have unhappy consequences, hardly imaginable at the time.