The Rise and Fall of the Great Powers (85 page)

The frailty of Britain’s international and economic position was partially disguised in the early post-1945 period by the even greater weakness of other states, the prudent withdrawals from India and Palestine, the short-term surge in exports, and the maintenance of empire in the Middle East and Africa.
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The humiliation at Suez in 1956 therefore came as a greater shock, since it revealed not only the weakness of sterling but also the blunt fact that Britain could not operate militarily in the Third World in the face of American disapproval. Nonetheless, it can be argued that the realities of decline were
still
disguised—in defense matters, by the post-1957 policy of relying upon the nuclear deterrent, which was far less expensive than large conventional forces yet suggested a continued Great Power status; and in economic matters, by the fact that Britain also shared in the general boom of the 1950s and 1960s. If its growth rates were about the lowest in Europe, they were nevertheless better than the expansion of previous decades and thus allowed Macmillan to claim to the British electors, “You’ve never had it so good!” Measured in terms of disposable income, or numbers of washing machines and automobiles, that claim was historically correct.

Measured against the much faster progress being made elsewhere, however, the country appeared to be suffering from what the Germans unkindly termed “the English disease”—a combination of militant trade unionism, poor management, “stop-go” policies by government, and negative cultural attitudes toward hard work and entrepreneurship. The new prosperity brought a massive surge in imports of better-designed European products and of cheaper Asian wares, in turn leading to balance-of-payments difficulties, sterling crises, and devaluations which helped to fuel inflation and thus higher wage demands. Price controls, legislation on wage increases, and fiscal deflation were employed at various times by British governments to check inflation and create the right circumstances for sustained growth. They rarely worked for long. The British automobile industry was steadily undermined by its foreign competitors, the once-booming shipbuilding industry grew to depend almost solely upon Admiralty orders, the producers of electrical goods and motorbikes found that they could no longer compete. Some companies (like ICI) were notable exceptions to this trend; the City of London’s financial services held up well, and retailing remained strong—but the erosion of Britain’s
industrial
base was remorseless. Joining the Common Market in 1971 did not provide the hoped-for panacea: it exposed the British market to even greater competition in manufactures, while tying Britain into the expensive farm-price policies of the EEC. North Sea oil also proved less than a godsend: it brought Britain massive foreign-currency earnings, but
that so drove up the price of sterling that it hurt manufacturing exports.
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The economic statistics offer a measure of what Bairoch terms “the acceleration of the industrial decline of Great Britain.”
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Its share of world manufacturing production slipped from 8.6 percent in 1953 to 4.0 percent in 1980. Its share of world trade also fell away swiftly, from 19.8 percent (1955) to 8.7 percent (1976). Its gross national product, third-largest in the world in 1945, was overtaken by West Germany’s, then by Japan’s, then by France’s. Its per capita disposable income was steadily overtaken by a host of smaller but richer European countries; by the late 1970s it was closer to those of Mediterranean states than to those of West Germany, France, or the Benelux countries.
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To be sure, much of this decline in Britain’s
shares
(whether of world trade or world GNP) was due to the fact that special technical and historical circumstances had given the country a disproportionately large amount of global wealth and commerce in earlier decades; now that those special circumstances had gone, and other countries were able to exploit their own potential for industrialization, it was natural that Britain’s relative position should slip. Whether it should have slipped so much and so fast is another issue; whether it will slip further, relative to its European neighbors, is equally difficult to say. By the early 1980s, the decline seemed to be leveling off, leaving Britain still with the world’s sixth-largest economy, and with very substantial armed forces. By comparison with Lloyd George’s time, or even with Clement Attlee’s in 1945, however, it was now just an ordinary, moderately large power, not a Great Power.

While the British economy was languishing in relative decline, West Germany was enjoying its
Wirtschaftswunder
, or “economic miracle.” Once again, it is worth stressing how “natural,” relatively speaking, this development was. Even in its truncated state, the Federal Republic possessed the most developed infrastructure in Europe, contained large internal resources (from coal to machine-tool plants), and had a highly educated population, perhaps especially strong in managers, engineers, and scientists, which was swollen by the emigration of talent from the east. For the past half-century or more, its economic powers had been distorted by the requirements of the German military machine. Now that the national energies could (as in Japan) be concentrated solely upon commercial success, the only question was the extent of the recovery. German big business, which had accommodated itself fairly easily to the Second Reich, to Weimar, and then to the Nazi period of rule, had to adjust to the new circumstances and pick up American management assumptions.
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The big banks were once again able to play a large role in the direction of industry. The chemical and electrical industries soon reemerged to be the giants of European industry. Massively successful automobile companies, like Volkswagen
and Mercedes, had their inevitable “multiplier effects” upon hundreds of small supplier firms. As exports boomed—Germany became second only to the United States in world export trade—increasing number of firms and local communities needed to bring in “guest workers” to meet the crying demand for unskilled labor. Once again, for the third time in a hundred years, the German economy was the powerhouse of Europe’s economic growth.
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Statistically, then, the story seemed one of unbroken success. Even between 1948 and 1952, German industrial production rose by 110 percent and real GNP by 67 percent.
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With the country having the highest gross investment levels in Europe, German firms benefited immensely from their ready access to capital. Steel output, virtually nonexistent in 1946, was soon the largest in Europe (over 34 million tons by 1960), and the same was true of most other industries. Year after year, the country had the largest growth in gross domestic product. Its GNP, a mere $32 billion in 1952, was the biggest in Europe (at $89 billion) by a decade later, and was over $600 billion by the late 1970s. Its per capita disposable income, a modest $1,186 in 1960 (when the United States’ was $2,491), was an imposing $10,837 in 1979— ahead of the American average of $9,595.
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Year after year, export surpluses were built up, with the deutsche mark needing frequent upward adjustment, and indeed becoming a sort of reserve currency. Although naturally worried at the competition posed by the even more efficient Japanese, the West Germans were undoubtedly the second most successful among the larger “trading states.” This was the more impressive since the country had been separated from 40 percent of its territory and over 35 percent of its population; ironically, the German Democratic Republic was soon to show that it was the most productive and industrialized per capita of all of the eastern European states (including the USSR) despite the loss of millions of its talented labor force to the West. Had it been possible to return to the 1937 boundaries, a united Germany would once again have been far ahead of any economic rival in Europe and, indeed, perhaps not significantly behind the much larger USSR itself.

Precisely because Germany had been defeated and divided, and because its international status (and that of Berlin) continued to be regulated by the “treaty powers,” this economic weight did not translate into political might. Feeling a natural responsibility toward Germans in the east, the Federal Republic was peculiarly sensitive to any warming or cooling in the NATO-Warsaw Pact relationship. It had the largest trade with eastern Europe and the USSR, yet it was obviously in the front line should another war occur. Soviet and (only slightly less) French alarm at any revival of “German militarism” meant that it could never become a nuclear Power. It felt guilty toward neighbors like the Poles and the Czechs, vulnerable toward Russia, heavily dependent
upon the United States; it welcomed with gratitude the special Franco-German relationship offered by de Gaulle, but rarely felt able to use its economic muscle to control the more assertive policies of the French. Engaged in a profound intellectual confrontation with their own past, the West Germans were very happy to be seen as good team players, but
not
as decisive leaders in international affairs.
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This contrasted very markedly, then, with France’s role in the postwar world or, more accurately, in the post-1958 world, when de Gaulle took over the helm of the state. As mentioned above (pp. 401–2), the economic progress which the planners around Monnet hoped to achieve after 1945 had been affected by colonial wars, party-political instability, and the weakness of the franc. Yet even at the time of the Indochinese and Algerian campaigns the French economy was growing fast. For the first time in many decades, its population was increasing, and thus fueling domestic demand. France was a rich, varied, but half-developed land, its economy stagnant since the early 1930s. Merely with the coming of peace, the infusion of American aid, the nationalization of utilities, and the stimulus of a larger market, growth was likely. Furthermore, France (like Italy) had a relatively low per capita level of industrialization, because of its small-town, agriculture-heavy economy, which meant that the increases in that regard were quite spectacular: from 95 in 1953, to 167 in 1963, to 259 in 1973 (relative to U.K. in 1900 = 100).
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The annual rate of growth reached an average of 4.6 percent in the 1950s, and spurted to 5.8 percent in the 1960s, under the impetus of Common Market membership. The particular arrangements of the latter not only protected French agriculture from world-market prices, but gave it a large market within Europe. The general boom in the West aided the export of France’s traditional high-added-value wares (clothes, shoes, wines, jewelry), which were now joined by aircraft and automobiles. Between 1949 and 1969, automobile production rose tenfold, aluminum sixfold, tractors and cement fourfold, iron and steel two and a half times.
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The country had always been relatively rich, if underindustrialized; by the 1970s, it was a lot richer, and looked altogether more modern.

Nevertheless, France’s growth was never as broadly based industrially as that of its neighbor across the Rhine, and President Pompidou’s hopes that his country would soon overtake West Germany had little prospect of realization. With certain notable exceptions in the electrical, automobile, and aerospace industries, most French firms were still small and undercapitalized, and the prices of their products were too high compared with Germany’s. Despite the “rationalization” of agriculture, many smallholdings remained—and were, in fact, sustained by the Common Market subvention policies; yet the pressures upon rural France, together with the social strain of industrial modernization (closing old steelworks, etc.) provoked outbursts of working-class
discontent, of which the most famous were the 1968 riots. Poor in indigenous fuel supplies, France became heavily dependent upon imported oil, and (despite its ambitious nuclear-energy program) its balance of payments heavily fluctuated according to the world price of oil. Its trade deficit with West Germany steadily increased, and necessitated regular (if embarrassed) devaluations against the deutsche mark—which was probably a more reliable measure of France’s economic standing than the wild fluctuations in the dollar-franc exchange rate. Even in periods of sustained economic growth, then, there was a certain precariousness to the French economy—which, in the event of shock, sent many prudent bourgeois across the Swiss frontier, bearing the family savings.

Yet France always had an impact upon affairs far larger than might be expected from a country with a mere 4 percent of the world GNP—and this was true not merely of the period of de Gaulle’s presidency. It may have been due to sheer national-cultural assertiveness,
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and that coinciding with a time when Anglo-American influences were waning, Russia was appearing more and more unattractive, and Germany was deferential. If western Europe
was
to have a leader and spokesman, France was a more obvious candidate than the isolationist British or the subdued Germans. Furthermore, successive French administrations quickly recognized that their country’s modest real power could be buttressed by persuading the Common Market to adopt a particular line—on agricultural tariffs, high technology, overseas aid, cooperation at the United Nations, policy toward the Arab-Israeli conflict, and so on—which effectively harnessed what had become the world’s largest trading bloc to positions favored by Paris. None of this restrained France from quite unilateral actions when the occasion seemed to merit it.

The fact that all four of these larger European states grew in wealth and output during these decades, together with their smaller neighbors, was not a guarantee of everlasting happiness. The early hopes toward ever-closer political and constitutional integration foundered upon the still-strong nationalism of its members, shown first of all by de Gaulle’s France, and then by those states (Britain, Denmark, Greece) which had only later, and more warily, joined the EEC. Economic disputes, especially over the high cost of the farm-support policy, often paralyzed affairs in Brussels and Strasbourg. With neutral Eire a member, it was not possible to effect a common defense policy, which had to be left to NATO (from whose command structure the French had now absented themselves). The shock of the oil price rises in the 1970s seemed to hit Europe especially badly, and to take the steam out of the earlier optimism; despite widespread alarm, and considerable planning in Brussels, it seemed difficult to evolve high-technology policies to counter the Japanese and American challenges. Yet,
notwithstanding these many difficulties, the sheer economic size of the EEC meant that the international landscape was now significantly different from that of 1945 or 1948. The EEC was by far the largest importer and exporter of the world’s goods (although much of that was intra-European trade), and it contained, by 1983, by far the largest international currency and gold reserves; it manufactured more automobiles (34 percent) than either Japan (24 percent) or the United States (23 percent) and more cement than anyone else, and its crude-steel production was second only to that of the USSR.
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With a total population in 1983 significantly larger than the United States’ and almost exactly the same as Russia’s—each having 272 million—the ten-member EEC had a substantially bigger GNP and share of world manufacturing production than the Soviet state, or the entire Comecon bloc. If politically and militarily the European Community was still immature, it was now a much more powerful presence in the global economic balances than in 1956.