The Decline of the British Economy: An Institutional Perspective

Abstract

This paper attributes the relative decline of the British economy in the twentieth century to rigidities in its economic and social institutions that had developed during the nineteenth-century era of relatively atomistic competition. Inherited and persistent constraints impeded British firms from acquiring the market control, authority in labor relations, or managerial hierarchy necessary to avail themselves fully of modern mass production methods. At the societal level there was an interrelated failure to transform the character of British educational and financial institutions, labor-management relations, and state policy in order to promote economic development. By performing better in these respects lateindustrializing countries were able to surpass Britain in economic growth.