Economic History Review, LVI, 4 (2003), pp. 736–742

The Broadberry-Crafts view andthe evidence: a reply

By ALAN BOOTH

I certainly agree with Broadberry-Crafts that the extent of Britain’smanufacturing failure before 1973 has been exaggerated and that any

shortfall in aggregate productivity growth ‘cannot be explained simply bytrends in manufacturing’. I am happy to admit that I exaggerated therelative improvement made by British engineering in the long boom, butre-emphasize that data on relative performance are much more favourablethan descriptions in the literature.1 I have no intention of disputing theidea of a productivity debacle after 1973—only the contribution to thatdebacle of what occurred during the golden age. We agree also that WestGermany’s aggregate productivity lead rested heavily upon its greaterpotential to shift under-utilized resources out of agriculture. We agreeover much, but disagree essentially on the potential for structural change(where the dispute is with Crafts alone), the treatment of the Anglo-German comparison, and the question of scale.

I

Half of my critique of Broadberry-Crafts repeated the view of Denison,Kaldor, Temin and, I think, Broadberry that Britain’s postwar relativeretardation derived in substantial part from its small agricultural sectorand the limited potential for structural change.2 Passages in the‘Restatement’ expose the tensions present in this joint statement byBroadberry and Crafts on this fundamental issue. The basic shift-sharecalculations allocating to intrasectoral productivity growth a much largerrole than structural change create reservations that appear in footnote16.3 These are anaemic when compared with previous observations madeby Broadberry on basic shift-share methodology. For instance, in 1998,he noted that ‘A major problem with the basic shift-share approach is thatit assumes that productivity growth in each sector would be unaffected bythe absence of structural change. Thus, for example, during the period

1 Broadberry’s benchmarks suggest that both UK-US and UK-German productivity gaps inengineering changed little between the mid-1930s and the later 1960s (Productivity race, tabs. A2.1,A2.2). Contrast this with the literature on the power of German, and the weakness of UK,postwar engineering.

2 Denison, Why growth rates differ, pp. 218-24; Kaldor, Causes; Temin, ‘Golden age’; Broadberry,‘How did the US and Germany overtake Britain?’.

3 The methods of van Ark and Maddison in calculating the impact of structural change differ(see Maddison, ‘Macroeconomic accounts’, pp. 61-2), but van Ark recognizes that his approach isopen to the criticism levelled by Broadberry and discussed below: van Ark, ‘Sectoral growthaccounting’, p. 97.

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1950 to 1990, agriculture experienced extremely rapid labour productivitygrowth … [b]ut it is simply not credible that labour productivity inGerman agriculture would have grown at 5.9 per cent per annum ifagriculture had continued to employ 24.3 per cent of the labour forceas it did in 1950.’4 He duly followed Denison and modified the shift-sharecalculation to make more realistic assumptions. His 1998 conclusions forthe long period 1870-1990 were stark: ‘using the basic shift-share method,internal [intrasectoral] productivity growth accounts for the bulk ofaggregate productivity growth … Using the modified shift-share method,however, we see that structural change accounts for a significant portionof aggregate labour productivity growth in [the UK, US, and WestGermany]. The effect of structural change is sufficient to account for thebulk of the Germany-UK aggregate labour productivity growth differen-tial, and to more than account for the US-UK differential, since thedecline of agriculture was more than pronounced in the US and Germancases.’5 Thus, the judgement in the ‘Restatement’ that two-thirds ofGermany’s aggregate productivity lead came from intrasectoral growthrests on a method that Broadberry previously regarded as ‘simply notcredible’. Denison, whose methodology Broadberry adapted, found thatthe bulk of variation in productivity growth between developed countriesin the period 1950-62 derived from differing potential for structuralchange and nothing in the ‘Restatement’ undermines that view.6

II

The Broadberry-Crafts comments on Anglo-German comparisons alsoraise issues of fundamental methodological importance. They argue thatthe correct period for study is 1950-79 and that the cause of the Britishproductivity debacle in the 1970s was the culmination of the longer runproblems in manufacturing that centred on weak incentive structures andunhelpful institutional arrangements in ‘the postwar settlement’. But theAnglo-German labour productivity differential in manufacturing wideneddramatically at the start and end of the period 1950-79. A total of 83.3per cent of Germany’s relative gain occurred in eight years, 1950-2 and1973-9. Germany’s manufacturing productivity growth was only mar-ginally faster in the remaining 21 years, and in the period 1959-73German and British labour productivity growth in manufacturing werevery similar, within the margins of error of this exercise. Broadberry andCrafts wish away these peculiar dynamics (table 4 and associatedcomments) but there is no reason to alter my view of a cumulativeimprovement in Britain’s manufacturing performance relative to Germany

4 Broadberry, ‘How did the US and Germany overtake Britain?’, p. 388.5 Ibid, p. 389.6 Denison, Why growth rates differ.

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Table 1. The German manufacturing productivity lead over the UK,measured across trade cycle peaks, 1950-1979

(percentage rate of growth in output per worker for the period stated)

1950-5 3.041955-60 0.571960-73 0.261973-9 2.79

Source: Broadberry, Productivity race, pp. 44-50

in the long boom. Table 1 here shows that there is no evidence thatGerman manufacturing ‘systematically outperformed’ the UK over thewhole period, unless ‘systematically’ and ‘outperformed’ are devoid of allmeaning. Table 1 also suggests that Britain’s productivity debacle of1973-9 could have ‘culminated’ from weaknesses evident in the longboom only if ‘culmination’ has a meaning known uniquely to Broadberryand Crafts. Explanations of Britain’s industrial ‘failure’ relative toGermany must focus on the two short phases in which that ‘failure’was concentrated.

III

There are substantial methodological problems with the Broadberry-Craftsapproach to incentive structures and institutional configurations. Theyseek to tell a comparative story, but on incentive structures they haveonly national data. Their regressions are interesting but cannot performa comparative job; they accept this difficulty, but then press on regardless.They also state quite clearly that ‘manufacturing, which accounted foronly about one-third of British employment during the period, was toosmall relative to the economy as a whole to account for anything likethe total productivity shortfall in these years’.7 However, they have persist-ently tested hypotheses on incentive structures and institutional forces,which are supposedly aggregate in scope, on manufacturing datasets. Noamount of sophisticated econometric testing can make a comparative,aggregate analysis from national, sectoral data. The comparative work oninstitutions upon which Broadberry and Crafts draw is little better. Theproblem here is to explain relatively small differences in national growthrates by differences in national bargaining frameworks. There areinvariably problems with both sides of the equation. Controls for catch-up potential, size of the war shock, potential for structural change, andother fairly obvious determinants of the aggregate growth rate areextremely rare. Eichengreen, cited by Broadberry-Crafts, wishes the prob-lem away.8 The usual method of ‘analysing’ institutional structures is to

7 Broadberry and Crafts, ‘Restatement’, p. 726.8 Eichengreen suggests that convergence and spring-back are influenced by the extent of consensus

in bargaining arrangements. The extent of consensus is not measured empirically, but seems to beinferred from the growth rate: ‘Institutions and economic growth’.

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describe peak level agreements; but to try to understand institutionalstructures more deeply and rigorously and use them to explain nationaleconomic performance is ultimately disappointing.9 Broadberry-Crafts, forexample, offer Germany as a case of centralized bargaining even thoughit is a mixed system, with framework agreements negotiated nationallyand implementation based on decentralized plant bargaining in workscouncils.10 Institutional ‘analysis’ is plagued by these definitional prob-lems.11

IV

Finally, we come to the related questions of scale, mass production, andheavy industry. Although I clearly stated that ‘Scale … explains part ofthe US-UK manufacturing productivity gap during the long boom. Butit can explain only part’, Broadberry and Crafts interpret this as dismissingarguments related to scale of production.12 My judgment was based onan assessment of existing studies and the idea of manufacturing footprints.Using a sample of approximately 50 per cent of manufacturing outputin each country, Davies and Caves pointed to the wide variability ofBritish productivity (relative to the US) in industries characterized bylarge establishments. British plant did not achieve economies of scalewhere these were available in US conditions.13 However, Davies andCaves did not comment on the relative sizes of the sectors in whichscale economies were and were not realizable in US conditions. Praisconcentrated on the industrial relations problems of giant firms, but theseaccounted for a small part of manufacturing output.14 Clearly, the sizeof establishment is an imperfect guide to the potential for scale economies,a point forcibly made by Scranton and implicit in Davies-Caves.15 Sohow big is this under-performing sector? Table 2 here identifies fromPrais those sectors where the upper quartile plant size is above the averagefor all manufacturing and adopts Scranton’s typology of production styles.In general, we might expect economies of scale to accrue more to‘routinized’ (mass and volume) production than to ‘specialty’ (unit andbatch) production. Mixed formats comprise both routinized and specialtyproduction, with their respective potential for economies of scale.16 Estab-lishments in the upper quartile accounted for approximately 30 per centof the total for manufacturing as a whole.17 The share of routinizedproduction is a matter of guesswork, but two-thirds is a very generous

9 Booth et al., ‘Institutions and economic growth’, p. 438.10 Markovits and Allen, ‘Trade unions’, pp. 120-1; Crouch, Industrial relations, pp. 208, 21.11 Booth et al., ‘Institutions and economic growth’, p. 418.12 Booth, ‘Manufacturing failure hypothesis’, p. 17.13 Davies and Caves, Britain’s productivity gap, pp. 70, 102.14 Prais, Productivity and industrial structure, p. 262; Booth, ‘Manufacturing failure hypothesis’, p. 15.15 Scranton, Endless novelty, p. 8. Davies and Caves note the variability in relative efficiency in

UK large plant: Britain’s productivity gap, p. 70.16 For definitions see Scranton, Endless novelty, pp. 10-22.17 Using upper quartile plant size from Prais, Productivity and industrial structure, tab. 3.4 and

shares of output estimated from Booth, ‘Manufacturing failure hypothesis’, tab. 5.

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Table 2. Upper quartile plant size in British manufacturing, type of industryand format of production, UK, 1970-1973

Number of workers Type of industry Production format

All manufacturing 1,490Mineral oil refining 1,910 Heavy RoutinizedFerrous metal manufacture 4,220 Heavy MixedGlass 1,500 Light MixedElectrical engineering 2,310 Heavy MixedMotor vehicles 7,200 Heavy RoutinizedShipbuilding 7,000 Heavy SpecialtyAerospace 6,000 Heavy SpecialtyTobacco 7,000 Light RoutinizedRubber processing 2,910 Heavy Mixed

Note: only those industries with an upper quartile size greater than the average for all manufacturing havebeen recorded.Sources: Row headings and col. (1): Prais, Productivity and industrial structure, tab. D3; col. (2): ibid., tab. 2.2; col.(3): Historical record of the census of production, tab. 7, using the definitions of Scranton, Endless novelty.

estimate. Thus, at the absolute maximum, failure of mass production inheavy industry occurs in 20 per cent of net manufacturing output.

The idea of manufacturing footprints was designed to help put the sizeof this ‘failure’ into perspective.18 The manufacturing footprint is animprecise measure but it can indicate whether differences in comparative(in)efficiency are concentrated within part or distributed throughout thedistribution of plant sizes. My calculations suggest that the Anglo-USproductivity gap is of approximately the same order of magnitude forestablishments of all sizes. Significant differences may exist in the verylargest plant, but in general the proportion of manufacturing output andthe relative productivity measures of the footprint are similar in the twocountries.19 This in turn implies that accounts of the ‘failure’ of Britishmanufacturing to achieve US levels of labour productivity are moreconvincing if they focus on issues unrelated to the scale of productionin subsets of manufacturing. Simple compositional arithmetic suggeststhat explanations of large productivity gaps are more likely to carryconviction if they apply equally to the whole population of establishmentsthan to a small proportion.

V

Finally, reservations about the empirical foundations of the Broadberry-Crafts view are emerging. Ward and Devereux recognize the value ofMaddison’s long span back projections, but suggest alternative methodsof calculating purchasing-power-parity-adjusted estimates of UK and US

18 Defined in Booth, ‘Manufacturing failure hypothesis’, pp. 15-16.19 Ibid., tab. 5.

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living standards and productivity since 1872.20 As the Broadberry-Craftsview was built on and derives its key turning points (British failure firstduring the ‘second industrial revolution’ and subsequently in the longpostwar boom until rescued by Thatcherism) from Maddison, Ward andDevereux’s conclusions are relevant.

First, [these new estimates] reveal that the United States, not the UnitedKingdom, had the lead in per capita income and output per worker as earlyas 1872…. Second, they show that the United Kingdom maintained itsstanding relative to the United States prior to the First World War, castingdoubt on many of the explanations of Britain’s relative decline. Third, wefind that the largest portion of the United Kingdom’s relative decline occurredbetween the First World War and 1950. Finally, [they] show that the UnitedKingdom performed substantially better after 1950 than is currently believed.21

These new estimates also suggest that the pace of relative improvementin output per worker was virtually identical in the periods 1955-73and 1973-90.22 To repeat, these are estimates of aggregate rather thanmanufacturing performance, but they question pretty fundamentally thebroad dynamics of the Broadberry-Crafts story.

University of Exeter

First submitted 19 December 2003Accepted 23 December 2003

20 Ward and Devereux, ‘Measuring British decline’.21 Ibid., p. 828.22 Ibid., tab. 6.

Footnote referencesvan Ark, B., ‘Sectoral growth accounting and structural change in post-war Europe’, in B. van Ark

and N. F. R. Crafts, eds., Quantitative aspects of post-war economic growth (Cambridge, 1999),pp. 84-164.

Booth, A., ‘The manufacturing failure hypothesis and the performance of British industry duringthe long boom’, Econ. Hist. Rev., LVI (2003), pp. 1-33.

Booth, A., Melling, J., and Dartmann, C., ‘Institutions and economic growth: the politics ofproductivity growth in West Germany, Sweden and the UK, 1945-55’, J. Econ. Hist., 57 (1997),pp. 416-44.

Broadberry, S. N., The productivity race: British manufacturing in international perspective, 1850-1990(Cambridge, 1997).

Broadberry, S. N., ‘How did the United States and Germany overtake Britain? A sectoral analysisof comparative productivity levels, 1870-1990’, J. Econ. Hist., 58 (1998), pp. 375-407.

Crouch, C., Industrial relations and European state traditions (Oxford, 1993).Davies, S. and Caves, R. E., Britain’s productivity gap (Cambridge, 1987).Denison, E. F., Why growth rates differ: postwar experience in nine western countries (Washington,

DC, 1967).Eichengreen, B., ‘Institutions and economic growth: Europe after World War II’, in N. F. R. Crafts

and G. Toniolo, eds., Economic growth in Europe since 1945 (Cambridge, 1996), pp. 38–72.Kaldor, N., Causes of the slow rate of growth of the United Kingdom (Cambridge, 1966).Maddison, A., ‘Macroeconomic accounts for European countries’, in B. van Ark and N. F. R.

Crafts, eds., Quantitative aspects of post-war economic growth (Cambridge, 1999), pp. 27-83.Markovits, A. S. and Allen, C. S., ‘Trade unions and the economic crisis: the West German case’,

in P. Gourevitch et al., eds., Unions and economic crisis: Britain, West Germany and Sweden (1984),pp. 89-188.

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Prais, S. J., Productivity and industrial structure: a statistical study of manufacturing industry in Britain,Germany and the United States (Cambridge, 1981).

Scranton, P., Endless novelty: specialty production and American industrialisation, 1865-1925(Princeton, 1997).

Temin, P., ‘The golden age of European growth reconsidered’, Eur. Rev. Econ. Hist., 6 (2002),pp. 3-22.

Ward, M. and Devereux, J., ‘Measuring British decline: direct versus long span income measures’,J. Econ. Hist., 63 (2003), pp. 826-51.

Official publicationsBusiness Statistics Office, Historical record of the census of production, 1907-1970 (1978).

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