Special Report - Are we better off as laggards?

The Chancellor is obsessed with the productivity gap between Britain and other leading industrial na

As a sales pitch to woo those all-important inward investors to our shores, it was not one of Gordon Brown's best efforts. More Cassandra than Del Boy, he proclaimed: "Productivity levels in the US are 40 per cent higher than in Britain, and 20 per cent higher in Germany than here".

Worse, he didn't exactly keep quiet about this claim. Instead, alongside his Calvinist zeal for the "work ethic", Brown made the need for higher productivity into a mantra late last year. In November he launched a series of "productivity roadshows" and hosted confessional seminars at the Department of Trade and Industry and the Treasury to spread the unhappy message. Rectifying Britain's laggardly performance will be a core theme of the March Budget.

But does Britain really need to pull its socks up as much as Brown says? Is there really still a huge productivity gap between us and our competitors, even after Thatcher's self-proclaimed "productivity miracle"?

Not everyone thinks so. Since Brown made this a big theme in his pre-Budget report last year - devoting 30 pages to it - a number of people have stepped forward to question his gloomy analysis. In a recent research paper, Lies, Damned Lies and Productivity Statistics, Graeme Leach, senior economist at the Institute of Directors, wrote: "Statistical deficiencies do not preclude the possibility that UK productivity levels are second only to the US. This seems unlikely, but is this caution merely the product of decades of doing Britain down in the media?"

Leach is not alone in questioning Brown's figures. The Institute for Fiscal Studies (IFS), the Trades Union Congress (TUC) and the Institute for Public Policy Research (IPPR) have all produced papers doing so. The TUC report, Productivity and Partnership, for example, points out that the most recent studies of the productivity gap with the US offer estimates of between 7 and 40 per cent.

The basic squabble is over what kind of definition should be used. This may sound an arcane topic, suitable only for economic pointy-heads. But it matters because, as Leach says, "if the gap is more of a mirage, then the opportunity for a productivity miracle is undermined".

What exactly do we mean by productivity? Statistical definitions are a bit like balloon animals. You've either got your basic, crude shape - not very sophisticated. Or, with a bit of imagination and sleight of hand, you can turn your material into a far more impressive puppy.

And so it goes with productivity figures. The standard definition of productivity is output per worker. This is the figure the government uses. What this ignores, however, is exactly how many hours the worker was beavering away to produce those widgets. If, for example, it took one worker ten hours to produce a car, and another one five hours, the output would be the same, but it is easy to see that one worker was more productive than the other. Tweak the equation by sprinkling "hours worked" into it and the gap with the US magically shrinks from 40 to 20 per cent, because the average American worker puts in longer hours.

And with a bit more clever tweaking, such as that employed by Rachel Griffith and Helen Simpson of the IFS in their paper Productivity and the Role of Government, the gap shrinks to nearly zero. This is because they also factor in both the age of Britain's physical capital and its dodgy quality. Workers, it seems, can sometimes legitimately blame their tools for their poor productivity levels.

Why then does Brown persist in putting the worst possible spin on British performance? There are good and bad reasons for his doing so. Poor productivity offers a handy scapegoat for the recession now hitting manufacturing. Ministers were particularly keen last year to blame poor productivity rather than the high pound for the problems at Rover's Longbridge factory. Far better, too, to talk, as Peter Mandelson did, about linking potential government subsidy to assist the ailing factory to "productivity improvements", rather than convey the impression that the government was engaged in old-style bailouts to prop up inefficient industries.

Making an issue of poor productivity shows Brown in a macho light for focusing on a tough long-term agenda. "To caricature Brown, you could say, 'In my first Budget I solved the unemployment problem, in my second I dealt with work incentives and now, in my third, I will lick the productivity problem'," observes Peter Robinson, senior economist at the IPPR.

Highlighting a productivity problem helps to get the issue higher up the political agenda. Indeed, the Treasury itself implicitly acknowledges that the figure it cites is inflated. "We know and you know there are a number of ways of looking at this," said John Kingman, head of the Treasury's productivity panel, at an IFS conference last year. He added that the high figure acts as "a way of focusing minds on the need for further supply-side reform which seems to us to be desirable". The seminars and the roadshows all helped to "build a public perception that this was an important priority".

And so it should be. Although it is possible to explain away why Britain has worse levels of productivity (shorter average hours, or ageing equipment and so on) this does not mean that we should ignore Britain's relative decline. Higher productivity does matter because, as Brown puts it, it is the "key to the stronger economy - to higher growth, more jobs and opportunities, and better living standards for us all".

How do we get to this economic utopia? There are lots of different routes. Margaret Thatcher thought she had found one and talked boldly of a "productivity miracle" in the 1980s. And although Peter Mandelson has claimed that "productivity relative to our main competitors did not improve during the Tory years", there is a body of evidence that contradicts him. Britain did see a marked reduction in the productivity gap, particularly in manufacturing, after a time of slow productivity growth, and even some decline, during the 1970s.

"It is hard to say Britain didn't improve," says Nicholas Crafts, professor of economics at the London School of Economics. However, some of that improvement came at a price. "The revival in manufacturing productivity growth stemmed mostly from reductions in employment; output rose at only 1.2 per cent per year during 1979-89," wrote Crafts in Britain's Relative Economic Decline 1850-1995,published by the Social Market Foundation.

Despite these improvements, Britain's relative economic decline was stalled, not reversed. Worse, official estimates of manufacturing productivity growth suggest that since 1994 even this progress has stopped, with spartan growth since then. Adair Turner, the director general of the Confederation of British Industry, argues: "The process of liberalising the economy in key ways, the productivity improvements in the privatised industries, labour market reforms and the relegitimisation of enterprise and business as key social values were all beneficial. So this government has to preserve them." But, he adds, "Thatcher's changes were probably a necessary but not sufficient condition for us to close the gap".

So what is still missing? For Turner there are two important elements. "Between 1979 and 1993 there were dramatic booms and busts. These are relevant to the productivity debate because in a more volatile macroeconomic environment it is more rational for businesses to focus on the short term."

The first way for Brown to help improve productivity, then, is to ensure that there is fiscal and monetary stability. "The more you strip out financial noise," argues Turner, "the more you can concentrate on the fundamentals." He suggests, however, that this stability may not be enough. "Does the pursuit of macroeconomic stability also require going into the euro? On balance I would say yes."

The second factor that Turner thinks significant is "the failure to grip the education system. We have a less skilled workforce compared with our major competitors. Therefore we need to focus on an education and skills agenda."

This kind of view, however, is dismissed by the McKinsey Global Institute, whose paper on British productivity helped jump-start the debate last year. It sees "low capital investment, poor skills and sub-scale operations" as merely secondary effects. Instead, McKinsey touts a neo-liberal agenda of ever more deregulation, arguing that the productivity gap is "the effect of regulations governing product markets and land use on competitive behaviour, investment and pricing".

Although this conclusion has been embraced by the Institute of Directors, there are not many others who subscribe to it. The Treasury's John Kingman says: "It [the McKinsey paper] was not something the government had commissioned and they have their own views. They are better on individual sectors than on the economy as a whole. They are more convincing at explaining the gap with the US instead of continental Europe."

The TUC has also duffed up McKinsey's findings. It points out that it is bizarre to say we are less productive than France and Germany because we are over-regulated. Those two economies, after all, are far more snarled up in red tape. The TUC argues that the real causes of poor performance are "under-investment, skill shortages and poor workplace relationships". While Britain was better at cost-cutting in the 1980s, Germany's higher labour productivity comes from a history of higher investments in human and physical capital.

The TUC is right to emphasise the need for higher levels of investment. However, its focus is still very much on improving manufacturing industry. Increasingly, experts recognise the crucial role of productivity in the service sector, which matters more than manufacturing, since the latter makes up only around a fifth of the overall economy.

Nicholas Crafts agrees that "we focus far too much on manufacturing. The lever for improving it is not necessarily the same as for services. It requires a different sort of human capital."

Mary O'Mahony, an economist at the National Institute of Economic and Social Research, is one of the few people who has attempted to quantify rigorously how Britain compares in this area. It's not all doom and gloom. Based on her data she found that, in sectors such as mining, utilities and construction, British labour is more productive than its French, German, American and Japanese counterparts. Overall, however, she concludes that "Britain does not generally enjoy a comparative labour productivity advantage in service sectors".

Figuring out ways to measure, or even boost, productivity in services is tough because what you mean by "output" is tricky. School class sizes are a good example of this. You could argue that the government's commitment to smaller classes, made in its five pre-election pledges, is a commitment to lower productivity in education because there will be more teachers ("input") to each child ("output"). But shouldn't "output" in education be measured by results? And, if so, which results: more exam passes, higher literacy levels, lower delinquency rates?

Or take retailing, in which France is far more productive than Britain. This is partly because there is more land available to build whopping big hypermarkets on the edges of towns. And they offer poorer service levels than British stores. There are no bag packers or people in unfashionable garb offering to show you where to find muesli. The French may be more productive in retailing, but are they really "better"?

A similar dilemma faces the hotel industry. Is a hotel "better" because guests have to make their own coffee and carry their own luggage? And again it is easier for a hotel to be more productive on a greenfield site than on an older one simply because you can design it so that, say, the kitchen is near to the dining room. Both France (which has the same population as Britain but twice the land) and America have a highly productive hotel sector, partly because they have the room for new edge-of-town development. One survey found that, for new hotels in Britain, the break-even occupancy rate was 80 per cent, compared with just 50 per cent in America.

Should we then rip up our planning laws as part of an effort to squeeze more productivity out of hotels? Most people would say not. But different issues are raised by efforts to forge industrial clusters, such as a mini-Silicon Valley in Cambridge. In this case, people like Adair Turner would argue that it may be worth compromising social welfare and allowing development to proceed in order to boost hi-tech productivity. What matters, Turner explains, is whether the industry is one which could have "a cumulative dynamic effect" on the rest of the economy.

The existence of these potential trade-offs suggests that the government needs to be careful about over-hyping the importance of higher productivity. A big part of the political problem is that long-run productivity performance can have nasty side-effects in the short term. There are often good reasons to prefer lower productivity. As Nicholas Crafts sees it, "productivity is a benchmark for performance, instead of an objective in itself ".

The additional danger is that, as Britain faces an economic downturn, efforts to get short-term productivity improvements are more likely to involve job losses or tougher conditions for workers - as they did at Rover's Longbridge plant - than expansionary investment to sustain economic development.

Speaking at the launch of the CBI's Fit for the Future campaign, Turner acknowledged this prognosis when he said "we need to improve more than productivity. If we simply improve productivity we will create a high unemployment economy."

This article first appeared in the 15 January 1999 issue of the New Statesman, A slight and delicate minister?

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Twilight of the postwar era

This Brexit-focused election is just one milestone in a long and complex relationship between the UK and the EU.

On 25 March the European Union celebrated its 60th birthday in Rome. Of the 28 members, only the United Kingdom declined to attend, signalling, to quote one senior EU diplomat, that it didn’t think the occasion was “appropriate for us”. The Daily Express called this a blatant “snub” to Brussels.

On 29 March Theresa May sent her “Dear Donald” letter – not, of course, to that dear Donald but to “President Tusk” at the EU in Brussels. It was delivered by a senior British diplomat with an antique and strained politesse reminiscent of his predecessors in Berlin in August 1914 and September 1939.

On 18 April the PM declared that it was in the national interest to hold a snap general election on 8 June, having five times in person or through official sources denounced the idea of going to the country before the set date in 2020.

On 29 April, a month after the PM’s letter, Donald Tusk secured agreement from the remaining 27 member states for the EU’s negotiating guidelines.

The following day the press reported a total face-off between May and Jean-Claude Juncker, the head of the European Commission, and EU negotiators at a Downing Street dinner. She was living “in a different galaxy”, Juncker is said to have exclaimed. May dismissed the story as “Brussels gossip”. But then, on 3 May, in an address outside 10 Downing Street, the Prime Minister hit back, accusing senior EU politicians and officials of meddling in the British election campaign.

Whom you believe depends, as usual, on which side of our national chasm you are standing. Of one thing we can be sure. The spin and the propaganda will go on remorselessly, day after day, for years to come, as this country tries to talk its way out of a European union in which it has never felt at home. To keep our bearings amid the dizzying intergalactic spin, it is worth taking a longer view. Because history matters in this debate and few of our “leaders” seem to have any historical perspective.

***

At 60 the EU is a senior citizen – rather stiff in the joints, grossly overweight and often a bit of a bore. It’s hard now to recall the heady hopes that its birth aroused. After two ruinous wars in three decades, many western European leaders were determined to escape from the vortex of belligerent nationalism.

Six countries signed the original Treaty of Rome in March 1957 to set up the European Economic Community. The EEC was a common market and customs union between Belgium, France, Luxembourg, the Netherlands and two defeated Axis powers from 1945 – Italy and West Germany. Britain could have been present at the creation; in fact, most of the six wanted us to join. But then, as now, the message was: “We don’t think it is appropriate for us.”

In part, the motives behind founding the EEC were economic. Hard borders and high tariffs would hamper recovery after the war. Belgium, Luxembourg and the Netherlands had already formed the Benelux customs union in 1948. They were also natural trading partners with Germany, sharing the Rhine-Meuse-Scheldt Delta, and Germany had vied with France for decades over the mineral resources of the Saar and the Ruhr. Now the six countries decided to pool these vital assets. The European Coal and Steel Community (ECSC) of 1952 was a stepping stone to the Treaty of Rome.

None of these states had abandoned the pursuit of national interests; rather, they were going about it in less confrontational ways. Electorates, still haunted by the Depression of the 1930s, now expected their governments not only to ensure order and security but also to stimulate growth and provide welfare. In these circumstances, some erosion of national sovereignty seemed necessary, even desirable. Prosperity wasn’t a zero-sum game, built on hard-nosed “us first” policies, but would be fostered by calculated yet enlightened interdependence. For the modern state, in short, absolute sovereignty could not be an end in itself.

That said, the essential imperative of European integration was not economic but political. For France and Germany, 1914 and 1939 were just the most recent manifestations of their bloody past, a cycle of wars that stretched back to the days of Bismarck, Napoleon and Louis XIV. Sedan 1870, Leipzig 1813, Jena 1806, Valmy 1792, Turckheim 1675 – the victories were emblazoned on public monuments and celebrated in school textbooks, the defeats quietly forgotten. ­European integration offered a chance for the French and the Germans to break free from centuries of tit-for-tat conflicts; a belated acceptance of the dictum “If you can’t beat them, join them”.

The Benelux countries were caught in the jaws of that Franco-German antagonism: whenever the two big beasts bit on each other, the three little ones felt the pain. ­Italy, the other founding member, was – like West Germany – desperate to jettison its pariah status from the Fascist era. So Rome 1957 served as a belated peace treaty, drawing a line under the Second World War for western Europe.

This zeal to transcend hard nationalism is seen most strikingly in the life of Robert Schuman, the man now celebrated as the “Father of Europe”. Born in 1886, Schuman grew up in Luxembourg but was educated at German universities and practised law in the city of Metz, in Lorraine – then part of Germany thanks to its victory in 1870-71. When the next war broke out in 1914, he was conscripted into the kaiser’s army: only medical problems saved him from having to fight against the French.

In 1919 France recovered Alsace and Lorraine, so Schuman became a French citizen and got into French politics. From 1942 to 1945 he fought in the wartime Resistance and then, amid France’s postwar kaleidoscopic politics, served variously as finance minister, prime minister and foreign minister. It was Schuman’s celebrated declaration of 9 May 1950 that paved the way for the ECSC and the Treaty of Rome.

Today the “Schuman roundabout” lies at the heart of the EU quarter in Brussels – an apt memorial, because his experience of the (un)merry-go-round of belligerent nationalism inspired his commitment to European integration. He was not alone. The West German chancellor Konrad Adenauer (born 1876) was a Rhinelander from Cologne who served as that city’s mayor from 1917 to 1933, until he was sacked by the Nazis. Over the years he had in turn chafed at Prussian domination of the Rhineland, feared French annexation, and endured two stretches of British military occupation.

The Italian premier Alcide De Gasperi (born 1881) had started his political life in the Austrian parliament before 1914, when his homeland, Trentino/South Tyrol, still belonged to the Habsburg empire. After the region was transferred to Italy in 1919, De Gasperi resumed his political career not in Vienna but in Rome, opposing first the Fascists and then the Communists.

The early lives of these three men along the shifting borderlands of war-torn Europe brought home to them the suicidal futility of hard nationalism. They also shared a profound sense of Catholic Europe, extending back through the Holy Roman empire to the era of Charlemagne.

It was from this historical platform that Schuman approached European integration. “If we don’t want to fall back into the old errors in dealing with the German problem,” he said, “there is only one solution: that is the European solution.” Coal and steel were an ideal starting point because they were double-edged – vital for industrial growth but also for waging war. Surrendering national control over these critical assets could enhance prosperity and peace.

***

The British approach to “Europe” was very different. In the mid-20th century Britain still saw itself as a global power. The sterling area took half of all British exports: western Europe, struggling to recover from the war, less than a quarter. In 1951 British industrial production equalled that of France and West Germany combined. And although Britain worked closely with France in 1947-49 over the Marshall Plan and the North Atlantic Treaty, its engagement with the Continent had clear limits.

“Our policy should be to assist Europe to recover, as far as we can,” senior British civil servants advised in 1949. “But the concept must be one of limited liability. In no circumstances must we assist them beyond the point at which the assistance leaves us too weak to be a worthwhile ally for USA if Europe collapses . . .”

“Limited liability” was a philosophy rooted in Britain’s experience of the war – also markedly different from that of the Six. In May and June of 1940, Germany conquered France, Belgium, Luxembourg and the Netherlands, with Italy jumping in to grab some of the spoils. That summer is now engraved in British national mythology. It was immortalised in David Low’s Very Well, Alone cartoon for the Evening Standard, depicting a pugnacious Tommy breathing defiance to the world from a rock in storm-tossed seas.

Victory was eventually achieved not with the Continentals, who seemed to be either foes or failures, but in alliance with those whom Churchill called “the English-speaking peoples” – above all, the United States. From this perspective, “sovereignty” clearly worked: we successfully defended our iconic southern border, the white cliffs of Dover, and gained ultimate victory. Only those who had been defeated (in 1940 or 1945) would imagine surrendering any national powers to a higher authority.

In 1950, therefore, when the Labour cabinet decided that the Schuman Plan was not appropriate for us, it was following the majority view in Whitehall and Westminster. Ernest Bevin, the ailing but still doughty foreign secretary who had led Britain’s drive for closer intergovernmental co-operation with France in the 1940s, had no time for the dread word “federalism”. In his inimitable phrase, “If you open that Pandora’s box, you never know what Trojan ’orses will jump out.” Pressed by the Americans to take these ideas more seriously, he questioned how he could go to his London dockland constituents in Woolwich, blitzed by the Luftwaffe in 1940, and explain that the Germans would help them in a war with Russia. As for France, he sniffed, “the man in the street, coming back from a holiday there, was almost invariably struck by the defeatist attitude of the French”. Great Britain, he exclaimed, was “not part of Europe”; she was “not simply a Luxembourg”.

This was a bipartisan attitude, endorsed by the Tories when they regained office in 1951. Churchill conjured up the image of three overlapping “circles” of global power, with Britain involved in each but not confined to any: the Commonwealth and empire; the “English-speaking world”; and, as he put it to the cabinet in November that year, “United Europe, to which we are a separate, closely and specially related ally and friend”. He and his successor Anthony Eden welcomed European integration for “them”, not “us” – as a way of reconciling France and Germany. After the Six embarked in 1956-57 on talks in Brussels about further integration, the British sent not a government minister but a Board of Trade official, and then merely as an “observer”.

The accepted wisdom in London remained that Britain’s trading interests were global and that a protectionist European bloc would be dangerous. Yet that kind of common market was not a foregone conclusion. Britain had a powerful potential ally within the Six in the form of West Germany, and especially its influential economics minister, Ludwig Erhard.

Almost as much as London, Bonn’s trading interests were global: 40 per cent of its exports went beyond Europe and much of West Germany’s European trade was outside the Six, with Austria, Scandinavia, Switzerland and the UK. Like the British, Erhard wanted a reduction of global tariff barriers to promote free trade, rather than the high-tariff, protectionist bloc favoured by Paris to defend France’s flabby economy. Yet a common market was inconceivable without the French, and Chancellor Adenauer – focused on postwar reconciliation – insisted that politics mattered more than economics. Erhard was told to get the best deal he could as long as France was “in”.

So that left the French able largely to dictate their terms. Among these were a steep external tariff, inclusion within the EEC of France’s overseas territories, acceptance across the Six of France’s high welfare payments and the development of a Common Agricultural Policy (Cap), which subsidised inefficient farming. By 1970 the Cap consumed 70 per cent of the EEC budget. But, as a senior Italian official observed ruefully, “Europe cannot organise without France and, to get her in, prices must be paid which may seem exorbitant.”

What would have happened if Britain had been fully engaged in these negotiations from the start? Might it have strengthened Erhard’s hand and helped forge a strong
Anglo-German axis in favour of a looser, more open free-trade area? That would have put pressure on Paris to accept London and Bonn’s terms, or be left out in the cold. In which case European integration could have developed along very different lines, with a Franco-German-British triangle operating in creative tension at the heart of the new Europe in an EEC that, in effect, would have been 3 + 4. A tantalising “what if”, but it would have required a very different attitude
in Britain towards its future and its past.

***

And so the EEC was born on New Year’s Day 1958 with six founder members, not seven. The British had been completely wrong-footed. In 1950 they expected Schuman’s pipe dream to go up in smoke; they were equally complacent about the Brussels talks in 1956-57; and they repeated the mistake yet again in assuming it would take years for the EEC to become a reality. Instead, not only was the EEC now a fact, but the Six made rapid progress in dismantling tariff barriers and agreeing the basics of the Cap. By 1961 they were seriously debating political union, or at least a common foreign policy.

London struggled to believe that those despised Continentals, who in their various ways had botched the Second World War, could bury the hatchet and work together. British complacency, even arrogance, has aptly been called the “price of victory”. And we’ve been paying the bill ever since.

Once the Six was up and running, there was a grave danger of Britain being marginalised. The European community threatened
to become “the only Western bloc approaching in importance the Big Two – the USSR and the United States”, a senior Whitehall committee warned in 1960. Aside from the economic damage that would ensue, “if we try to remain aloof from them” Britain would “run the risk of losing political influence and of ceasing to be able to exercise any claim to be a world Power”. The economic case for membership was still finely balanced: commercial and emotional ties with the Commonwealth, strengthened by the war, remained strong. Yet, for Harold Macmillan, like Adenauer in 1956, politics took precedence over economics. In August 1961 his government applied to join the EEC.

But the price of victory kicked in again. Charles de Gaulle had not forgotten or forgiven Roosevelt and Churchill for treating his Free French as second-class members of the wartime alliance. A fierce nationalist, he accepted the European project but sought to turn it to France’s advantage, or his conception of this. Crucial to his strategy was keeping Britain out of the EEC.

“My dear chap, it’s very simple,” the French agriculture minister told his British counterpart. “At the moment, with the Six, there are five hens and one cock. If you join, with other countries, there will be perhaps seven or eight hens. But there will be two cocks. Well, that is not so pleasant.”

Determined to rule the roost, de Gaulle blocked first Macmillan’s application to join and then Harold Wilson’s. By the time he retired and Edward Heath had negotiated terms of entry, 15 years had elapsed since 1 January 1958. The original deal-making among the Six had set hard, to their advantage. Any new member had to accept the club rules as given: the “acquis commun­autaire”, in Eurospeak. Worse still, in 1973, just months after Denmark, Ireland and the UK had joined the community, the bottom fell out of the world economy with the oil crisis, recession and stagflation, making it nigh impossible amid all the crisis management to force the EEC into reform as Heath had hoped. The good ship Europe had been launched on the high tide of postwar prosperity. But as the Six became the Nine, that tide began to ebb. We have never had it so good – ever again.

Since the 1970s and Britain’s “entry” into Europe, successive prime ministers have tried to undo the damage caused by their aloof predecessors. Most have done so “alone” – in 1940 mode – rather than working to form alliances with reform-minded colleagues on the Continent. In particular, as in the mid-1950s, they failed to build creative partnerships with the Germans.

Margaret Thatcher was a notable example. Her cantankerous “handbagging” secured rebates on British budget contributions in excess of what probably could have been obtained by “normal” diplomacy, but it alienated many of her European colleagues. And her visceral suspicion of the Germans, dating back to the Second World War, poisoned relations with Bonn. “She doesn’t really believe that there’s any such thing as useful negotiation,” observed Sir Nicholas Henderson, a high-ranking British diplomat. “She doesn’t see foreign policy as it is, which is a lot of give and take.”

Yet Thatcher was only the extreme case. Even prime ministers who were more “pro-Europe”, such as John Major and Tony Blair, were hamstrung by domestic politics – meaning both the rooted Euroscepticism of Tory backbenchers and also the tabloids’ determination to treat every encounter with “Europe” as a replay of old battles. Woe betide any British PM who returned from Brussels without being able to proclaim victory in another Waterloo (though the 1815 battle was won in tandem with the Germans, plus Dutch and Belgian support).

The Brexit frenzy is only the latest round in that story. Even on the Remain side, the Cameron-Osborne campaign – a breathtaking blend of arrogance and incompetence – chose to make its case almost entirely by economic scaremongering about the dangers of Leave (through “Project Fact”, aka “Project Fear”), rather than highlighting positives of the European project, especially its enduring contribution to postwar peace.

Of course, the EU has often been its own worst enemy. Reform has been slow: the Cap, for instance, accounted for 73 per cent of total EU spending as late as 1985 and did not fall below 40 per cent until 2013, still a remarkable figure for one of the most industrialised regions of the world. Institutionally, the bureaucracy is flabby; financial control is weak; decision-making is ponderous; the European Commission frequently locks horns with the European Council (the heads of government); and the persistent “democratic deficit” has exacerbated a popular sense of alienation.

Repeatedly, too, politics has trumped economics, particularly over the question of enlargement. In the 1980s the Nine ­became 12 in order to embrace three underdeveloped countries that had recently thrown off authoritarian regimes: Greece, Spain and Portugal. In the 1990s the euro was driven not just by the ambition of Jacques Delors but by the determination of François Mitterrand and Helmut Kohl to anchor the financial and industrial power of a unified Germany firmly in European structures – updating, if you like, Schuman’s vision. And since 2000, the EU has welcomed in from the Cold (War) those countries of eastern Europe that were anxious to escape the Russian bear hug. All these politically inspired moves have come at an economic price. To be sure, the EU28 is far more truly “European” geographically, but the original Six (apart from southern Italy) had a coherence as developed economies and functioning democracies that today’s mixed bag of members conspicuously lacks. Yet the EU project has continued to be animated by aspirations for close economic and political union that date from the 1950s.

***

Sixty is a ripe age. Many institutions do not survive that long and the EU (like Nato, founded in 1949) is painfully aware of the need to think imaginatively about its form and direction. The “Future of Europe” was firmly on the menu even at the Rome birthday party. On 29 March 2017 the UK, by contrast, began Year Zero – reborn into a brave new, Britain-shaped world, if you believe the Prime Minister; tumbling into the abyss, if you heed remaindered Remainers. Now Old EU@60 is about to meet New UK@0 for a long and bruising battle.

The stakes are high on both sides. Brussels is in no mood to let Britain off lightly: an easy exit would encourage other waverers and jeopardise the whole European project. Across the Channel, if May puts politics before economics (“control” of borders over access to the single market) her hard nationalism could alienate Scotland, undermine the Irish settlement, rupture the United Kingdom and end in no deal. A “full English” Brexit might prove very expensive.

The tabloids will doubtless report it as a replay of 1940 and “Our Finest Hour”: an earlier Brexit moment. Attentive as ever to them, May has embraced the description of herself as a “bloody difficult woman” who is eager to “fight for Britain”, in Churchill-Thatcher mode. Is her snap election intended to pave the way for a hard, nativist Brexit? Or does she just hope that a bigger majority will give her more room for manoeuvre in battling Brussels? No one knows, probably not even May herself. Current negotiating strategies, like battle plans, will not survive the first encounter with “the enemy”.

That is why it is important, amid the daily barrage of spin, sneers and aggro, to keep the bigger historical picture in mind. Because we may be entering the twilight of what can be called the postwar era, which began in the decade after 1945, when the horrors of belligerent nationalism prompted a fervent effort to make peace and build truly international institutions. The UN, Nato and the EEC were all products of that creative moment; likewise the General Agreement on Tariffs and Trade and the Universal Declaration of Human Rights.

This fabric of postwar internationalism is now ageing and strained – often in need of radical modification – yet in a world where nationalism, protectionism and racism are on the rise, it provides some flimsy protection against the law of the jungle. If Brexit is handled belligerently, it could help to pull the threads from that thin tissue of coexistence and co-operation.

Our leaders show little awareness of what is at stake historically. According to US Vogue’s recent interview with Theresa May, “She says she doesn’t read much history and tries not to picture how things will be in advance.” Jeremy Corbyn seems to live in an ideological time warp of his own. Boris Johnson does have historical sensitivity, but of a typically self-serving sort: see his entertaining little (auto)biography of Churchill.

This Brexit election is just an early milestone on a long and painful road. It took the UK over 11 years from first applying to joining the EEC. It may take as long to complete a full, legally watertight exit from the EU. Certainly, for the next few years, at a time when so many global problems are crying out for creative policymaking, the EU and the UK will confront each other obsessively to the exclusion of almost everything else. A dysfunctional union and a disunited kingdom – each captivated by its contrasting past – will struggle and muddle towards divergent futures.

David Reynolds’s books include “Britannia Overruled” (Routledge) and “The Long Shadow: the Great War and the 20th Century” (Simon & Schuster)

This article first appeared in the 25 May 2017 issue of the New Statesman, Why Islamic State targets Britain

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