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The Rise Of Germany And The United States Notes

History Notes > British Economic History - 1840-1964 Notes

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THE RISE OF GERMANY AND THE UNITED STATES: 18701914 Did Britain lose economic leadership to the US and Germany before 1914? Why/why not?
How did the United States and Germany Overtake Britain... - JEH: S.N. Broadberry
Contrary to popular opinion, both Germany and the US overtook Britain in terms of labour productivity by shifting resources out of agriculture and into highvalue services, rather than by improving their position in manufacturing1.
Britain lost labour productivity leadership in the services sector as changes in technology allowed standardisation and reorganisation.
US GDP per capita overtook UK in the 1890s. Labour productivity within various industries tells a fuller story. US labour overtook British in agriculture and mining by 1890; in manufacturing, construction, and transport this had occurred decades earlier. Only in financial services did Britain retain a productivity advantage, and even so, US productivity in this area rose from 64% of British in 1870 to 78% in 1910 2.
Germany did not perform as well as the US when compared to Britain. In 1914 its GDP per capita was only c75% of Britain's. Whilst advances had been made in raising the productivity of labour in agriculture and services, they remained in 1914 only 5060% as efficient as their British counterparts. It is in mining, manufacturing, and utilities that Germany demonstrates the greatest progress in the years after 1870, although it did not begin to overtake Britain in these areas until the very end of the period of our study. Only in the area of transport and communications does Germany demonstrate a significant and enduring advantage3.
Between 1870 and 1910 the percentage of the US labour force within manufacturing rose from 17
22%; American labour in manufacturing was nearly twice as productive as British and therefore its shift away from agriculture aided the ascent of the US in terms of GDP per capita. The growing importance of gas extraction and electricity generation, and the substantial productivity advantage the US enjoyed in this industry, further contributed to the trend pre1914.
'The U.S. labourproductivity lead in manufacturing was already substantial by the midnineteenth century on account of technological differences underpinned by U.S. resource abundance and demand homogeneity'4.
Agricultural employment in Germany fell from 49.5% in 1875 to 34.5% in 1913; the figures for the US show similar levels of employment and trends. However, they are still vastly higher than Britain, where the level of employment in this industry fell from 22.2% to 11.8% over the same timeframe. This meant that the shift out of relatively unproductive (in GDP terms) agricultural employment contributed to German/American 'catchup' pre1914, and would continue to do so in the following years.
By 1899 the US was exporting 23% of its agricultural output.
Perhaps of most significance is Britain's loss of comparative advantage in services.
From 18701930 UK labour productivity grew at 0.7% per annum, German at 1.17% and US at

1.49%. Greater capital investment and better harnessing of technology and organisational improvements all contributed to this, as did the movement of labour out of agriculture. Did Late Nineteenth Century U.S. Tariffs Promote Infant Industries... JEH: D.A. Irwin 1 How Did the US and Germany Overtake Britain...JEH: S.N. Broadberry 2 How Did the US and Germany Overtake Britain...JEH: S.N. Broadberry 3 How Did the US and Germany Overtake Britain...JEH: S.N. Broadberry 4 How Did the US and Germany Overtake Britain...JEH: S.N. Broadberry

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