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.
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.
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