Why did Britain lose her lead?

Britain had been the world's leader in industry and trade. Why did she let Germany and the U.S.A. catch up? Part of the answer is that she could not stop them. The U.S.A. is far bigger and richer than Britain. In the end, it was almost bound to take the lead.

At the same time, some British firms were badly managed. By the 1880s and 1890s, a lot of them were run by the sons and grandsons of the men who set them up. And the sons and grandsons, too often, never went near the mills and factories. They just lived off the profits.

To keep up with their rivals, firms need to invest money. (For example, they have to buy more up-to-date machines.) The money comes from the firm's own profits or from well-off investors. But after 1870, British investors put more money into foreign railways and mines than they put into British factories and mills. They got good dividends, but they did not help British industry. In fact, they helped foreign firms to grow.

British firms which sold machines abroad also helped Britain's rivals. Foreign mills, full of British-made machines, made good, cheap cloth. Then they sold it to customers who, 30 years before, had bought from Britain.

On top of this, Britain stuck to free trade, while most other countries did not. The French and Germans put tariffs on imports to protect their own industries. French tariffs on imported cloth made British-made cloth expensive in France. So French people bought French-made cloth instead.

Lastly, British inventors were falling behind. Had this something to do with education? German schools and universities led the world in science and engineering. But young men in Britain's 'public schools' studied Latin and Greek and not much else. Most of them knew no science at all.

Walter Robson: Britain 1750 – 1900; Oxford University Press, 1993/2002, page 61 f.