WI British Economy Maintains Dominance

[John Fredrick Parker]

Stemming from this thread, and likely using this as a PoD:

What if Britain's manufacturing output grew more than OTL, maintaining Britain's position relative to Europe? What are the geopolitical effects? Does WWI still happen? What else?

CLARIFICATION: Oh, the idea is Britain maintains this edge until at least 1890, as opposed to seeing its growth lag in the 1870's. Sorry, should have given dates earlier

[Typo]

How would this be possible?

Britain only have so many people and so much resources, how does this happen?

[John Fredrick Parker]

Here are the posts that put it best:

Originally Posted by philjd

Britain really pushes free trade and the other nations are persuaded to adopt it.. this enables some threatened industries to remain their competativeness in the global market place...
Also, there is a possibility of Government, slim admitedly, of bringing in some of exchange controls, and trying to persaude UK capital to invest more in British Industry (or Imperial?) rather than fostering overseas competitors - however, some of the Governments oversea aid was used to build railroads etc using British sourced material (South America especially), so more of this kind could be done?

Originally Posted by robcraufurd

If we work on the assumption that an investment in industrial machinery provides at least a limited fix to the decline issue, then providing an incentive to invest is obviously necessary. Prior to 1965 companies were taxed under the same rules as individuals. But what if Robert Lowe, the chancellor in 1868-1873- and, incidentally, the man who created modern company law- had proposed a change to the income tax regime to allow companies to deduct the cost of machinery purchased from their chargeable profits?

It's not entirely unrealistic, given that Lowe reforms taxes in various other ways, and it's simplistic enough to be plausible as a Victorian reform (as opposed to the convoluted nightmare of capital allowances we have today). There should be little problem funding it given that 1870-1874 saw the government run surpluses each year and drop the rate of income tax to boot. On the other hand, it's an entirely hindsight-driven suggestion and, given that the rate of tax was 4d in the pound, might not be enough of an incentive for business-owners to plough money into machinery.

Oh, and I edited the first post

[Typo]

Also, there is a possibility of Government, slim admitedly, of bringing in some of exchange controls, and trying to persaude UK capital to invest more in British Industry (or Imperial?) rather than fostering overseas competitors - however, some of the Governments oversea aid was used to build railroads etc using British sourced material (South America especially), so more of this kind could be done?

How does this solve the problem of limited labor in Britain?

You have the capital, but labor is going to become a problem eventually, also, those industries are going to be less competitive, for one since raw material would needed to be imported.

If we work on the assumption that an investment in industrial machinery provides at least a limited fix to the decline issue, then providing an incentive to invest is obviously necessary. Prior to 1965 companies were taxed under the same rules as individuals. But what if Robert Lowe, the chancellor in 1868-1873- and, incidentally, the man who created modern company law- had proposed a change to the income tax regime to allow companies to deduct the cost of machinery purchased from their chargeable profits?

The thing is I don't see how essentially lowering taxes is going to save British industry on the long run, they might be slightly more competitive on the short-run. But if it makes that big of a difference, there's no reason why other countries can't simply copy it

The fundamental problem is that Britain by 1880s was a fully developed industrial country, while everyone else was -underdeveloped-.

[John Fredrick Parker]

The thing is I don't see how essentially lowering taxes is going to save British industry on the long run, they might be slightly more competitive on the short-run. But if it makes that big of a difference, there's no reason why other countries can't simply copy it

The fundamental problem is that Britain by 1880s was a fully developed industrial country, while everyone else was -underdeveloped-.

AIUI, Britain's most immediate problem with being fully industrialized was that it had come to rely on outdated machinery, with little incentive to replace it; that's how nations like Germany could surpass Britain building from scratch, because they were buying the most advanced machinery out there.

Giving factories tax incentives to replace their machinery would go aways in rectifying that, buying British economic growth edge a couple of decades, maybe.

[Typo]

Why weren't there incentive?

[John Fredrick Parker]

Because, Britain already had the machinery in place, and new investments are risky.

That's what I understand, anyway.

[Typo]

If Germany's new Machinery was giving them such huge advantages, wouldn't it stands to reason that Britain's intelligent Capital holding class would be able to have identified this and also invested in new Machinery?

If this was the case, I do not recall a point where Britain's relative decline got less steep before WWI.

[John Fredrick Parker]

If Germany's new Machinery was giving them such huge advantages, wouldn't it stands to reason that Britain's intelligent Capital holding class would be able to have identified this and also invested in new Machinery?

Capitalists tends to be conservative -- if they has something making money, they're reluctant to adapt what they have to new ways if it requires more capital. Bird in the hand and all that.

We're seeing something roughly similar with energy efficiency today -- making the needed investment is easier said than done, when all the businessman is thinking about is money saved versus money invested, even if the former is larger than the latter.

But craft some government tax breaks, external price controls, etc -- then you see a lot more willing investors...

If this was the case, I do not recall a point where Britain's relative decline got less steep before WWI.

The 1870's weren't so much notable as a period of British decline, as a shrinking of British economic dominance, largely due to other nation's growing at a much faster rate. This illustrates part of what I'm talking about:



What I'm trying to picture is an ATL where this trend is delayed; that's my intent with this thread.

[philjd]

Originally Posted by Typo

How does this solve the problem of limited labor in Britain?
The fundamental problem is that Britain by 1880s was a fully developed industrial country, while everyone else was -underdeveloped-.

Two points:-
The industries that provided the backbone of British dominance became subject to exorbitant import duties by other countries - the worst example being raw iron and steel, both of which became subject to an import duty of 100% in the US, thus coddling the US steel industry. If these duties are not imposed then it encourages investment in productivity improvements in the UK as it would run out of capacity, either plant or labour.

Second point. Yes, for a given level of industrialisation there is an equality of capability that is restricted by machinery, labour and material, hence the larger population produces a greater volume. However, like all such equations, its fine in theory, but RL never quite works that way, or else the industrial revolution nor the manufacturing revolution etc etc would happen, innovation brings changes and improvements (hopefully) that everyone else has to catch up with. eg mass production techniques pioneered in the US took 50 years to be universally adopted.

[John Fredrick Parker]

The industries that provided the backbone of British dominance became subject to exorbitant import duties by other countries - the worst example being raw iron and steel...

Reversing this loss after 1870 may be tricky; if Britain still loses raw Steel and Iron dominion, what other industries could they maintain their hold in?

I'd also like to get this back to the question of the thread, being: What are the effects of British manufacturing growth staying high relative to Europe until at least 1890's?

[John Fredrick Parker]

For example, here's something I'm still trying to figure -- if I'm calculating right, this extra growth means Britain has a manufacturing output by 1900 about that of the US, and much higher than Germany, or the rest of Europe (except Germany) put together.

If I'm not mistaken, does this mean Britain can defeat Germany sooner in WWI, without the US getting involved (obviously, assuming butterflies don't stop the war itself...)

[Typo]

The industries that provided the backbone of British dominance became subject to exorbitant import duties by other countries - the worst example being raw iron and steel, both of which became subject to an import duty of 100% in the US, thus coddling the US steel industry. If these duties are not imposed then it encourages investment in productivity improvements in the UK as it would run out of capacity, either plant or labour.

True, but it was not Britain's decision whether to impose those duties either.

Imposing Tariff's to allow native industries to grow is pretty fundamental part of economics.

Capitalists tends to be conservative -- if they has something making money, they're reluctant to adapt what they have to new ways if it requires more capital. Bird in the hand and all that.

I'm not quite sure I agree with that assertion

We're seeing something roughly similar with energy efficiency today -- making the needed investment is easier said than done, when all the businessman is thinking about is money saved versus money invested, even if the former is larger than the latter.

But craft some government tax breaks, external price controls, etc -- then you see a lot more willing investors...

Granted

What I'm trying to picture is an ATL where this trend is delayed; that's my intent with this thread.

By how long?

[Grey Wolf]

A major war in the 1870s-1880s might do it, pointing out all the deficiencies creeping in and allowing change to be made in time


Best Regards
Grey Wolf

[John Fredrick Parker]

By how long?

I'm looking to delay the relative decline which began in the 1870's OTL until the 1890's.

A major war in the 1870s-1880s might do it, pointing out all the deficiencies creeping in and allowing change to be made in time

Had not thought of that

[mowque]

Originally Posted by Grey Wolf

A major war in the 1870s-1880s might do it, pointing out all the deficiencies creeping in and allowing change to be made in time


Best Regards
Grey Wolf

But with who, the USA?

[John Fredrick Parker]

But with who, the USA?

If this is the 1870's, France is recently curbstomped, and Prussia is rising; I'm still undecided on this option myself.

But back to the question: What are the effects of British manufacturing growth staying high relative to Europe until at least 1890's?

[John Fredrick Parker]

Here's some ideas: if relative decline starts in the 1890's, by 1900 Britain could still well be producing a fourth of the world's manufactured goods.

This could mean British Empire is less formal; from Wikipedia:

By the time Benjamin Disraeli ushered in the age of New Imperialism with his watershed Crystal Palace Speech, which was delivered by no mere coincidence after the Franco-Prussian War and during the Long Depression, Britain was no longer the world's sole modern, industrial nation. Pessimists thus inferred that unless Britain acquired secure colonial markets for its industrial products and secure sources of raw materials, the other industrial states would seize them themselves and would precipitate a more rapid decline of British business, power, and standards of living. The prospect of having to compete to remain the forerunner of the world's economies and empires due to recent changes in the global economy and continental balance of power thus left it ripe for Disraeli's Conservative rule in the 1870s, which would usher in an era of extreme national rivalry that would one day culminate in the Great War.

In this sense, historian Bernard Porter argues that formal imperialism for Britain was a symptom and an effect of its relative decline in the world, and not of strength. Symbolic overtures, in fact, such as Queen Victoria's grandiose title of "Empress of India", celebrated during Disraeli's second premiership in the 1870s, helped to obscure this fact. Joseph Chamberlain thus argued that formal imperialism was necessary for Britain because of the relative decline of the British share of the world's export trade and the rise of German, American, and French economic competition.

Conversely, it could also mean that Victorian norms and social ideas -- in terms of gender, social darwinism, free trade, and so forth -- could have even more heft globally around this time.

[Grey Wolf]

Would a Crimean War Mark 2 help if 1878 blows up into a war against Russia? IIRC that had the biggest war scare in this period.

Best Regards
Grey Wolf

[MNP]

Could there be a focus on building production in India to take advantage of those resources?

I am not familiar with the industrial potential of India however it might require the full abandonment of the idea that colonies exist to serve as resources for the mother country to use.