How did UK, from the first nation to industralize, fall behind in economic growth?

[Semper Victor]

Britain was an industrialized country, but industrial exports were not the main export of the British economy. Before 1939, the largest export product was coal. And Britain ran regularly a trade deficit for decades, which was covered by exports (both industrial and non-industrial) only by one third of the total. The other two thirds were covered by the profits of its large shipping industry and the returns on foreign investments, both in colonies like Burma or India and in countries that were not colonies like Argentina or Iran.

But when studying the dynamics of British economics in the colonial era we shouldn't be too naïve either. Once Britain controlled India, it was used as a platform to control the whole Indian Ocean and to intervene in other countries. The explotaitive agreement with Persia that led to the establishment of the (very lucrative) Anglo-Persian Oil Company in the early XX c. was backed in the end by the might of the British Indian Army. And Burma or Malaysia fell in British hands thanks to the employment of Indian troops too. Both colonies were "profitable" in an economic sense: Burmah Oil was the first large British oil company that started British investment in this important sector, and by the late 1940s and early 1950s the exports of Malaysian rubber to the USA amounted to more than the sum of all British industrial exports to the USa, and were thus of vital importance for Britain to obtain US dollars (hence their lack of enthusiasm to abandon it). As for administrative costs: all the British administration in India (and the cost of the Indian Army too) were paid by the Indian taxpayers, included the (very generous) pensions that retired functionaries and (white) officers were entitled to receive once they retired back to Britain. And if that wasn't enough, before 1914 the sterling adopted the gold standard while the Indian rupee was kept on the silver standard, while silver devaluated steadily with respect to gold, but said payments in the form of salaries and pensions to British particulars and companies had to be liquidated in pounds sterling, with the result that the drain of money from India increased steadily while the size of the British administration (or the number of British officers in its army) did not increase at the same rate.

A map from 1864, showing graphically the amount of coal that the Uk exported back then to the rest of the world:

 

[Hawkslime]

A map from 1864, showing graphically the amount of coal that the Uk exported back then to the rest of the world:
View attachment 581594

I like how the oceans are coloured white yet the North sea and the Medditerean are still blue

 

[Semper Victor]

I like how the oceans are coloured white yet the North sea and the Medditerean are still blue

Most of the coal exported by the British went to European countries and to the Mediterranean.

 

[pithorr]

So Britain was Saudi Arabia of the 1860s

 

[Semper Victor]

So Britain was Saudi Arabia of the 1860s

Yeah, exactly. The situation remained very much the same until 1914, and it took a battering due to the Great War. Coal exports resumed after the war on a lesser scale, but in 1939 Britain was still the "Saudi Arabia" of the time.

British coal had key competitive advantages over other countries: the mines were located near sea ports, it was cheap to mine (not too deep mines) and its shipping industry could ship it overseas at very competitive rates and with a regular and reliable service. Even coastal cities in countries with coal mines (like Hamburg, Amsterdam or Saint Petersburg) ran on British coal, as it was cheaper that their own national coal. The decrease in importance of coal as an energy source, the increasing search of self-suffiency in energy by European countries after the Great War and the improvements in overland rail transportation networks hit British coal exports hard.

 

[Herbert West]

That is actually quite surprising, I fell for the haigography and game representation as Britain mainly exporting industrial goods.

How does the supposed scare/innudnation of the UK with German products in the late 19th-early20th century factor into this? Was it, irony or ironies, a situation where Brits kept buying German industrial good refined using British coal?

 

[Ming]

So Britain was Saudi Arabia of the 1860s

If Saudi Arabia also had the US navy.

 

[pithorr]

If Saudi Arabia also had the US navy.

Technically they have

 

[Semper Victor]

That is actually quite surprising, I fell for the haigography and game representation as Britain mainly exporting industrial goods.

How does the supposed scare/innudnation of the UK with German products in the late 19th-early20th century factor into this? Was it, irony or ironies, a situation where Brits kept buying German industrial good refined using British coal?

That scare was mostly over nothing, and pushed by British industrialists who wanted to apply proteccionist policies and a policy of "imperial preference". Britain had electric and chemical industries, although they did not grow to be able to compete fully with the German ones until the 1920s. The only area in which the UK was truly behind was automobile manufacture, although that was reversed after 1911 thanks to American investment.

 

[Eusebio]

A map from 1864, showing graphically the amount of coal that the Uk exported back then to the rest of the world:
View attachment 581594

You say that coal was the largest single export product, but do you know its share as a % of the total value of exports? IIRC the United States' largest (maybe 2nd largest?) export product is oil, but that doesn't mean to say the US economy is driven by oil exports.

 

[Semper Victor]

You say that coal was the largest single export product, but do you know its share as a % of the total value of exports? IIRC the United States' largest (maybe 2nd largest?) export product is oil, but that doesn't mean to say the US economy is driven by oil exports.

I stand corrected; it was the second single export product. According to David Edgerton (The Rise and Fall of the British Nation), in 1920 it amounted to 10% of the exports in value (but 70% in volume), while cotton textiles amounted to 30% of the exports in 1914 (2/3 went to India) and would retain their place as the single most important item until 1939. Notice that the value of coal exports had declined since 1913 (graphic taken from Edgerton's book):

As for British investments abroad (both within the Empire and out of it), in the Edwardian era it amounted to 40% of the total amount of international investment (about 50% of all British investment went overseas), and the returns on it were huge: British capitalists received returns that amounted to one third of the value of all British exports (say as much as the cotton textiles exported), and it was practically equal in value to the total income generated by shipping companies (with the UK merchant fleet being the largest in the world). All the data are taken from Edgerton.

 

[Eusebio]

Yeah it makes sense that the export of capital was one of the major drivers of the pre-WW1 British economy. It's certainly emphasised a lot in the histories I've read of the period. Thanks for the data.

 

[treb]

As a working class lad from the norf, a full half of the country is still econoically reeling from deindusrialization, nothing has ever filled the employment void left by the collapse.