The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor (W W Norton & Company; 1998)

LOSS OF LEADERSHIP^459

ICI, Pilkington, Glaxo, Courtauld, Dunlop, all of which bear witness
to the commercial power of innovation. But these examples were not
contagious. In the decades after World War II, Britain (along with the
United States) lagged the club of advanced industrial nations (see Table
26.1).
What would such differences mean for the long run? A growth rate
of 2.8 percent yields a sixteen-fold increase over the course of a century,
as against 2,200 times for an annual rate of 8 percent. Such is the
power of compound interest. Of course, no country can maintain a
gain of 8 percent per year over a century, what with linked constraints,
accidental reverses, cyclical downers, changes in government, compe­
tition, and the soothing corruption of success. Even Japan has had its
setbacks in real estate and banking; while the increase in the exchange
value of the yen chilled demand for Japanese manufactures. In contrast
British industry, buoyed by North Sea oil, hospitality to foreign enter­
prise, and Margaret Thatcher's showdown with tool-dragging labor
chiefs, has done better since the 1980s.*
A final word about the United States of America. At the end of
World War II, with just about all industrial rivals in ruins, America ac­
counted for the greater part of world industrial product. Its labor pro-

Table 26.1. Annual Percentile Rates of Growth by Country,

1950-87

GDP Labor Productivity

in Manufacturing

Japan 7.9 8.0

Germany 4.6 4.3

United Kingdom 2.5 2.8

USA 3.2 2.6

SOURCE: Porter, Comparative Advantage, pp. 279-80.

• And even earlier by some calculations. Estimates of annual growth in value added
  per hour in manufacturing, 1950-90, show Japan at 7.4 percent, France at 4.9, Ger­
  many at 4.5, Britain at 4.1, the USA at 2.6—Eaton and Kortum, "Engines of
  Growth," p. 6. Even allowing for error, we clearly are not in the presence of decline;
  rather, of apparent convergence.