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The ability of a nation to earn its way in the world rests primarily on its productivity: its capacity to marshall its human and mechanical resources to produce goods that can compete with those of other nations in the world marketplace. Only then does it earn enough income to buy the things it imports. For most of the postwar years, Britain's productivity has failed to keep pace with that of its competitors. Among the major industrial nations, Britain since 1951 has had the slowest rise in productivity, the lowest rate of investment in private enterprise and the largest rise in its export prices. In its case, the equation is doubly exacting; poor in natural resources, Britain must import much of its food and the raw materials for the goods it makes.
Both British management and successive governments are to blame for not pumping enough of the right kind of investment into industry to modernize it or, in spite of all the export campaigns, for not really getting out and hard-selling British goods. The job of salesman holds little status in Britain and, for that matter, business itself still tends to be looked down upon as the domain of the hustling parvenu or the disdainful "gentleman amateur."
Needing Every Penny. Labor, too, with its fierce class antagonisms still smoldering and its "I'm all right Jack" attitudes, has stoutly resisted any modernization of British industry that infringed on shop-hardened rituals. The unions' push for wages, backed by a proclivity for wildcat strikes unmatched in any country, sent hourly earnings soaring some 40% from 1960 to 1966. While Britain's productivity grew by only 18%, West Germany's was rising 29% and Italy's 40%. The result was that British goods were priced out of the market, while Britons used their money to buy more and more foreign, imported goods.
Britain's pretensions to playing the role of a great power added to her trade-imbalance difficulties. She still keeps fairly large worldwide defense commitments, last year gave $630 million in foreign aid. For most countries, their money is their own, to use as they wish abroad. But the British pound, as a reserve currency, is used much like an international money by traders and central banks the world over. The U.S. can afford to let its money be used by others; Britain, needing every penny it mints, no longer can, but has long insisted on continuing to try. The result is that when the Bank of England is driven to the wall to defend sterling, it may discover that as much as 75% of the supply of pounds extant is in the hands of foreigners—and out of reach.