The British cannot bear very much reality. This lecture, delivered by a leading historian at this week's Ways With Words literary festival in Dartington, argues that our future is being held hostage by a past in which we hide to avoid facing up to the truth about the present
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My annual visit to Lord's is usually pure catharsis for me. It tends to coincide with some depressing enormity in the world. This year - on the Saturday of the first Test against Pakistan - it was a grim fistful: the Atlanta bomb and the Burundi slaughter, with the search for the TWA airliner continuing off Long Island, all against a backdrop of Orange and Green squaring up once more in Northern Ireland. But the pleasures and rhythms of Lord's have a timelessness - a permanence - which resists and deflects all of that and much more.

This year, however, the event brought another blessing. During the lunch interval, in the shiny new Lord's shop, I picked up Christopher Martin- Jenkins's book, The Spirit of Cricket, and, in it, found this gem from 1930 by Neville Cardus, cricket-writer, musical critic and connoisseur of Englishness.

"The laws of cricket," he wrote, "tell of the English love of compromise between a particular freedom and a general orderliness, or legality ... Law and order are represented at cricket by the umpires in their magisterial coats (in England it is to be hoped these coats will never be worn as short as umpires wear them in Australia, much to the loss of that dignity which should always invest dispensers of justice) ... If everything else in this nation of ours were lost but cricket - her Constitution and the laws of England of Lord Halsbury - it would be possible to reconstruct from the theory and the practice of cricket all the eternal Englishness which has gone to the establishment of that Constitu-tion and the laws aforesaid."

Cardus, with George Orwell, captures for me more evocatively than anyone else the texture and flavour of mid- 20th-century Britain - that special period which, roughly speaking, spans the 20 years from 1933 (when Hitler came to power in Germany and the slump was at its height here) to 1953 (when Stalin died in Moscow and it was Coronation Year here - with Britain on a cultural cusp before commercial television, a fully-fledged mass- consumption society and the shock of Suez). By a set of seemingly miraculous chances, Britain found itself not just safely through a desperately close- run war, but with full employment, a welfare state, a high level of social tranquillity and a new, moderate balance in domestic politics (now labelled "consensus"). The outcome of the war had seemed either to sanction or to engineer these golden combinations - the victory a vindication of our peculiar ways.

But what particularly intrigued me about that comfortingly serene Cardus conspectus, its tranquillity verging on smugness, was the chord it struck with my own thoughts - themselves provoked by my work on my forthcoming book, Muddling Through - on the themes of power, politics and the quality of government in post-war Britain. In particular, I had been musing upon that magical little bundle of crown powers and prerogatives, that touch of the ancien regime, at the heart of our constitution; upon the fluctuating, often unsatisfactory relationship between a supine Parliament and an overmighty executive; and upon our persistent desire to cut a dash in the world out of line with our capacity to sustain foreign and defence commitments which history bequeathed us - the "itch after the amputation", as a member of the Secret Intelligence Service once put it. Cardus's words gave those musings a fresh perspective.

Since the summer of 1945, especially, there have been changes that have led, in Cardus's world, not just to short-coated umpires, but to a third umpire by a television set (not to mention recourse to the High Court to resolve the differences of two of the world's greatest all-rounders); and, beyond Cardus country, to Lord Nolan's being sent for to restore a measure of decency to public life, to a deep and sustained debate about the shortcomings of our unwritten constitution, and to acute anxieties about our place in the world - worries about how we fit in an integrating Europe and about what the super-competitor nations beyond Europe might do to what remains of our trade, commerce and manufacturing.

Each generation since the Second World War has found itself unable to appreciate fully the powerful undertows behind our relative decline, and, in so failing, has helped to perpetuate the process. Harold Wilson was on to something when he said the job of prime minister was very largely "organised by history"; as was Churchill when he told a young American: "Study history. Study history. In history lie all the secrets of statecraft." Our leaders mentalites, it must always be remembered, were very largely the product of an accumulation of their past experience, felt or learnt.

The sociologist Jean Seaton has suggested that the best way to recreate what the Americans call the "mind-sets" of decision-takers is to imagine who is sitting in the "gallery" to which individuals play when confronted by testing circumstances. Lord Hailsham expressed a similar thought to me over 20 years ago. We were talking of Harold Macmillan in the pomp of his premiership, before the setbacks crowded in after 1960. Hailsham imagined Macmillan, at the supreme moment of one of his parliamentary triumphs, gazing up at the ghosts of that generation of golden Oxford contemporaries who never returned from the trenches. There they sat in a kind of wraiths' gallery above the chamber of the House of Commons, gazing down at him fondly but dismissively and saying: "What, you, Harold? You Prime Minister?"

It's an intriguing test to apply to prime ministers and their colleagues. When successive sets took the decision to make or update the British nuclear weapon, were they not imagining possible re-runs of "standing alone" in June-September 1940? Who was in Harold Wilson's "gallery" when he ruled out devaluation in October 1964? Stafford Cripps, of course, who as Attlee's Chancellor in 1949 resisted the notion of reducing the exchange rate of the pound on the grounds that it would cheat the holders of the sterling balances, who included some of the poorest nations on the globe. And, as everyone knows, Eden, in 1956, saw the menacing figure of Hitler and the strutting shape of Mussolini in the uniformed frame of Colonel Nasser.

On a less obvious level, every generation of British policy-makers has carried a range of assumptions about Britain's place and prestige in the world that was usually up to two generations out of kilter with reality. Attlee and Bevin came to their intellectual formations in the late 19th and early 20th centuries - in the full flower of Empire and at the height of what we would now call Britain's "superpowerdom". They, no more than Churchill, could have contemplated a late-20th-century Britain that was 19th and falling in the international economic league of wealth-per-head, its reserve currency gone, its diplomatic effort reduced noticeably below those of Germany and France.

A megawattage of intellectual energy has been expended over the past 30 years to explain - or, in some cases, explain away - modern Britain's relative economic decline. The mix of factors is enormous: the inevitability of slippage if you were the first nation through the industrial revolution, the world's first economic and military superpower; the "low trust" industrial relations bequeathed by the otherwise hyperachieving 19th century; the class-based politics that grew ruinously out of it; the rigidities it inflicted on the 20th-century labour market; the cultural shifts whereby the horny-handed makers of the industrial revolution put their sons through public schools that turned them into lawyers and administrators rather than engineers or entrepreneurs; the loss of one-sixth of our wealth in the Great War and one-third in the Second World War; the bloated defence, imperial and world-reserve-currency commitments that lingered long into the post-war period; our inability to achieve either the fruitful mix of education and training that our competitors have managed or to eradicate the class virus that still blights our schools and universities; the crippling bias within the British economic psyche that puts short-term financial gain above long-term industrial investment.

From this bran tub of explanations, alibis, hypotheses and assertions the political and intellectual partisans in our "blame culture" pick whichever combination of suspects it suits their prejudices to round up. The quality of our political and intellectual debate suffers accordingly, partly because it is precisely the combination of such factors and problems that begins - no more than that - to answer what is still the leading question of post-war British history: how and why the country that had made so many of the great breakthroughs in the first industrial revolution began to slip so noticeably during the second (from about 1870) and failed to produce more than a feeble flicker of growth during the 30 golden years after 1945, which saw several "economic miracles" elsewhere in the world.

Each generation of decline-managers in the post-war period has been flying on deficient radar, applied to the wrong targets and producing fragmented and illusory images. Some of these images have been noble (a multi-racial Commonwealth that could, somehow, both sustain British power and make the world a better place). Others have been romantic (the notion of a balanced, self-righting system of government shaped, cleansed and preserved by the tacit understandings of an unwritten constitution). Some have been heartwarming but deluded (the hope that full employment would heal the scars of the industrial revolution and engineer a benign cycle of still more economic growth and social easement).

The gap, however, that appears most frequently in the various phases of our post-war national life is the lack of a sustained determination to confront reality in the round and adjust. One can see this most recently from the failure of successive sets of ministers to take a proper, global, strategic look at British resources and capabilities in the context of the new post-Cold War geopolitics. The kind of exercise we needed would have gone way beyond the Ministry of Defence's Options for Change. It would, like Macmillan's Study of Future Policy at the end of the 1950s, have embraced foreign, economic and trade policy as well (though so stark were the conclusions of that survey, with its focus on where Britain would be by 1970, that ministers shrank from its realism).

A similar need also applies, now, to the institutional, structural and constitutional implications of our new place in the world. Would it not be sensible, for example, before designing a parliament and an administration for Scotland, probably some kind of assembly for Wales and perhaps new bodies even for the odd English region, to think carefully about what is done best at which level, by whom, under what constraints and with which mechanisms for arbitrating disputes between these said levels from parish council to the Council of Ministers in Brussels? It would. But we won't do it because it's too difficult, too rational; and because this is Britain, and things happen differently here.

Difference. How that matters to us - our love of the quirky, the irrational and the asymmetrical. Without the old Gladstonian notion of "home rule all round" overlain by a federal parliament at Westminster, reason and symmetry won't have a chance in any DIY constitutional settlement that anyone is contemplating in connection with Scottish devolution. And though the Cardus in me loves the peculiarities and the paradoxes that go into the British way of governance, I have a sense that, thanks to the coarsening of our society and to the convulsions that European integration and globalisation are transmitting to our national existence, we cannot go on much longer in the sublime and smug enjoyment of our very peculiar practices. Perhaps muddling through is no longer an option.

At such moments one must, however, try once more to get inside the skins of those on the inner circle of post-war government. They foresaw very few of the shocks that assaulted their hopes and assumptions, whether it was sudden discontinuities in world politics or tectonic shifts in the money markets or even the pattern of developments in domestic politics and economics. "The opposition of events", Macmillan ruefully called all of these - a comforting phrase taken up by John Major after "Black Wednesday" in September 1992.

One has to remember, as well, just how little purchase even the best- ordered governments can have on changes in society driven by any factors other than those firmly in the grasp of Whitehall - huge shifts in the global economy; or great changes in the patterns of consumption; or related changes in expectations since the arrival of commercial television in 1955; or - most profoundly of all - the transformation of home and workplace by electronics.

The public, I suspect, has not caught up with the sense of powerlessness that has afflicted the state since ministers and civil servants lost faith in the posthumous power of Keynes to soften the cruder fluctuations of the economy and of Beveridge to ease the social consequences of these minor adjustments. In the course of the past year I have heard two of the most accomplished public servants, whose careers between them span the post-war period to date, musing on this theme. Both have had spells in the mighty and professionally pessimistic Treasury. The eldest, after years of reflection, concluded that even if we had had the most modern and finely calibrated state machine, our overall performance as a nation might have been just a few percentage points higher, certainly no more. The younger, at a City dinner, cried out about the impossible demands to "do something" that arose from an uncomprehending public and Parliament alike when matters went wrong. I had to remind him that this had to do with democracy; a concept with which Her Majesty's Treasury has always had some difficulty.

Yet there is a danger that so great has been the seepage of confidence on the part of the British state that it has lost sight of its still considerable capacity for not just soothing the bruises caused by the buffeting of change but setting the thinking and the processes in motion that could move us on to the path towards sustainable and sensible improvements. After all, no one else in Britain determines the disbursement of some pounds 264bn of public money a year.

It is not enough to seek other power centres to which to abdicate, whether it be the International Monetary Fund, the European Union or our domestic money markets. Any incoming government should set in train a series of reality audits about the strengths and weaknesses of their inheritance and the fitness, or otherwise, of the processes of state to play upon the former and combat the latter. If it did, it would not only be living up to its responsibilities but might even acquire an enduring competitive edge in political terms. And here Churchill's dictum about history and statecraft does have a real resonance, 43 years after he uttered it.

I am aware that thinking people have been saying such things in virtually identical language since the Boer War gave Britain, in Kipling's phrase, "no end of a lesson" and the luminaries of the national efficiency movement began to suggest that, unless we ruthlessly examined virtually every aspect of our national life, we were doomed to the kind of decline which, give or take the odd burst of recovery, has indeed been our fate since the Exchequer almost ran out of funds in 1917. And yet here we are, our institutions preserved (the last up and running ancien regime in the advanced world, as Cambridge historian Jonathan Steinberg likes to call us), our most dangerous enemies vanquished with not one moment of our 20th-century political existence contaminated by any kind of autocracy other than that which our first-past-the-post voting, our supine parliament and our overmighty executive have occasionally - and inefficiently - inflicted upon us.

I began these reflections as part-Cardus, part-Cassandra. I end them with but two certainties to offer. One is that among our most glorious national gifts is that of being a thinking-aloud nation; especially, in my lifetime, in the place where radio and the spirit of public service meet. Britain is a nation much discussed by those to whom it belongs. If we ever lose that shared, Radio 4-style capacity for thinking together, a terrible impoverishment awaits us.

The other certainty is this: that, short of the last trump or invasion by a foreign power, we shall continue to mix the practical and the romantic, the sensible and the absurd, the realistic and the deluded in the way we govern ourselves and argue about the disposition and the uses of power.

At a particularly grim moment in the Great War, the Liberal MP McCallum Scott recorded in his diary a telling Churchillian vignette: "As we were leaving the House [of Commons] that night, he [Churchill] called me into the Chamber to take a last look round ... 'Look at it,' he said. 'This little place is what makes the difference between us and Germany. It is in virtue of this that we shall muddle through to success and for lack of this Germany's brilliant efficiency leads her to final destruction. This little room is the shrine of the world's liberties."

Sentiments such as those are both the glory and the bane of our governing culture. So powerful have been the drumbeats of such a past that it can be no surprise that - after 11 years of Mrs Thatcher, nearly a quarter of a century inside the European Community in its various guises, the collapse of much of our influence abroad and the shrivelling of our economic and industrial sinews - we find it so hard to make the leap to modernity. But perhaps it's because we really don't want to try; that muddling through is our preferred way. Such preferences come at a price. As Ted Heath said more than 20 years ago: "The alternative to [economic] expansion is not, as some occasionally seem to suppose, an England of quiet market towns linked only by trains puffing slowly and peacefully through green meadows. The alternative is slums, dangerous roads, old factories, cramped schools, stunted lives." I sometimes think that it would take the Four Horsemen of the Apocalypse to request landing permission at Heathrow for Britain to acquire a sense of urgency about its need to reform and modernise. But let's face it, not even their imminent arrival could take the shine off a Test Match Saturday at Lord's. If their flight path took them right over the ground, no one would notice, not even me.

! Peter Hennessy is Professor of Contemporary History at Queen Mary and Westfield College, University of London, and Gresham Professor of Rhetoric at Gresham College, London. A longer version of this article was delivered last week as the "Independent on Sunday" Lecture at the Ways With Words festival at Dartington Hall, Devon. The festival concludes tomorrow. Peter Hennessy's "Muddling Through: Power, Politics and the Quality of Government in Postwar Britain" will be published by Gollancz on 26 September at pounds 20.