The Anxious Triumph

by Donald Sassoon

  British entrepreneurship (as opposed to the policies of the British state), however, was a major example for French steel magnates such as François de Wendel, Eugène Schneider, and Georges Dufaud, who regularly visited Great Britain.12 And so did Germany’s Alfred Krupp, who went to Sheffield in 1839 in order to ‘learn the secrets of England’s supremacy in the manufacture of steel’.13 In the middle of the nineteenth century the world produced only 70,000 annual tons of steel; 40,000 tons in the United Kingdom alone. To put this in perspective: in 2013, Greece, which ranked fiftieth in the world league of steel producers, produced 1.2 million tons, that is, thirty times more than Britain in 1850. Then, after 1856, a number of technological advances such as Henry Bessemer’s converter enabled a massive expansion of the industry.14 It also meant that, since these innovations could be quickly used by everyone, the days of British supremacy were numbered.

  Britain continued to do well even when other countries were catching up: in the 1870s productivity growth in critical industries such as iron and steel was still higher in Britain, though the United States had surpassed it by the 1890s.15 Even industrially important regions such as Bohemia and Moravia in the Austro-Hungarian Empire were well behind the United Kingdom in 1910, since their per capita industrial production was 66 per cent of Britain’s, though far better than Poland, which was still 22 per cent.16

  At the beginning of the nineteenth century, productivity in France was a little better than in Britain, but by the last quarter of the century Britain was clearly in the lead.17 French agriculture, until the end of the nineteenth century, was barely active in international markets, except for a few well-known luxury products, such as champagne and fine wines.18 France was industrializing faster than most countries, though not as fast as her nearest rivals. Between 1882 and 1907 the number of German workers increased from 10 million to 16 million; but in France there were only 3,385,000 wage earners employed by 778,000 small entrepreneurs (4.4 workers per employer). Had French agriculture been less protected by tariffs, there would have been a far greater rural exodus.

  Nevertheless by 1879 French industry, in terms of its contribution to the national economy, had almost caught up with agriculture. In 1890 the share of industry was still 29 per cent (almost the same as in 1820), while agriculture was 35.1 per cent. By 1913 industry’s share had overtaken that of agriculture (38.6 per cent and 35.3 per cent respectively).19 Services and transport recruited another 23 per cent of the workforce, with 3.2 per cent in the public sector.20

  France, as a manufacturing country, was overtaken first by Germany in 1880, then by the United States in 1914 and, by 1930, by Japan.21 Of course, by 2011 every country, except the USA, was overtaken by China in world manufacturing output. And it is estimated that China will eventually overtake the USA in terms of its share of the world economy – not surprisingly given its massive population.22 In 2011 the old pathbreaker, the United Kingdom, once the leading economic power in the world, was ninth after the USA, China, India, Japan, Germany, Russia, Brazil, and France.23 The richest countries in the world, in terms of GDP per capita, are now small countries, almost special cases, countries such as Luxembourg, Qatar, and Singapore, whether one goes by IMF or World Bank data.24

  But what about the so-called laggards? The ‘advanced’ countries do not wait passively to be overtaken; they do everything they can to keep on top. The others, those that lag behind, lag differently. Countries that have little in common are lumped together because the one characteristic they share is that they are not in the top group. Italy, in 1870, was certainly a laggard country, but so was Paraguay, and far more so. As countries ‘caught up’, new and more complex differentiations emerged.

  One of the key differentiators was the emergence of bourgeois democratic states. In 1880 most European countries still lagged behind the early starters (England and Belgium). Those who were close behind were Germany, France, Denmark, Sweden, and parts of the Austro-Hungarian Empire. In some countries belonging to this group, such as Denmark and Sweden, the establishment of bourgeois democracy occurred without revolution or violence, or internal or external strife. No revolution was required to unhinge the shackles of the old order; no struggle for national independence, as in Germany or Italy, had been necessary since these countries were already nation states; no external enemy threatened their sovereignty (though Denmark lost Schleswig-Holstein to Prussia in 1864). Modernizing reforms had been promulgated granting freedom of religion, greater equality for women, local self-government, a new criminal code, and constitutional reform.25

  Scandinavian economies were also on the move. Until the middle of the nineteenth century, Swedish exports consisted largely of primary products, wood in particular.26 This export, led by the constantly increasing demand from the United Kingdom, turned out to be the engine for Swedish economic growth.27 Norway exported fish as well as timber and Denmark specialized in food exports. Then the three Scandinavian countries developed industries directly or indirectly connected to their exports: iron and steel in Sweden, wood processing in Norway and Sweden, and food processing in Demark. All, and Sweden more than the others, achieved extremely high growth rates, catching up, in terms of per capita income, with the leading western European countries.28 Because of Sweden’s use of primary products, a capitalist economic development less dependent on the state was possible there and state intervention could be limited to infrastructure projects.29 But the state, or in this case the State Church (Svenska kyrkan – established by King Gustav I in 1526), played a key role in promoting one of the central conditions for economic growth: the development of a highly literate and educated population. The Church Law of 1686 had in fact decreed that everyone should be able to read the Bible. This made Sweden, by the mid-nineteenth century, one of the most literate countries in Europe. The real benefit of a population of competent Bible-readers was a skilled working class that contributed to the wood industry first and later to other, more sophisticated industries, and eventually to an advanced banking and financial sector.30 Swedish agriculture too underwent significant changes in the course of the nineteenth century with the development of large capitalist farms, particularly in Skåne County at the southern tip of Sweden where a new class of landless agricultural workers emerged.31

  Whereas the Scandinavian economies were too small to perturb Great Britain, Germany, by the end of the nineteenth century, emerged as a new and fearsome competitor. Had the country remained a conglomeration of statelets dominated by Prussia in the east and by Bavaria and Austria in the south, Britain would not have had much to fear, just as it never had to fear Switzerland or Sweden. But, after 1871, Germany had become the strongest state in continental Europe, and the customs union of German states, which had existed in Germany previously under the banner of the Zollverein, now had a powerful political entity as a protector, a new unified Reich.

  The Germans rejoiced. Werner Sombart, writing in 1913, announced, with a note of pride, that Germany was almost on a par with the United States as the land where the new spirit of capitalism had reached its utmost development (thanks to the organizational abilities of the Germans and their attitude towards science).32 And, with some satisfaction, he explained that the old pathbreaker, England, was on the decline. There, he claimed:

  Clear thinking has ceased to be an active and compelling influence in economic activities … The spirit of enterprise, interest in business, and love of industry are all declining … The Englishman finds pleasure in luxury, in an aristocratic manner of living, and above all in sport.33

  For a long time the British had tried to come to terms with the ‘puzzling signs’ that their own economic fate was without historical precedent and possibly fraught with danger.34 Now its undisputed lead was being disputed. The British intelligentsia was still complacent, but alarmist voices were raised, even though British decline was then more imagined than real and the country was as prosperous as ever.

  In 1907, Austin Harrison, a journalist who was briefly editor of the
Observer and later of The English Review (1909–23), wrote, somewhat torn between alarm and admiration, that since his last visit to Berlin he had noticed that German living standards had improved remarkably, leading to a development of ‘a truly prodigious kind: in shipping, national wealth, industry, commerce, population, production, consumption, prosperity’.35 Women were well dressed; one rarely saw real poverty, or drunken women; and ‘the children of the poor are much better dressed than our own’.36 While ‘a few decades ago’ Germany was divided into ‘petty principalities, petty Courts, petty policies, petty Philistinism’, now Germany was one country.37

  Ernest E. Williams was equally alarmist about Britain’s predicament. His ‘Made in Germany’ (1896) was an influential and popular contribution to the literature on British decline, a literature that has been developing ever since, repeating the same clichés, unaware that it had all been said before. Williams balanced the laziness of the British workers with the incompetence of the British entrepreneur and contrasted both, unfavourably, with German workers and entrepreneurs:

  Ask your tailor whether he would rather employ an Englishman or a German? and why? His answer will be conclusive … the cost of running a factory is less when the men are regular … the great cause of German success is an alert progressiveness, contrasting brilliantly with the conservative stupor of ourselves.38

  Arthur Shadwell’s Industrial Efficiency (1906) continued in the same vein, lamenting that ‘the once enterprising manufacturer has grown slack, he has let the business take care of itself, while he is shooting grouse or yachting in the Mediterranean’. The British worker is almost as bad since, Shadwell continued in what would become a familiar whinging mode, his motto is ‘Get as much and do as little as possible’, his main business being ‘football or betting’. Among the culprits, then as now, were seen to be excessive and obsolete regulations that handicapped the manufacturer. Government departments were ‘too indolent to … adapt regulations to changing conditions’ while ‘everybody is bent on pleasure and amusement … We are a nation at play. Work is a nuisance, an evil necessity to be shirked and hurried over as quickly as possible …’39 To strengthen his argument Shadwell quoted the occasionally bizarre views of foreigners writing letters to the British press. Here is ‘A German Resident’ writing in The National Review (June 1905):

  the majority of your workers read little but the sporting press, and care for little but betting and sport … You are even getting ready, I see, to feed the children of the poor, and next I suppose you will clothe them as well, winding up by maintaining their parents … you seem bent upon producing a nation of degenerate paupers, not of sturdy men … Your politicians appear ready to promise anything to the working-man, provided it is at somebody else’s expense … You call this democratic government; I call it the rule of the nursery. The children are to govern the wise and far-seeing men – to ruin your State in gratifying their own selfish caprices.40

  Then there is a Mr Taylor from New York, who explained in the Daily Telegraph the real reason behind English decline:

  The plain truth is the English are suffering the physical diseases which arise from excess and immorality. Your females show their physical degeneration by their excessive increase in stature, which has always been a characteristic of those ancient races which have been killed off the face of the earth by their luxuries and vices; for as human females increase in size so also they decrease in vigour, endurance and fruitfulness.41

  And a Russian in the Pall Mall Gazette:

  it is too late for you to take any action that will save your race from speedy extinction, because during the last thirty years the English people have become mentally, morally, and physically rotten to the core. If your male population only were defective there might be some chance of your regeneration; but your women have decayed also, as is clearly proved by the miserably feeble, imbecile, crippled and neurotic children which they bring into the world to be future English citizens.42

  Of course, the British elites still believed they were top of the world, while elites in other countries tended to be envious Anglophiles. But the Germans felt that they were really catching up. By 1900, Germany had a larger share of trade with other industrial countries than Britain.43 The great Anglo-German rivalry that preceded the Great War had an economic underpinning. And this was the novelty. Until then Britain’s great rival had been France. Now industrial competition had become more important than the political one or, to put it differently, economics had become the main determinant of politics. If you were on top, economically speaking, you tried to remain on top. If you were near the top, you tried to make it to the top. If you were outside the magic circle of ‘top countries’, you tried to enter it. In the world of capitalism standing still is an unaffordable luxury, hence the British anxiety about decline and decadence. The use of the word ‘decadence’, whether in The Times or in books, accelerates constantly from 1800 to 1900, before calming down. The use of the word ‘decline’ gently decreased between 1810 and 1920, then increased (with a pause during the Second World War) before decreasing again in the 1980s, paradoxically, just as capitalist growth declined.44

  There were laggards with a long way to go. Italy, for instance, though far from the bottom of the league in terms of European development (she did better than most), had a textile industry that was almost entirely pre-capitalist in terms of organization and was dominated by small entrepreneurs of rural origin craving the support of the state.45 Alessandro Rossi, one of the country’s few large-scale textile industrialists (founder of Lanerossi in 1873), though convinced of the benefits of large-scale industry, particularly his own, was equally convinced that the state should protect industry (particularly his). When it came to the so-called ‘social question’, the euphemism for helping the poor, he was an economic liberal. The state should keep out of welfare. This should be left in the hands of philanthropic entrepreneurs like himself. The way to inspire workers was through a policy of paternalism (prizes, pensions, homes, schools). Yet Rossi was a modern entrepreneur able to combine tradition and innovation and able to link up with the most advanced European business centres.46 The commitment to what we would call today ‘compassionate capitalism’ was aimed at keeping the state out of the way, unless capitalism and capitalists were in trouble, in which case the state had to intervene and save them both.

  Which foreign model to choose became a permanent preoccupation of Italian elites, though, in general, the idea was to pick and choose whatever was convenient. Odd explanations for backwardness were provided by people regarded as economic luminaries. Thus Luigi Einaudi, later President of the Italian Republic (1948–55), wrote in 1899 that the reason why the standard of living in Italy was lower than elsewhere in Europe was because of the high population density (a way of saying that there were too many people). Actually, density was higher in far more prosperous Belgium and Great Britain.47 And Einaudi added that if Italy wanted to avoid the fate of Iberian or Balkan people, it should imitate England and Germany rather than France by adopting more liberal economic policies.48 Obviously he had failed to realize that both England and Germany had turned towards liberal interventionism.

  In fact, the Italian state was far from inactive, whether run by conservatives (the so-called Destra Storica, the ‘historic right’) or the liberals. Public expenditure in the years leading up to the First World War was a considerable 16–18 per cent of GNP.49 The money was spent on traditional law-and-order duties and education, but also on public works (the railways above all, as well as the telegraph and the postal services) and on some of the infrastructure necessary for capitalist development. Private enterprise was often subsidized by the state in the form of loans and guarantees. In the Italian South there was further intervention in agriculture in the hope of alleviating poverty and keeping the landlords on the side of the new Italian state.50

  Everyone agreed on the link between industry and modernity, and on the necessity to bridge the gap with the wealthier European countries,
but also with the idea that the road to prosperity, if it were to involve a wider group of people than the elites, would go a long way towards ensuring a greater degree of legitimacy for the recently united Italy. This project, or hope, of democratization via industrial production and industrial consumption was made clear, as Ilaria Barzaghi shows with a wealth of illustrations, at the 1881 Esposizione Industriale Nazionale held in Milan in 1881, only twenty years after national unification.51

  In other Mediterranean countries, deprived of even the backward capitalism that existed in Italy, the prospects were negative. That was the case with Spain and Greece, but Portugal too stagnated in the decades leading up to the First World War, partly because of bad harvests (Portugal was highly dependent on its agriculture), partly because of the drop of remittances from Brazil.52 Its internal market was small, but it could have used the revenue of some of its exports (cork, tinned fish, wine) to fund manufacturing, yet its chances to excel in this were poor, given the competition from the more advanced European countries. Little was spent on education in spite of the country having one of the lowest literacy rates in Europe.53 Humiliated by Britain in Africa, debilitated by a chronic governmental instability (fifty-four cabinets between 1834 and 1905 and ten between 1905 and 1910), plagued by corruption at the highest levels, and further weakened by social unrest, the Portuguese monarchy collapsed shortly after the assassination of King Carlos I in 1908. A republic was proclaimed in 1910.54 The decisive force in the Portuguese ‘revolution’ had been the middle classes and an intelligentsia ideologically committed, as was that of Spain and much of Latin America, to anticlerical liberal republicanism, which made them even more distant from the traditional peasantry.