Gee. I go off to Ohio State and Barry Eichengreen becomes depressed:
Is America Catching the “British Disease?”: Imperial overreach, political polarization, and a costly financial crisis.... [I]t is important to understand the nature of the British disease. It was not simply that America and Germany grew faster than Britain after 1870.... 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... failed to adopt precision machinery that depended on electricity, which prevented it from producing machined components.... 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? Answering this question requires understanding the reasons behind Britain’s lack of technological progressiveness... Britain failed to put in place an effective competition policy. In response to the collapse of demand in 1929, it erected high tariff walls. Sheltered from foreign competition, industry grew fat and lazy. After WWII, repeated shifts between Labour and Conservative governments led to stop-go policies that heightened uncertainty and created chronic financial problems. Herein lies the most convincing explanation for British decline. The country failed to develop a coherent policy response to the financial crisis of the 1930’s. Its political parties... remained at each other’s throats... politics grew fractious... policies erratic... finances increasingly unstable.
In short, Britain’s was a political, not an economic, failure. And that history, unfortunately, is all too pertinent to America’s fate.