[Artigo] David Coates Shadows of the Past in the Making of the Future, Models of Capitalism and British Imperialism

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1 
 
 
 
Was there a distinct British model of capitalism that the global financial crisis has exposed or is Britain better seen 
as having developed a variant of a more ‘liberal’ or ‘Anglo-liberal’ economic model? Either way, when did this 
distinctive model date from, how has it been sustained over time, and what its sources of systemic weakness? 
 
 
 
Shadows of the Past in the Making of the Future: Models of Capitalism and British 
Imperialism 
David Coates 
Paper prepared for the SPERI Inaugural Annual Conference 
The British Growth Crisis: The Search for a New Model 
University of Sheffield, July 16-18, 2012 
 
 
 
“London stays top of finance league.” (The Financial Times March 19, 2012) 
 
“The UK has a strategic nightmare: it has a strong comparative advantage in the world‟s most irresponsible industry. 
So now, in the wake of the biggest financial crisis since the 1930s, the UK must ask itself a painful question: how 
should the country manage the cuckoo sitting in its nest?” 
 (Martin Wolf, “Why Britain has to curb finance,” The Financial Times May 22, 2009, p. 9) 
 
 
 
David Coates 
Worrell Professor Anglo-American Studies 
Wake Forest University, 
Winston-Salem, NC 27106, USA 
coatesd@wfu.edu 
www.davidcoates.net 
2 
 
 
 
It is conventional in much of the comparative political economy literature on models of 
capitalism to treat the US and the UK economies as examples of one particular capitalist model, 
to be contrasted with one/more other models invariably treated as socially superior but 
economically suspect. Sometimes the typology is that of liberal market economies against co-
ordinated market economies.
1
 Sometimes it is Anglo-Saxon capitalism against Rhineland 
capitalism.
2
 Sometimes it is liberal welfare states against conservative and social-democratic 
welfare states;
3
 but regardless of the specific categorization, there is a tendency in the relevant 
literatures to group the US and the UK together.
4
 This paper will suggest that putting them 
together has some virtues and some dangers, that those dangers are significantly lessened if the 
typology is redesigned, and that within a new typology the present condition and future needs of 
the UK economy can be better grasped – in part by contrasting its condition and needs with those 
of the United States. 
I 
Prime responsibility for linking the US and UK together as liberal market economies lies 
with Peter Hall and David Soskice.
5
 Though their predominant concern was visibly with the 
defense of co-ordinated market economies, they did unwittingly concede the Thatcherite point 
that the UK‟s late twentieth century economic weaknesses had much to do with the partial nature 
of the constraints on private enterprise created by years of half-hearted social democracy.
6
 By 
treating both the US and UK as non-coordinated economies, Hall and Soskice drew attention to 
the distance between government and business in both of them, the weakness within them of 
organized labor when compared to more coordinated market economies, and the predominance 
of idea systems within the liberal model privileging the right of managers to managed and of 
capital freely to move. One problem with the categorization was that it treated all sectors of each 
economy as though they were similar – the homogenization problem. Another was that it played 
down the differing degrees of public provision of both capital and welfare in the US and UK – 
the compression problem. Yet a third was that it provided no analytical tools through which to 
 
1
 So, for example: “the broad argument presented here is that the UK does conform to a liberal model of capitalism, 
not least in terms of the centrality and modes of organization of the financial services sector, but that the terrain is 
more contested in the UK than in the US.” (Wyn Grant, „Was there ever an Anglo-American model of capitalism?” 
in Terrence Casey (editor), The Legacy of the Crash: How the Financial Crisis Changed America and Britain. New 
York: Palgrave Macmillan, 2011, p. 22). Also Andrew Gamble, Between Europe and America: the Future of British 
Politics. New York, Palgrave Macmillan, 2003, pp. 102-107. 
2
 Michel Albert, Capitalism Against Capitalism, London, Whurr Publishjers, 1993. 
3
 Gosta Esping Andersen, The Three Worlds of Welfare Capitalism, Princeton, Princeton University Press, 1990. 
4
 For the history of this tendency, and on recent changes justifying it, see James Cronin, “Convergence by 
Conviction Politics and Economics in the Emergence of the „Anglo-Saxon‟ Model,” Journal of Social History, 33(4), 
2000, pp. 781-804. 
5
 “Among the large OECD nations, six can be classified as liberal market economies (the USA, Britain…” (Peter 
Hall and David Soskice (editors), Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. 
Oxford, Oxford University Press, 2001, p.19) 
6
 “But, because international liberalization enhances the exit options of firms in LMEs….the balance of power is 
likely to tilt towards business. The result should be some weakening of organized labor and a substantial amount of 
deregulation, much as conventional views predict.” (ibid, p. 57) 
3 
 
explain differential economic performance either between the economies or by each of the 
economies over time – the static/dynamic problem. Nor did the initial variety-of-capitalism 
formulation draw attention to dangers created by too great a gap between governments and 
business, or make any moral judgment on the adequacy of the welfare net associated with 
market-based social provision. 
Certain of these earlier defects are clearer now. The dangers of deregulating financial and 
housing markets were underscored by the credit-crunch of 2008. The social cost of uncontrolled 
income inequality was brought home by the scale and character of the 2011 Occupy Wall Street 
Movement; and the degree of interconnectedness between the US state and major sectors of US 
business (from oil and agriculture to military production and private security) was daily 
illuminated by the blatant imperialism of the Bush Administration. The best of the new 
institutionalist scholarship has now recognized the dangers of functionalism and economic over-
determination in the original variety-of-capitalism formulations,
7
 and certain of the new 
institutionalists (most notably, Wolfgang Streeck) are at last engaged again with the key 
dimension of the models that Marxist scholarship has long recognized: namely that the models 
being analyzed are all capitalist ones.
8
 These intellectual moves have improved the capacity of 
the relevant literature to handle complexities of institutional form within particular economies 
(no longer treating ideal types and real economies as though they are the same thing); and have 
freed up our capacity to explain differential economic performance over time, and indeed the 
reappearance of crisis (by recognizing the presence, within each model, of core capitalist 
contradictions). But we are still no nearer explaining why, in the original typologies, it did make 
a certain kind of sense, and yet was still something of a stretch, to put the US and the UK in 
some analytical box together. 
To explain that, we need to refine the typologies once more, this time building on the 
recognition that the US and UK economies have long shared two features that set them apart 
from even Germany and Japan. One feature is that they were both Stage 1 capitalisms, not Stage 
2 capitalisms (the distinction is from Coates and Looker, detailed below
9
). The other is that they7
 In particular, the scholarship of Colin Crouch and Vivien Schmidt: reviewed in David Coates, “Behind and Beyond 
the Diversity of Contemporary Capitalism,” paper prepared for the conference on Comparison, Analysis, Critique: 
Critical Perspectives on the Diversity of Contemporary Capitalism, Frankfurt, February 2012 
8
 Wolfgang Streeck, Taking Capitalism Seriously: Towards an Institutionalist Approach to Contemporary Political 
Economy, MPifG Discussion Paper 10/15. Cologne, Max Plank Institute for the Study of Societies, 2010 
9
 “In first wave capitalisms, those which began the process of capitalist industrialization on a significant scale in the 
first half of the nineteenth century - notably Britain, the Low Countries, the USA and, more problematically, France 
– industrialization followed a relatively lengthy period of internal social differentiation which had already brought 
about significant shifts from pre-capitalist to capitalist modes of production in key economic sectors before factory 
production was introduced…in the first wave capitalisms, it was the bourgeoisie who set the pace, presiding over an 
industrialization process whose tempo was, in retrospect, relatively slow, but whose reach and penetration into the 
economy was relatively thorough and dense from early on. Second wave capitalisms – German, Russia and Japan – 
were rather different. Their industrialization on a significant scale began in the latter part of the nineteenth century. 
Here the impulse towards capitalist industrialization arose less from the internal evolution of their societies than 
from external pressures working on their ruling groups from an emerging industrial capitalist world. In these 
societies….the industrial bourgeoisies…were weaker, and more dependent on pre-capitalist ruling groups, and 
indeed it was the national-military needs of these autocratic regimes which often provided the key impetus to 
industrialization as such. The state apparatus tended in consequence to preserve greater organizational roots in the 
landed aristocracy…. while, paradoxically, generally being from the outset far more deeply involved in the 
orchestration of capital accumulation than were the „liberal‟ states of first wave capitalism.” (Robert Looker and 
4 
 
were (and arguably the US still is) successful globally hegemonic economies in ways that the 
German and Japanese economies (in spite of their best efforts in the 1930s) even regionally were 
not. This paper will argue that key features of both the US and UK economies – including the 
weakness of business regulation in both, their propensity for Reagan-like conservative 
governments, the moderation of their labor movements, the weight of finance relative to 
manufacturing in their GDP, and their current inability to turn trade deficits into trade surpluses – 
all these can and should be linked back to the UK and US‟s shared experience of early 
industrialization and subsequent global economic dominance. The paper will also argue that 
where the US and UK economies differ – on such things as the greater political importance of 
deregulation in the US, the greater public support for state welfare provision and even public 
ownership in the UK, the greater weight of finance and the lower degree of militarization of 
core engineering industries in the UK – these differentiations too need to be linked back: this 
time to the timing of global dominance, to the fact that the UK is now a post-imperial economy 
and society while the US is (at most) simply poised to become one. 
The UK and US economies are not simply liberal market economies.
10
 They are also 
imperial capitalisms, at different stages on a standard imperial trajectory. It is for that reason, and 
not because they are two versions of some timeless LME, that the two economies are both so 
similar and so distinct, and yet in critical ways now so different from each other. And if it is 
their imperialism rather than their liberalism
11
 that is their key defining feature, then for the 
varieties-of-capitalism literature to make further progress, it will be necessary for its adherents to 
generate a typology of capitalisms that is capable of distinguishing imperial capitalisms from 
post-imperial capitalisms, and of differentiating capitalisms that have exercised global hegemony 
from those that have never done so. Only in that way will the varieties-of-capitalism literature be 
able accurately to explain (and not simply to describe) the salient features of the UK‟s present 
condition and immediate economic needs, colored as those are by the legacies of a transient 
empire and a temporary global hegemony. 
II 
So what are those present conditions and immediate economic needs: these at least. 
 
David Coates, “The State and the Working Class in Nineteenth Century Europe,” in James Anderson (editor), The 
Rise of the Modern State. Brighton, Wheatsheaf Books, 1983, pp. 99-101) 
10
 In the case of the US/UK, there is a genuine danger that the LME label will obscure more than it illuminates. 
When using the label to characterize the US economy, Hall and Soskice focused on financial systems and corporate 
governance, industrial relations, education and training, and inter-company relationships. That focus led them to 
ignore/downplay, among other things, the close working relationship between (a) the Pentagon and the American 
engineering industry, (b) the oil industry and the Department of Energy, (c) large agribusinesses and the Agriculture 
Department, and (d) large pharmaceutical companies and federally-funded basic research and Medicare/Medicaid 
spending. Missing so much of what is defining of US capitalism, the LME label simply played into the hands of 
conservatives keen to extol the virtues of what they like to characterize as a free-market capitalism unburdened by 
extensive welfare rights or corporate cronyism. Sadly, in reality there is far too much of the latter, and far too little 
of the former, in contemporary America – and the categories of our scholarship ought not to prevent us from seeing 
that. 
11
 Liberalism understood here in its European, not American sense, as referring to limited government and the 
relatively unregulated nature of market forces. What Americans call „liberal‟ politics, most English-speaking 
Europeans call progressive politics, or social-democracy, or simply the programs of the center-left. 
5 
 
 The contemporary UK economy is not performing well, certainly not by its own recent 
standards, and is showing particular difficulty in shaking itself free of recessionary pressures 
initially generated by two crises: the 2008 financial crisis in which UK-based financial 
institutions were critical players, and the subsequent Eurozone crisis in which they were not. The 
UK economy contracted by 7.1% during the five-quarter 2008-9 recession, and now for the first 
time since the 1970s is in double-dip recession, with UK GDP still 4.3% down (April/May 2012) 
on its first-quarter of 2008 peak. As this paper is being drafted, the rate of increase in average 
wages in the UK (1.1%) is more than two percentage points lower than the current rate of 
inflation, putting a generalized pressure on living standards and a particularly acute pressure on 
the one-in-three working-age adults in the UK (some 11 million in total) living in households 
earning low or middle incomes.
12
 The current official unemployment rate, of 8.4% in April 2012, 
represents 2.68 million people without work – that number is itself a 17 year high – in an 
economy in which there is much hidden unemployment and under-employmentthat the official 
figures do not capture. The TUC thinks the true figure of those without adequate work is 
currently over 6 million.
13
 Certainly unemployment rates are far higher than 8.4% among key 
groups such as the long-term unemployed, 16-24 year olds, (22.4%) college graduates (maybe 20% 
in 2011
14
) and ethnic minority workers (for 16-24 year olds, heading towards 50%
15
). 
Responsibility for the renewed recession, and for rising unemployment among public sector 
workers (270,000 public sector jobs were lost in 2011 alone, out of the 490,000 planned to be 
gone by 2014-15), is now increasingly placed at the feet of the Coalition Government, whose 
austerity budgets in 2010, 2011 and now again 2012, have failed to release the explosion in 
private-sector investment and job creation that was supposed to accompany drastic cuts in public 
spending and Osborne‟s focused determination on the reduction of public debt. Two immediate 
things, therefore, that any analysis of the UK‟s contemporary condition has to explain are this 
vulnerability of the modern UK economy to financially-induced crises, and its propensity to 
attract conservative austerity-focused public policy in response to those crises. 
 There is also a longer story that needs to be addressed. Between 1992 and 2007 that story 
was largely one of success. The economy went a full 15 years without any recession – the 
longest unbroken period of economic growth in the UK‟s modern history – momentarily 
persuading Gordon Brown that the business cycle had been permanently tamed:
16
 tamed by 
policies that had also significantly narrowed the gap in productivity and living standards which 
had opened up between the UK and other leading industrial economies in the preceding 
decades.
17
 By 2007, on the Government‟s own figures, UK productivity had caught up with 
France by more than a third and with Germany substantially, and the UK had even narrowed its 
productivity gap with the US by 6 index points.
18
 By 2010 however, that trend had again 
reversed, leaving UK productivity per hour currently “23% less than the US, 18% lower than 
 
12
 See James Plunkett, Growth Without Gain? London, The Resolution Foundation , 2012, p.7. 
13
 Dan Milmo and Phillip Inman, “‟True‟ UK unemployment is 6.3 million, says TUC,” The Guardian, February 14, 
2012. 
14
 See Jessica Shepher, „20% of graduates out of work,” The Guardian, January 26, 2011 
15
 Diane Abbott, “Young, black and unemployed, the tragedy of the 44%,” The Guardian, March 5, 2012. 
16
 “A once stop-go British economy is now stable.” (Gordon Brown, Moving Britain Forward, London, Bloomsbury 
Publishing, 2006, p.5) 
17
 On New Labour‟s record, see David Coates, “‟Darling, It‟s Entirely My Fault!‟ Gordon Brown‟s Legacy to 
Alistair and to Himself,” British Politics, 3(1), April 2008, pp.3-21 
18
Productivity in the UK 7: Securing long-term prosperity. London, HM Treasury, November 2007, p. 16. 
6 
 
Germany and 16% lower than France.”19 The creation and persistence of this productivity gap 
therefore needs explaining. We need to know how an economy which enjoyed global dominance 
in the 19
th
 century as the manufacturing center of the world could struggle in the post-war period 
to maintain its position as one of the top major capitalist economies – could in fact both struggle 
and fail – eventually slipping down international league tables to position itself well behind 
anywhere between 10 and 15 other economies, depending on which league table is considered 
and to which indicator of economic performance precedence is given. Why is it that the UK 
GDP/head in 2010 is still only 10 percent about the EU27 average, well behind the equivalent 
figure for Luxemburg, the Netherlands, Ireland, Denmark, Austria, Sweden, Belgium, Germany 
and Finland?
20
 
So there are both immediate and long-term features of the UK economy that need to be 
explained in ways that are consistent both with each other and with the characterization of the 
UK economy as a particular kind of capitalist model: long term economic decline, recent 
economic catch up, immediate economic recession, and current public austerity. The suggestion 
here is that we construct that explanation around a characterization of the UK economy as 
previously imperial and now post-imperial. 
 
III 
 The general thesis underpinning the argument here is that post-imperial economies tend 
to have an unbalanced relationship between manufacturing and finance, an overly militarized and 
increasingly uncompetitive manufacturing sector, a globally-focused political class and a more 
than usually moderate labor movement. Applied to the contemporary UK, the argument is as 
follows. 
Financial dominance 
All capitalist economies contain, to varying degrees between individual capitalisms and 
to varying degrees over time, different circuits of capital: merchant capital, agrarian capital, 
industrial capital and financial capital. It is a feature of hegemonic economies that, as their 
hegemonic presence grows, so too does the weight of financial capital in the circuits that 
constitute them. That increasing weight is partly a product of the surpluses earned by global 
dominance then coming back to the hegemonic center. It is partly a product of other economies 
coming to the center to buy the technology that first established that hegemony, and needing to 
borrow local finance to do so; and it is partly because the export needs of a dominant economy 
initially require the outflow of local funds to lubricate its export sales. In hegemonic economies, 
this outflow of capital is initially functional to all its key capitalist strata – merchants, farmers 
and industrialists as well as bankers – but over time it inevitably creates a gap between finance 
and industry which undermines the capacity of local financial institutions to help the hegemonic 
industrial base retool to meet overseas competitive challenges which its hegemony has helped 
call into existence. The retreat from retreat from circuits of industrial capital to those of finance 
 
19Philip Inman, “UK productivity lagging behind main competitors,” The Guardian, September 20, 2011. 
20
 Eurostat news release, 186/2011, December 2011. 
7 
 
capital is would appear endemic to all dominant capitalisms.
21
 We certainly see it in the 
separation of financial and manufacturing capital in the contemporary US.
22
 
 In the UK case in particular, it is impossible fully to understand the weight of finance in 
the contemporary economic formation without linking that weight back to the gap which opened 
up between UK-based finance and UK-based industry in the critical decades before 1914. The 
story has often been told of how initially Britain‟s world monopoly position gave its industrial 
capitalists surpluses on which internally-financed long-term investment could proceed apace; 
how that world monopoly position also gave sterling a particular role in the 19
th
 century world 
economy (broadly similar to that of the dollar between 1944 and 1971); and how it attracted to 
London foreign borrowers keen to draw on those surpluses for their own industrial take-off. 
From the 1890s in consequence, the English banking system found it more profitable to finance 
foreign trade and to handle portfolio investment abroad than to seek out domestic industrial 
demand for long-term finance. This established both a distance between industrial and financial 
interests and an international focus for British banking practices that had no close contemporary 
parallel elsewhere.
23
It was in this manner that, asAndrew Gamble rightly observed, “far from 
being the pioneer of industrialism, Britain [became] an economy dominated by financiers and 
rentiers.”24 Indeed, the word „became” may not actually be entirely appropriate here, because 
industrial capitalism in the UK, even at the height of its brief global dominance, was always the 
minor player – always the bastard child of a capitalist social formation that was throughout 
predominantly commercial and financial in nature. 
Manufacturing Weakness 
What that brief period of global manufacturing dominance then consolidated was what 
Cain and Hopkins have labeled as “gentlemanly capitalism;” the fusion of aristocratic and 
banking interests and the generation of a social culture which prioritized the making of money 
from money over the making of money from industrial enterprise.
25
 Though the UK is known as 
the home of the first industrial revolution, that primacy was possible only because of the prior 
development within the UK of both agrarian and mercantile capitalism; and there remains much 
 
21
 See Giovanni Arrighi, The Long Twentieth Century: Money, Power and the Origins of Our Times London, Verso, 
1994. 
22
 See David Coates, Making the Progressive Case: Towards a Stronger U.S. Economy. New York, Continuum 
Books, 2011, pp. 142-46. 
23
 For the full argument, see David Coates, “The character and origin of Britain‟s economic decline,” in David 
Coates and John Hillard (editors), The Economic Decline of Modern Britain: The Debate between Left and Right. 
Brighton, Wheatsheaf, 1986, pp. 269-71; and David Coates, The Question of UK Decline. Hemel Hempstead, 
Harvester-Wheatsheaf, 1994, pp. 153-162. 
24
 Andrew Gamble, “British National Capitalism since the War: Declinism, Thatcherism and New Labour,” in 
Jonathan Perraton and Ben Clift (editors), Where Are National Capitalisms Now? New York, Palgrave Macmillan, 
2004, p. 37. 
25
 It was Cain and Hopkins‟ view that “gentlemanly capitalism then developed in ways which emphasized the 
distance between land, high finance and the upper reaches of the service sector on the other side, and mechanical 
industry on the other.” (P. J. Cain and A. G. Hopkins, British Imperialism: Innovation and Expansion 1688-1914, 
Harlow, Longman, 1993, p. 15) There is much debate in the relevant literature about whether early twentieth century 
UK manufacturing suffered from a corresponding “loss of the industrial spirit,” or merely from a freezing of 
dominant mindsets in an increasingly inappropriate early Victorian classical liberalism. On this, arguing the latter, 
see David Coates, Models of Capitalism: Growth and Stagnation in the Modern Era, Cambridge, Polity Press, 2000, 
pp. 135-41. 
8 
 
academic controversy, particularly in Marxist academic circles, about exactly why, and exactly 
when, UK manufacturing industry fell victim to the dominance of financial interests in the 
circles surrounding the British state.
26
 Certainly by 1914 “with over 40 percent of the total 
exported capital of the world raised on its financial markets, London was the leading center for 
the issue of foreign loans and equities,”27 a fully capitalist rentier class had come into existence, 
and the viability of London as an imperial center had come to depend heavily on its role as a 
financial entrepôt rather than as a major manufacturing center with global leadership capacities 
That in its turn reminds us that the economic (and political) weakness of UK-based 
manufacturing industry is of long standing. The industrial owning class was, from the outset of 
the UK‟s rise to brief global manufacturing dominance, heavily concentrated regionally away 
from London; and as a class never replaced in political dominance more traditional elites whose 
income depended on banking and on land. The brief mid-Victorian period of unrivaled 
manufacturing supremacy left economic and political elites in the UK slow to respond to the 
challenges to dominance represented by the pre-1914 rise of German and American competition. 
There is plenty of evidence in the late Victorian UK economic story of a retreat into imperial 
markets by established industries, and of a general “institutional rigidity” – a slowness to make 
the move from proprietary capitalism to managerial capitalism made necessary by the second 
industrial revolution.
28
 The long-term legacy of that – a post-war “flawed Fordism”29 – left the 
UK manufacturing sector vulnerable to German competition a second time after the brief 1950s 
hiatus caused by the devastation suffered by German industry during World War II: and by then 
the UK state lacked both the capacity and the will for effective rapid economic modernization. 
There can be no full explanation of the UK economy‟s continuing trade deficit without some 
recognition of that particular lack, and the resulting failure to seize the opportunity of full-scale 
post-war industrial modernization before the revival of Germany and Japanese competition. 
Liberal Militarism 
Why this lack of capacity and will: in part because of the long-term impact on UK manufacturing 
competitiveness of a century of liberal militarism. Globally hegemonic powers spend money on 
 
26
 On this, see Geoffrey Ingham, Capitalism Divided: The City and Industry in British Social Development. London 
Macmillan, 1984; Colin Lees, “The Formation of British Capital,” New Left Review 160, Nov-Dec 1986, pp. 114-
120; Perry Anderson, “The Figures of Decent,” New Left Review 161, Jan-Feb 1987, pp. 20-77; Michael Barrett 
Brown, “Away With All the great Arches: Anderson‟s History of British Capitalism,” New Left Review 167, Jan-Feb 
1988, pp. 21-51; Alex Callinicos, “Exception or Symptom? The British Crisis and the World system,” New Left 
Review 169, May/June 1988, pp. 97-106; and Geoffrey Ingham, “Commercial Capital and British Development: A 
reply to Michael Barrett Brown, New Left Review 172, Nov-Dec 1988, pp.45-66. 
27
 Y. Cassis, “British finance: success and controversy,” in J. J. van Helten and Y. Cassis (editors), Capitalism in a 
Mature Economy, Cheltenham, Edward Elgar, 1990, p. 1. 
28
 This is the William Lazonick thesis, laid out most fully in chapter 1 of his Business Organization and the Myth of 
the Market Economy. Cambridge, Cambridge University Press, 1991; also in B. Elbaum and W. Lazonick, „The 
decline of the British economy: an institutionalist perspective,” Journal of Economic History, xliv 92), 1984, pp. 
576-83. 
29
 Robert Boyer, “Capital-Labour Relations in OECD Countries: from Fordist Golden Age to Contrasted National 
Trajectories,” in J. Schor (editor), Capital, The State and Labour. Aldershot, Edward Elgar, 1996; and Ian Clark, 
“Employment Resistance to the Fordist Production Process: „Flawed Fordism‟ in post-War Britain,” Contemporary 
British History, 15(2), 2001, pp. 28-52. 
9 
 
armaments and on war. The UK did (and still does) both.
30
 Globally hegemonic powers develop 
and sustain a large military-industrial complex. The UK still has that – a manufacturing sector 
disproportionately focused (and holding global leadership capacities in) military rather than 
civilian industrial production.
31
 And globally hegemonic powers of the UK kind – ones that 
industrialized prior to dominance with only the minimum of direct state economic leadership – 
demonstrate a propensity for what David Edgerton properly called “liberal militarism”:32 namely 
a state propensity to regularly reconfigure military-focused manufacturing while deliberating 
abstaining from similar leadership in the civilian sector.
33
It is true that, undefeated militarily but 
seriously weakened economically by World War II, successiveUK governments did then 
periodically attempt state-led industrial modernization: but always to very limited effect. For far 
too long for the competitive health of the UK‟s manufacturing sector, post-war UK governments 
attempted to retain the possessions and strappings of empire.
34
 For far too long, “both Labour 
and Conservative governments …pursued an expensive strategy of keeping Britain‟s military 
industries at the leading edge.”35 For far too long, a disproportionately large proportion of UK 
R&D, and associated scientists and engineers, remained focused on military, not civilian, 
production:
36
 this at the very time when “countries such as Japan were investing in the long-term 
technological development of motor vehicles and other manufacturing industries”37 under strong 
state leadership (in Japan‟s case, through MITI). For far too long, that is, (initially from 1985, 
and then again from 1995
38
) the UK has remained “a major net exporter of armaments but… a 
net importer of manufactures.”39 
 
30
 Paul Kennedy noted this for the 1980s, and linked it to UK decline: “Britain spends proportionately more (5.5 
percent of GDP) than any other NATO partner except Greece.” (Paul Kennedy, The Rise and Fall of the Great 
Powers. London, Unwin & Hyman, 1988, p. 243) 
31
 At the start of the new millennium, UK defence industries still “employ[ed] some 345,000 people directly and 
indirectly in the UK, and provide[d] around 3% of the UK‟s manufacturing output.”(Ministry of Defence Policy 
Paper: No. 5, Defence Industrial Policy, 2002, p.7. 
32
 David Edgerton, “Liberal Militarism and the British State,” New Left Review, 185, January/February 1991, pp. 
138-69: Also David Coates (editor), Industrial Policy in Britain, London, Macmillan, 1996, pp. 33-61, 241-46. 
33
All would-be imperial powers develop a military-industrial complex – Germany and Japan did too – but defeated 
imperial powers eventually find that route to global dominance blocked. In the German and Japanese case, blocked 
by Allied fiat in 1945; and obliged thereafter to refocus their economic growth strategies on civilian production 
alone. But second stage capitalisms like Germany and Japan never pursued liberal militarism – their whole 
economic endeavor was always deliberately state-led – such that when military production was denied them, the 
capacity for state-leadership of civilian production remained intact. The UK, by contrast, was quite willing for 
example to use its state capacity to help reconstruct Volkswagen immediately after World War II (for short-term 
humanitarian and geopolitical reasons) while singularly failing to be equally involved in the reconstruction of an 
efficient UK-based equivalent. (This often forgotten story is in Simon Reich, Fruits of Fascism, Ithaca, Cornell 
University Press, 1990, pp. 170-176) 
34
 “The argument of this essay is that Britain‟s economic problems have been caused in large measure by the 
policies of successive governments, especially those policies which dealt with Britain‟s role in the world…British 
leaders were unable, especially in the first postwar decade, to device an acceptable international role that the nation 
could afford” (Stephen Blank, “Britain: the politics of foreign economic policy, the domestic economy, and the 
problem of pluralistic stagnation,” International Organization, 31(4), 1977, pp. 674-721. 
35
 David Edgerton, op. cit., pp. 140-1 
36
 On this, see The Question of UK Decline, pp. 193-201; and Models of Capitalism, pp. 198-201 
37
 Ben Fine and Lawrence Harris, The Peculiarities of the British Economy, London, Lawrence & Wishart, 1985, p. 
243. 
38
 Valerie Fender, “The changing nature of the UK‟s trade deficits, 1985-2008,” Economic and Labour Market 
Review, 4(1), January 2010, pp. 18-24. 
39
 David Edgerton, op. cit., p. 164 
10 
 
 So that by the time the UK political class did come to terms with the UK‟s diminished global 
role, it had let slip key opportunities for civilian manufacturing modernization of the kind 
underway in the UK‟s main CME competitors, most notably Germany and Japan. The twentieth-
century UK state was one created far more for empire than for domestic industrial modernization. 
Its strongest institutional nexus in the years before 1964 was that linking the Treasury to the 
Foreign Office and the Ministries of Supply/Defence. As the UK‟s global power waned, so did 
the standing of the Foreign Office – replaced within the core institutional triangle by various 
iterations of a civilian industry ministry. To this day, The UK state remains a triangular structure 
linking the Treasury, the Ministry of Defence and the DTI (with the last perennially renamed and 
persistently denied real purpose and purchase). There is an important “industry ministry” story to 
be told for post-war Britain, and sadly it remains (as we see once more with Vince Cable) largely 
a story of failure.
40
 And even today, after years of attempts of civilian modernization and a 
curtailing of the UK defence budget, the volume of arms sales still rose globally during the 
recent economic downturn, and BAE still tops the list of the world‟s largest weapons 
manufacturers!
41
 
The Consolidation of an Imperial Mindset 
 In the modern era, the legacies of empire are not simply institutional and economic. They 
are also cultural. In empire after empire, predominant patterns of thought emerge to reinforce the 
imperial project, patterns which then help to undermine the very imperialism which first created 
them. In the UK case, there is a legitimate debate in the relevant historical literature about how 
deep and wide was support for the British Empire even at its height.
42
 It is possible to point to 
critics of imperialism throughout the nineteenth century – free trade liberal critics as the UK 
began to lay claim to more and more territory from the 1840s, and center-left (social democratic) 
critics at century‟s end, when imperial jingoism was at its height. But there is no escaping the 
fact that those critics remained a minority voice within the British political class prior to 1914 – 
imperialism at its height was politically popular – and that although the proportions shifted 
thereafter, the Empire project left a generalized hubris among British politicians and state 
administrators which has still not entirely gone away. The 1940s freeze of the international 
architecture of the post-war world order still encourages UK governments to punch above their 
weight, to see themselves as the United States‟ ally in global policing, and to be at best reluctant 
Europeans for fear of losing their capacity for an independent role on the world stage. And that is 
 
40
 It is possible to trace the DTI story back to the first Wilson Government, with the initial clash between George 
Brown‟s DEA and James Callaghan‟s Treasury over The National Plan (won by Callaghan i). Stronger attempts 
were then made to create a powerful civilian industry ministry by Anthony Wedgewood Benn: his 1960s DTI was 
dismantled by Heath. His second attempt at the Department of Industry was diminished by the Left‟s defeat in the 
EEC referendum in 1975, and was run down by Eric Varley). The DTI under Thatcher – with Nicholas Ridley at the 
helm – was at an all-time low, until resurrected as a power base for Michael Heseltine as Deputy Prime Minister 
under Major. The DTI was emasculated again under New Labour by Gordon Brown‟s resetting of the Treasury as 
the de facto industry ministry; and is now the scene of a party battle inside the coalition between Vince Cable 
(wanting his ministry to be a genuine engine of manufacturing growth) and a Treasury under the most austerity-prone Chancellor since Thatcher‟s Geoffrey Howe. In these clashes to date – the Heseltine period apart – the 
Treasury has always won, leaving the civilian industry ministry subject to a regular change of title, functions, and 
status.(The early story is well told by Simon Lee in Andrew Cox et al, The Political Economy of Modern Britain, 
Cheltenham, Edward Elgar, 1997, pp. 108-65.) 
41
 Data in The Guardian, March 1 2012 and April 12, 2012. 
42
 See Bernard Porter, Empire and Superempire: Britain, America and the World, New Haven, Yale University 
Press, 2006, pp. 22-27 
11 
 
true not just of post-war Conservative governments. Old Labour governments were equally 
prone to this global posturing, and so too was New Labour after 1997. In Tony Blair‟s defiant 
internationalism, and arguably even in Robin Cook‟s ethical foreign policy (“doing good in the 
world”), we see the same propensity to rearrange other people‟s political furniture – the same 
imperial hubris that once justified colonial expansion.
43
 That hubris is there in the wider political 
culture too – we need only remember the popularity of the Thatcher invasion of the Falklands to 
realize that. Certainly as late as 1983, the UK electorate seemed to have no difficulty supporting 
sovereignty claims on territory at the other end of the world, without in any way conceding 
similar sovereignty to others: imagine what the British popular reaction would have been, had 
the Argentinians laid claim to the Isle of Man for some equally specious historical reason. 
Given the disproportionate involvement of residual aristocratic elements in the staffing of 
the Empire, and the general propensity of right-wing politics to emphasis issues of national 
(rather than class) interest, the persistence of an imperial hubris on the right of British politics is 
perhaps only to be expected. What is less clear is why center-left parties in the UK should be still 
so vulnerable to the same thing. That vulnerability has a structural, as well as a personal and 
accidental, origin. Tony Blair‟s personality may explain some of the reason for British 
involvement in the 2003 invasion of Iraq, but it does not explain it all. The vulnerability of the 
British center-left to the residue of imperial hubris lies in the manner in which the relatively 
slow transformation of the pre-capitalist UK economy into an industrial capitalism one, and the 
associated slowness (or in the US case, the entire absence) of the destruction of a traditional 
peasantry, combined in the nineteenth century to moderate early working class politics in both 
the UK and US: moderate, that is, when compared to labour politics in later industrialisers like 
Germany, Russia and Japan. It was this moderation which was then reinforced by the bounty of 
empire, with the contradictions of early capitalist accumulation being softened in the core of the 
global system by being pushed to its edge. It is not just conservative politics in the UK (and the 
US) that is anchored away to the right in the wake of empire. The whole center of political 
gravity shifts that way, to the extent that entire labour movements are suborned into the imperial 
project. This incorporation is both extreme and unavoidably visible in the contemporary US case, 
but it is there too in the UK. British labourism was always less radical than mainstream European 
social democracy, and in large measure remains so. Remember with what ease Gordon Brown 
could articulate a discourse of „Britishness,” and with what speed the post-New Labour 
parliamentary leadership moved, in 2012, to condemn the renewed Argentinian claims on the 
Malvinas!
44
 
Perhaps there is a general truth here: that ultimately the whole center of gravity of UK 
(and indeed US) politics can only be explained the imperial way. Certainly the ease with which 
UK (and later US) industrial capital established a powerful global presence – without any direct 
and systematic state intervention for that purpose – reinforced in conservative circles, once their 
economy became globally hegemonic, an equation of business interests with limited government 
at home and with market-opening policies abroad. It was in catch-up capitalisms, not in early 
capitalisms, that conservative political elites and supporting business leaders readily deployed 
state-led civilian industrial modernization programs. It was business and political elites in 
 
43
 The difference between Cook‟s “offensive multilateralism” and Blair‟s “defiant internationalism” is discussed in 
David Coates and Joel Krieger (with Rhiannon Vickers), Blair’s War, Cambridge, Polity Press, 2004, pp. 110-112. 
44
 See Simon Hoggart, „Labour sabres still rattle loudest for the Falklands, 30 years on,” The Guardian, February 20, 
2012. 
12 
 
economies like Germany and France (and indeed, even in the US after the Civil War, and Japan 
after World War II) who deployed protectionism against the penetration of their domestic 
markets by manufactured goods from stronger economies abroad. Political and industrial elites in 
early capitalisms, by comparison, became wedded to limited government and free trade maxims 
during their period of global dominance – when they needed open markets to keep their export 
factories in full production – and then proved slow to shed that non-interventionist and free trade 
mentality when their economic supremacy begins to wane. We invariably see the persistence of a 
“strong state, free market” liberalism in imperial capitalisms which was functional to the 
beginning of their imperial story but not to its end. What was it that Keynes said: that “Ricardo”s 
doctrine conquered England as completely as the Holy Inquisition conquered Spain!”45 
IV 
In summary then it is still possible argue, as we did just before New Labour arrived in power, 
that
46
 
The key to economic underperformance in the contemporary UK seems to lie, more than anywhere else, in the 
structural location which early industrialization established for the UK in the world system, and in the strong 
internal social forces created by that location. Economic performance in the UK is inadequate now because of 
processes set in train by the UK‟s occupation of the role of hegemonic power in the nineteenth century. That role 
drew UK financial institutions into an international set of trading and investment relations, and later sent large-scale 
UK industrial capital off in the same direction. It sustained the UK state‟s pretensions to world power, and placed 
sterling as a critical reserve currency. It provided UK manufacturing with easy imperial export markets, and later – 
via the state‟s military spending – with protected domestic markets for certain kinds of military production. It even 
softened the impact of early industrialization on the working conditions and living standards of key groups of skilled 
workers, and eased their absorption into a modern form of pro-capitalist politics; and it provided the historical 
experience in which all sections of UK civil society could become wedded to an imperial sense of their own 
nationhood, and to the beneficial effects of free trade and limited state involvement in economic activity. An 
imperial state, internationalized capital, a moderate labour movement, and a liberal imperialist culture fused together 
in the brief period of UK international economic and political domination, then sat there like a nightmare on the 
brain of the living, to block rapid and effective responses by any section of UK society to the transformation and 
replacement of that international domination first in the 1890s and then after 1945. 
The thing about nightmares is that they are best put to rest by the sleeperactually waking up. 
l. So, for example, it will be no good simply blaming Tony Blair for the Iraq War, or Gordon 
Brown for New Labour‟s Faustian compact with the City of London. That compact was central 
to the whole New Labour project, and the active intervention of UK troops in foreign wars met 
no serious internal party resistance until the invasion of Iraq. It was Brown, after all, not Blair 
who so opposed any move to join the euro, and it was Brown as well as Blair who campaigned 
for great labor market flexibility inside the Eurozone. The break with New Labour now required 
of the new Labour leadership has therefore to be a fundamental one – nothing less than the 
creation of a growth strategy and a foreign policy entirely free of the shadows of empire. To 
create that, a future Labour government will have to judge each inherited institution on its 
contemporary functionality, and not on its past status. (Indeed, institutions strong in the past will 
need to justify themselves all the more, if that status can be shown to have its anchorage in years 
of imperial glory and global hegemony.) And as a litmus test of how fundamental the break has 
become – this: next time the Argentinian Government raises the issue of the Malvinas, an 
 
45
 John Maynard Keynes, The general Theory of Employment, Interest and Money, London, Macmillan, 1936, p. 32. 
46
 The Question of UK Decline, op. cit., pp. 274-5 
13 
 
imperial-free Labour Government should instinctively talk joint-sovereignty and phased-
withdrawal rather than battleships and war. 
2. Successive UK governments clearly missed opportunities for industrial modernization in the 
Keynesian growth period that ended in 1979; and equally clearly there no simple market solution 
to the now widely recognized need to rebalance the UK economy. Thatcherite deregulation, so 
eagerly adopted by New Labour, left personal debt in the UK higher than GDP even before 
deregulated banking plunged the global economy into recession,
47
 and left the UK on a growth 
trajectory that is now significantly lower than the trajectory operative before 2008. Vince Cable 
is not alone in recognizing the need again for an active industrial policy in the UK, though the 
case he has made for it – both privately and publicly – is a strong and convincing one.48 One of 
New Labour‟s most egregious mistakes was to so enthusiastically denude itself of powerful 
policy instruments for the shaping of private sector economic activity. A future Labour 
government will need to get at least some of those policy instruments back. This is not the time 
for Osborne austerity,
49
 Cameron‟s big society and the politics of small government. It is time to 
revisit the story of the DTI, the thinking behind the Alternative Economic Strategy, even to read 
again and ponder the discussion of “modernizing agencies” in Perry Anderson‟s Figures of 
Descent. 
3. This lack of fit between small government policies and long-term post-imperial adjustment is 
not just the UK‟s problem alone. Here in the United States progressive forces face a similar 
future, and broadly similar issues. The similarities are those rooted in the costs of imperialism 
and the fragility of global hegemony. Their political consequences are more evident in the UK 
than the US now primarily because the UK is further into its post-imperial phase, as even the 
Conservative wing of the Coalition Government is now obliged publicly to concede.
50
 Politically 
the options are wider in the UK than in the US, because in the latter the hubris and self-delusion 
of imperial dominance remains more firmly intact, and because the classic weakness of 
progressive forces in imperial economies is even more marked in America than in Britain. 
Labourism make look a weak flower to continental European Social Democrats, but it looks a 
relatively hardy beast from the other sides of the Atlantic, where blue-dog Democrats still chase 
Tea Party Republicans for the electoral support of a white working class responsive to campaigns 
built around issues of gays, guns and god. But regardless of the political difficulties, the long 
term progressive strategy on both sides of the Atlantic must remain the same: to reset the social 
fabric of post-imperial economies by developing a new growth strategy based on equality, 
 
47
 The consultancy firm Grant Thornton found debts on mortgages, overdrafts and credit cards bigger than UK GDP 
for two years running: 2007 and 2008. 
48
 Vince Cable‟s leaked letter to George Osborne, canvassing the need for active industrial policy, is at 
http://www.telegraph.co.uk/finance/newsbysector/industry/9126792/Vince-Cable-leaked-letter-in-full.html 
49
 Will Hutton, „Osborne is intellectually broken and the real enemy of business,” The Observer, April 29, 2012; and 
Paul Krugman, “The Austerity Agenda,” The New York Times, May 31, 2012. 
50
 In the October 2010 defense cuts, the rhetoric went one way and the policy another. “Britain has traditionally 
punched above its weight in the world and we should have no less ambition in the years to come,” Cameron told the 
Commons, emphasizing that the UK still had the world‟s fourth-largest military budget, with more than 2% of GDP 
going to defence. But an 8% cut in military spending still took out more than 40,000 military and civilian jobs, the 
full withdrawal of UK troops from Germany by 2020, a 40% cut in tanks and heavy artillery, and the loss of the 
Harrier jump jet. Even the naval cuts spoke of a diminished capacity – with two new aircraft carriers to be built, but 
one of them immediately to be mothballed. (Details in The Wall Street Journal, October 20, 2010.) 
14 
 
inclusion and industrial democracy. This is a task for the Left and the Left alone; and it is the 
task facing the Labour Party‟s next generation. 
 
David Coates, 
Wake Forest University, 
North Carolina, 
June 1, 2012. 
 
 
www.davidcoates.net