LETTER: Economic decline of post-war Britain: myths and realities

From Dr Jim Tomlinson

Sir: Corelli Barnett ("How Blighty turned victory into defeat", 27 April) perpetuates some hoary old myths about the British economy in the late 1940s.

First, he talks about the "complacency" of Britain about her industrial position, completely ignoring the massive efforts by the Labour government to improve that position. Policies to that end included a major expansion of the research and development effort, the funding of the British Institute of Management, the provision of investment incentives, and the first ever anti-monopoly policy. In addition, nationalisation, whatever its results, was intended as a way of securing economies of scale and hence embraced efficiency in basic industries. These measures had varying degrees of success, but to ignore them is to give continued currency to an approach to the 1940s that recent historical research has shown to be seriously deficient.

Secondly, and more specifically, Barnett suggests that Britain suffered from not spending Marshall Aid as investment but squandering it on debt retirement. Marshall aid was about providing dollars to the economies of Western Europe. These dollars could be spent to purchase imported capital goods for investment and, in Britain's case, they largely were. They were not used, as he suggests, to finance the welfare state because the welfare state needed little imported materials - it was largely a matter of redistributing income internally. Barnett's confusion arises from the role of "counterpart funds", which were sums of money that recipients of dollar goods had to pay in sterling to the Government. But such money could not increase the amount of investment, as this was restrained by the capacity to import - the money could not be spent twice!

In fact, British investment rose faster than almost any other western European country in this period, and the striking factor of the period was the willingness of the Government to hold down consumption in order to put resources into exports and investment. The Attlee government eventually paid the price for this highly responsible economic policy in the election defeat of 1951.

Yours sincerely,


Reader in Economic History

Brunel University



28 April