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Post war growth wasn’t all that great you know

Using the economist Angus Maddison’s figures, the per annum (real GDP per capita) growth rate for the UK from 1947 – the post-war nadir – to 1976 when the wheels came off the model, was 2.9%. That is indeed better than the neoliberal years since of 2.3%. So, does that prove the conventional wisdom?

Well, not quite. The point here is that long-term growth rates are driven by advancing technology, which is closely allied but not exactly the same as advancing productivity. Growth from 1918 to 1947, by the same measure, was 0.7% a year. Case proven again we might think – except when we combine the two periods we get a proper long-term growth rate of 2.1%.

I’ve expressed this view before in Anglo-Saxon terms, but to do so more politely: some portion of that post-war growth was driven by the technological and productivity advances of the previous decades that were not, earlier, translated into actual economic growth.

It is indeed possible to argue that peace and the absence of a depression allowed that expression of the stored up growth, but it becomes a lot more difficult to argue that it was those golden years policies that were the cause. That 2.1% growth rate across the whole period is about what we think a mature economy is capable of over longish periods of time, after all. That it came as lean years and fat is interesting but not a proof of policy actions. That the neoliberalism since has matched or slightly beaten that long-run rate is another interesting point. Growth is more to do with technology and productivity than public policy perhaps.

12 thoughts on “Post war growth wasn’t all that great you know”

  1. So the additional growth in the 1947-76 period couldn’t possibly have anything to do with the fact that prior to 1945 the world had spent 6 years systematically destroying capital at an unprecedented rate, which all needed to be replaced as a matter of some urgency?

  2. Was the motorcycle industry big enough to have shown up in the numbers and to have had a noticeable effect? From the end of the war to around the mid sixties there were dozens of firms in the UK making and exporting motorcycles. Some were quite small but BSA group was huge. By 1976 the whole industry had contracted to almost nothing. NVT were still making Commandos and Tridents, Meriden were still making the Bonneville but on a vastly reduced scale.

  3. Case in point: the boom in electrical appliance manufacture and use could not happen until the national grid system and standards unification of the 1930s. Before then there were about 300 different combinations of voltage and frequency across the UK, manufacturers were stymied either having to target a small pool of potential customers or add extra complexity and cost into their products to make them multi-standard usable. And then the 1950s boom was bounce-back of suppressed production that would have “naturally” have happened in the early 1940s as a continuation of the increased electrification that had already got off the ground in the late 1930s.

  4. Meat and all other food rationing ended in Britain on 4th July 1954.

    Clearly that was a policy change that lead to growth, though it too was a bounce-back from the previous policy that supressed demand.

  5. “dozens of firms in the UK making and exporting motorcycles”: and, dear God, they were crap. No wonder Honda wiped the floor with them.

  6. I never experienced the joys of the old British Motorbikes as they had pretty much disappeared by the time I left school, so my first bike was a Yamaha. Much later I had a Hinckley Triumph and it was a good bike.

  7. Bloke in North Dorset


    They get to know whether what they are seeing in their own company is representative of their sector and the economy as a whole.

    Whether that information is worth the cost is another matter.

  8. Bloke in North Korea (Germany province)

    So growth measured over any long enough period post industrial revolution averages out to two point summat annually. Look, I know the bit after the decimal does matter over long enough time, but you can prove anything.

    There’s a famous example whereby it’s proven that long-term growth always reverts to the mean – the purchase price of the island of Manhattan in 16xx compared to the estimated value of everything on it today (do they attribute negative value to the northern bits I wonder?). You can calculate a growth rate and it’s within striking distance of mean growth over the period. Two point summat. The problem is it is such a long period that you’d be within striking point of two point summat if it had become farmers fields, rather than dystopian metropolis.

  9. @ BiNKGP
    The growth rate over a long enough period tends to revert to the norm because there are periodic changes in government.
    If you look at the growth rate under Conservative governments and under Labour governments, there is a statistically significant and economically significant difference. There is also, even within that, a significant difference between nationalised industries and the private sector despite the £billions of taxpayers’ money poured into nationalised industries. The commanding heights of the economy were nationalised by Attlee – how many of them are still commanding heights? [Well, the BoE could be argued …]

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