Introduction

By the early 1950s the US labour productivity lead over all European countries, including both Britain and Germany, had reached its peak. This was true in market services as well as in the economy as a whole, and reflected in part, at least, the much greater degree of disruption caused by World War II in Europe. Between 1950 and 1990 Britain narrowed the productivity gap with the United States, in services and in the economy as a whole, but at a slower pace than Germany. As a result, Germany overtook Britain in terms of labour productivity during the mid-1960s, again in both services and the economy as a whole.

As during the inter-war period, Britain's performance was generally poorer in sectors suitable for standardised, high-volume, low-margin business with hierarchical management, such as the railways, and rather better in sectors that remained suitable for customised, low-volume, high-margin business organised on the basis of networks, such as parts of the financial service sector. This is reflected to some extent in the benchmark estimates in table 10.1. However, general technological trends continued to favour standardisation and large-scale organisation, and more and more services became increasingly industrialised. Britain had little choice but to embrace these developments, but the transition to industrialised services was difficult, since social capabilities remained oriented towards the network form of organisation.

In considering the contrasting performances of the British, American and German economies after World War II, it is important to consider the institutional framework.