In the United States, 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.”Read the article to find Eichengreen's answer to this question!
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 like 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 America 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 nineteenth 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 like 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 like synthetic chemicals, dyestuffs, and telephony, in all of which Britain failed to establish a foothold.
The rise of new economic powers with lower costs made employment loss in old industries like textiles, iron and steel, and shipbuilding inevitable. But Britain’s signal failure was in not replacing these old nineteenth-century industries with new twentieth-century successors.
Is America doomed to the same fate?
Eichengreen's closing comment should get American's attention: he claims that the English example -- and the reason for its decline -- is highly relevant to the US.