Subject: Westward the Course of Empire Takes Its Way... - Brad DeLong's Blog
From: "Michael Andrews" <[email-masked]>
To: "Hunter Biden" <[email-masked]>, "Eric Schwerin" <[email-masked]>, "Curtis Hastings" <[email-masked]>, "Devon Archer" <[email-masked]>
Date: Wed, 10 Nov 2010 11:16:50 -0500

Just so you know DeLong is one of the few blogs Larry Summers reads  
ever day. DeLong is very smart and Professor at Berkley. - MPA

Westward the Course of Empire Takes Its Way...

Gee. I go off to Ohio State and Barry Eichengreen becomes depressed:

Is America Catching the “British Disease?”: Imperial overreach,  
political polarization, and a costly financial crisis.... [I]t is  
important to understand the nature of the British disease.  It was not  
simply that America and Germany grew faster than Britain after  
1870.... The problem was Britain’s failure in the late nineteenth  
century to take its economy to the next level. Britain was slow to  
move from the old industries of the first Industrial Revolution into  
modern sectors like electrical engineering which impeded the adoption  
of mass-production... failed to adopt precision machinery that  
depended on electricity, which prevented it from producing machined  
components.... The same story can be told about other new industries  
like synthetic chemicals, dyestuffs, and telephony, in all of which  
Britain failed to establish a foothold. The rise of new economic  
powers with lower costs made employment loss in old industries like  
textiles, iron and steel, and shipbuilding inevitable. But Britain’s  
signal failure was in not replacing these old nineteenth-century  
industries with new twentieth-century successors.

Is America doomed to the same fate? Answering this question requires  
understanding the reasons behind Britain’s lack of technological  
progressiveness... Britain failed to put in place an effective  
competition policy. In response to the collapse of demand in 1929, it  
erected high tariff walls. Sheltered from foreign competition,  
industry grew fat and lazy. After WWII, repeated shifts between Labour  
and Conservative governments led to stop-go policies that heightened  
uncertainty and created chronic financial problems. Herein lies the  
most convincing explanation for British decline. The country failed to  
develop a coherent policy response to the financial crisis of the  
1930’s. Its political parties... remained at each other’s throats...  
politics grew fractious... policies erratic... finances increasingly  
unstable.

In short, Britain’s was a political, not an economic, failure. And  
that history, unfortunately, is all too pertinent to America’s fate.