Wednesday, November 24, 2010

Fwd: Is US catching the British Disease by Barry Eichengreen

nov 24th, 2010

---------- Forwarded message ----------
From: sanjeevnayyar

In a deeper sense it is the Law of Karma at work, u reap what u sow.
The wane in America's economic and political prowess raises parallels with Britain's slump after World War II

In the US, the scent of decline is in the air. Imperial overreach, political polarization, and a costly financial crisis are weighing on the economy. Some pundits now worry that America is about to succumb to the "British disease".

Doomed to slow growth, the US of today, like the exhausted Britain that emerged from World War II, will be forced to curtail its international commitments. This will create space for rising powers such as China, but it will also expose the world to a period of heightened geopolitical uncertainty.

In thinking about these prospects, it is important to understand the nature of the British disease. It was not simply that the US and Germany grew faster than Britain after 1870. After all, it is entirely natural for late-developing countries to grow rapidly, as is true of China today. The problem was Britain's failure in the late 19th 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 such as electrical engineering, which impeded the adoption of mass-production methods. It also failed to adopt precision machinery that depended on electricity, which prevented it from producing machined components for use in assembling typewriters, cash registers and motor vehicles. The same story can be told about other new industries such as synthetic chemicals, dyestuffs and telephony, in all of which Britain failed to establish a foothold.

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Also read

1. How India became a poor country by sanjeev nayyar - examples of how British exploited India economically.


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