Europe's Advantage

Explores the causes of the decline of British manufacturing in the 20th century by focusing on the relationship between banks and small firms. By comparing the rise of small firms in France, Germany and Italy and their decline in Britain, this book analyses how the structure of these countries' banking systems affected small firms' growth.

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This is the first book to explore the causes of the decline of British manufacturing in the 20th century by focusing on the troubled relationship between banks and small firms in a comparative historical perspective.

Since the mid-1970s, the 'rediscovery' of small firms and of the important role they have played in the economies of continental Europe have occupied a substantial part of the literature on the sources of economic competitiveness. In Britain, the relationship between banks and industry has been the object of intense speculation since before the First World War. Since then banks have been accused by the business community, academics and politicians of neglecting industrial finance and by doing so of reducing the competitiveness of British firms.

By comparing the rise of small firms in France, Germany and Italy and their decline in Britain this book analyses how the structure of these countries' banking systems has affected small firms' growth. This analysis is placed in the historical context of the political economy of these four countries, to show how banking and industrial structures developed over the century as a consequence of the state's need to mediate between different social and economic groups. This approach allows the author to show why British banking came to be so concentrated and the negative impact that this had on the supply of finance to small firms. The experiences of France, Germany and Italy show alternative structures and policy responses towards small firms.