Two Hundred Years of Muddling Through review – a brisk and readable account of Britain’s economic history
Two Hundred Years of Muddling Through. The surprising story of Britain’s economy from boom to bust and back again by Duncan Weldon. (Little, Brown Book Group, £16.15).
When it comes to economic growth, nothing much happened in the West for 1,000 years after the fall of the Roman Empire, until industrialisation gathered pace in pockets of Europe and Britain suddenly started to overtake other nations in the eighteenth century. The tale of how this damp island was a pioneer in economic progress and then exported it worldwide is a remarkable one naturally attracting the quizzical examination of great and curious minds.
No single explanation is sufficient. But a reasonable summary is that, with limited access to European markets in the aftermath of the Reformation, Tudor merchants commenced exploration and trading with the world, stimulating the growth of London as a major commercial hub, which in turn drew in cheap coal and products from the provinces.
This acceleration in commerce coincided with first an institutional revolution, resulting in 1688 in a constitutional monarchy accountable to Parliament, an independent judiciary and a new central bank. This collectively created stability, reduced friction costs and stimulated further innovation via the ready availability of finance. To this market-oriented political order, blessed by geography, was added a liberal dose of education. A powerful tradition of innovation and bourgeois values completed the mix.
What is interesting is how different economic historians come up with different theories. For Deidre McCloskey, the Industrial Revolution is about the triumph of bourgeois values. For Joel Mokyr, it is about culture and the idea of “useful progress”. For Douglass North, it is about institutions, notably the Glorious Revolution and the independence of the judiciary, which controlled vested interests and which was enshrined in the Act of Settlement. For Robert Allen, it is about cheap energy, especially coal.
Duncan Weldon, a journalist at the Economist, commences his enjoyable narration of the British economy at the end of the eighteenth century and rather than taking sides in these debates, presents a brisk and readable rehearsal of events as they unfolded. Remarkably, he does not mention geography or energy much and instead concentrates on more intellectual developments. According to him, ideas count, but what counts more is the political environment prevailing at the time.
He does, however, give weight to the development of Georgian and Victorian institutions, including the Gold Standard and Gladstone’s belief in balanced budgets, peace and reform. This created a system that was, relatively speaking, “Knave-proof”. The British system was apparently immune from hijack by special interest groups with selfish motives until it broke down under the strain of the Great War, which brought in its wake mass democracy, the welfare state and repeated devaluations of sterling over half a century.
The restraining virtues of a “knave-proof” system, essentially low church in origin, are attractive and were recovered in the last 30 years when Margaret Thatcher took on the Trade Unions and Gordon Brown made the Bank of England independent, thus insulating it from cutting or raising interest rates under political pressure. However, the system is again under strain.
The unions remain tamed, but the older, asset-rich electorate, which underpins both Brexit and Boris Johnson’s Government, has managed to ensure that the economy is run in its interests. Rising taxes on workers, rising house prices and increased friction costs from Brexit, contributing to higher inflation, all leave younger, less wealthy voters disadvantaged. Yet there is not much they can do about it as they are outnumbered at the ballot box.
The independence of the Bank of England has also displayed a disadvantage: what happens if it gets things wrong? The Bank has continued to keep interest rates low and print money, despite evidence that inflation is a growing threat, but the only element of accountability is that the Governor, Andrew Bailey, must write a letter to the chancellor explaining why the Bank has missed the inflation target again.
He cannot be reprimanded or dismissed unless he is declared bankrupt. Rather than benefiting from a “knave-proof” system, it seems as if there is a collection of incompetent rogues running the country. A combination of the pandemic and Brexit has enabled them to bypass ordinary constitutional safeguards.
Weldon is a political economist who is more concerned with narrative than argument, and his approach is too light touch to be dragged too deep into such ideological battles. This is both his strength and weakness.
There is something for everyone in his approach, but not much of an argument. The advantage is that anyone can read it without feeling indignant, which is welcome when you consider how much there is to learn from Britain’s unique and compelling economic history.
For instance, I was delighted to be reminded of Tony Benn’s Alternative Economic Plan in 1975, when he advocated a siege economy based on protectionism, pulling out of the Common Market, higher taxes on the rich and lavish public spending in order to avoid having to borrow from the International Monetary Fund.
At the time, the “AEP” it was judged by his Cabinet colleagues and the country to be too extreme. Let us hope we are not about to implement a version of it fifty years later.
George Trefgarne is an economics writer and founder of Boscobel & Partners, an independent strategic communications firm.