A navy is no more than the armour and the weapons-system of seapower. The hull, providing essential buoyancy, is the national wealth. The propulsion is commercial and industrial success, which creates the national wealth. By the end of the Second German War in May 1945 British national wealth, once the greatest in the world, had given way to bankruptcy, with overseas debts exceeding reserves of gold and foreign currency by nearly fifteen times. Whereas in 1870 Britain's foreign trade had nearly equalled that of France, Germany and the United States put together, in 1945 her export trade had collapsed to less than one-third of the 1939 level, and her visible exports could finance no more than one-tenth of her overseas requirements. Worse still, the British industrial machine, once the envied model for the rest of the world, had been revealed by the war to the government, though not to the British people at large, as out-of-date in equipment, methods and attitudes; crippled by poor management and obstructive workforces; and weak in advanced technologies. All this was especially true of shipbuilding.

With the outbreak of war in 1914 the internationalists in the Liberal and Labour parties, already losing credit, seemed to go into intellectual bankruptcy. The moral law was demonstrated to carry less weight than a military railway timetable. A solemn treaty was shown to have the protective power of a magic charm. The natural harmony of human interests was disproved by the spectacle of great nations at each other's throats. The pacifying and unifying effects of modern science and communications were ridiculed by the convenience with which railways launched into battle millions of men equipped with artillery and machine-guns. The liberal-evangelical faith in love, reason and the brotherhood of man was cruelly mocked by the ferocious hatreds bayed by the mobs in the great cities of Europe.

There are of course the neo-Puginites or neo-Morrisites who like to think of Britain as leading the world into a post-industrial phase where this form of capability will be obsolete, and who despise so material a matter as GNP as unethical or—the trendy version—unecological. Yet these high-minded escapists are among the first to howl about the need for more resources to be invested in hospitals, schools, good works, prison improvement, subsidies for the arts and what not. A country of static or declining GNP will not be an 'Erewhon' but a pinched and increasingly bitter place. Poverty may be noble as a concept; it is rarely so in in the flesh.

The truth is that the Labour Government, advised by its resident economic pundits, freely chose not to make the re-equipping of Britain as an industrial society the Schwerpunkt of her use of Marshall Aid. Instead, the Government saw Marshall Aid (like the American loan of 1945) primarily as a wad of greenbacks stuffed by a kindly Uncle Sam into the breeches pocket of a nearly bankrupt John Bull who, though diligently seeking future solvency, nevertheless still wished in the meantime to go on playing the squire, beneficent to his family and the poor, and grand among the neighbours.

The British complained at the time, and were long to complain afterwards, that the French had let them down; that the French army had not fought well enough; that France, by capitulating, had left them to carry on the war alone against overwhelming odds. These were complaints which the British, who had been hardly more than spectators of the battle, were singularly ill-qualified to make. For it was, after all, only the logical, if not the inevitable, consequences of the entire course of British policy towards France in the previous twenty years, and of the whole pattern of British grand strategy and re-armament in the 1930s, that France should virtually alone have to fight the decisive land battle against Germany, a nation twice her size; and that she should therefore lose that battle.
Now the British were face to face with the doom which, step by step, illusion by illusion, they had brought down on themselves – a war without an ally against two great powers, possibly three; their own island in danger; an ill-defended and immensely vulnerable empire; and an inadequate industrial machine; and insufficient and fast-dwindling national wealth.

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Growing foreign perils were perceived and promptly and fully reported, first to London and then to ministers. Some permanent officials, such as Crowe in his time and later Vansittart, struggled hard to convince governments of the need for a strong foreign policy, and to puncture the prevailing euphoria with a bodkin of realism. They failed. They failed because there was another, competing influence on politicians, a more congenial and therefore in the end a more effective influence: a constellation of moralising internationalist cliques, each with its ideas-peddlers, its contact-men in high places, and its tame press. These busy romantics – from Philip Kerr (Lord Lothian) and Lord Robert Cecil on the Right, through liberals like Smuts and Gilbert Murray in the middle to Kingsley Martin and Clifford Allen on the Left – not only believed, admirably enough, that morality rather than power ought to govern relations between states but acted as though it did... The internationalists successfully imposed on governments their pretension to speak for the inarticulate and unsounded body of the British nation; that is, to represent public opinion at large.

British policy was therefore the child of their insemination of the politicians – politicians like Baldwin and MacDonald, the Chamberlains, Simon and Henderson, Halifax, Eden. It was as if the encumbents of quiet early-nineteenth-century rectories and nonconformist minister's houses had been miraculously transported into the great offices of State of a hundred years later. Instead of the suspicious minds of pre-Victorian statesmen, there was trustfulness; instead of a worldly scepticism, a childlike innocence and optimism. And instead of a toughness, even a ruthlessness, in the pursuit of English interests, there was a yielding readiness to appease the wrath of other nations. For the very bedrock of the national character had been crumbled since the eighteenth century. Whereas the pre-Victorian Englishman had been renowned for his quarrelsome temper and his willingness to back his argument with his fists – or his feet – now the modern British, like the elderly, shrank from conflict or unpleasantness of any kind. In Lord Vansittart's words: "Right or Left, everybody was for a quiet life."

The importance of war and military institutions has been generally neglected in British historical writing, whose tone has been set by the Whig and liberal emphasis on peaceful constitutional progress. In this liberal view war appears as an aberration, an interruption of a "natural" condition of peace: almost as a form of delinquency unworthy of intellectual attention. The liberal, pacifistic view of history can only be maintained by resolute aversion of the gaze from the facts. For conflict between tribal or social groups and nations constitutes the essential human condition in the absence of a world-state with a monopoly of force. The relations between nation states have always been those of a struggle for advantage and domination, where friendships may indeed burgeon while interests temporarily coincide, but then again languish when those interests diverge. Peace and war in history flow continually in and out of each other, alternative aspects of the single phenomenon of the struggle for power. It is false and unrealistic therefore to divide policy between hard-and-fast categories of "peace" and "war". Policy may shade all the way from trade and diplomatic rivalry through indirect conflict and limited war to total war; the distinctions are of degree, not of kind

Two things caused the decadence of British maritime power: the long peaceful supremacy after Trafalgar and the capture of the navy by that hierarchy of birth and class that controlled so many of Britain's national institutions. Drawing most of its officers from 1 per cent of the nation, the Royal Navy never tapped that great reservoir of urban middle-class talent that made Scheer's fleet so well-educated and so intelligent... The navy reflected social rather than functional values, preoccupation with tradition rather than technology... It was a tragedy for Britain that the aristocracy and gentry had never been cut off from the national life, as had largely happened in France... [T]he social and intellectual values of industrial society never ousted those of the aristocracy. The richer Victorian England became, the more ashamed in a deep sense did she become of the technological origin of those riches. The engineer and the businessman have never been as "respectable" in Britain as in Germany or America... [I]n the world after 1870, when Britain faced the technical challenges of the more complex phase of the industrial revolution and the commercial challenge of foreign competition, the leadership of the country was in the hands of the social group least likely (because of its wealth and privilege) to be aware of the challenges and to respond to them. From 1870 to 1914 Britain was decadent because a decadent ruling social group and decadent (non-functional) values had captured or corrupted the forces of technological and social change.

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As a consequence of this spiritual revolution English policy ceased to be founded solely on the expedient and opportunist pursuit of English interests. International relations were no longer seen as being governed primarily by strategy, but by morality. As Gladstone put it in 1870: "The greatest triumph of our epoch will be the consecration of the idea of a public law as the fundamental principle of European politics."

Cobden in his boundless mid-Victorian optimism about free trade could no more have imagined such a plight than Adam Smith could have imagined refrigerated cargo ships bringing meat from the New World to undercut British livestock farmers. Perhaps their intellectual descendants today are at times too preoccupied with peacetime world trade and the advantages of economic specialisation between nations, to the neglect of the total-strategic implications in wartime of such specialisation. But at least Adam Smith himself recognised that, in his words, "defence, however, is of much greater importance than opulence".

[T]he essential and constant factor common to all three national academies [in Britain, France and America] is the indoctrination with tradition: potent emotional conditioning in military myth, habits, and attitudes. There are the physical symbols and reminders: engraved tablets of the glorious dead; the museums; the assembled iconography of illustrious graduates; statues; guns... At all three academies there are songs, slang, customs and ceremonies that link each annual class together for the rest of their army life... This indoctrination has grown out of history rather than been artificially created, but it may be doubted whether psychologists or sociologists could improve on it. Upon this mental sub-structure, purely neo-feudalist with its emphasis on glory, gallantry, honour, duty, and patriotism, is built functional and technical training, both concurrently at the academies, and later in schools of application. But it is this indoctrination, together with drill and discipline, that turns civilians into soldiers. Without it there would be no difference between a general in a defence ministry and a high executive in a business cartel. In terms therefore of creating the common character of the military elite, this constant factor of conditioning inside cadet colleges has been of greater importance than the changing detail and emphasis of academic curriculum and military training.

Now...came a further threat to the power of employers (no longer "masters"): the arrival of national trade unions or federations of unions. So the employers too began to organise themselves on an industry-wide scale. Their purpose was well expressed by Colonel Dyer, the American leader of the Federation of Engineering Employers (founded in 1896), in respect of his own industry. It was "to obtain the freedom to manage their own affairs which has proved so beneficial to the American manufacturers as to enable them to compete...in what was formally an English monopoly..." Just how far that freedom had been cumulatively shackled by the past step-by-step gains of the trade unions was revealed by books and newspaper campaigns urging Britain to "wake up" to German and American competition. In 1894 appeared the bestselling British Industries and Foreign Competition. In 1896 followed a "Made in Germany" press panic, on publication of a book under that title. In 1901 the Daily Mail followed a Daily Express series entitled "Wake up England!" with its own on "American Invaders". In 1900–1901 The Times, governing-class opinion incarnate, ran major articles on "The Crisis in British Industry" and "American Competition and Progress". Technical journals critically examined the efficiency of particular industries. All exposed British owners and managers as now widely old-fashioned in outlook, lethargic in action, and smug. But also fully explored was the opposition of the unions to new machines and new methods; the shackling effect of union restrictive practices on efficiency and productivity.

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It is Northern Ireland that provides the classic contemporary demonstration of Clausewitzian principles in action. In 1974 the Ulster Protestants rejected powersharing under the 1973 Sunningdale agreement to the point of launching a general strike which the British army warned the British government it could not handle. The government thereupon abandoned the project. But in 1998 the majority of Unionist political parties and at least half the Unionist electorate have come to accept power-sharing under the deal brokered by Mo Mowlam. Wherein lies the essential difference between 1973–74 and 1998? It lies in the profound yearning on the island of Ireland and on the British mainland (including Whitehall and Westminster) for "peace" after the intervening 25 years of unrelenting "war" on the part of the IRA, years of violence of the most extreme kind intended (to quote Clausewitz) "to compel our opponent to fulfil our will". Thus all the talk of compromise and reconciliation in Northern Ireland is just so much small-l liberal blather disguising the Clausewitzian reality that by their "continuation of politics by other means" the IRA have indeed compelled their opponents to fulfil their will.

The evidence also justifies a verdict that the British character in peacetime...lacked not only hardness of mind, but also (except perhaps among the trade union barons and the shop-floor mutineers) hardness of will. In a corruption of the virtue of tolerance into a vice, the British too readily put up with slackness; they shrank from weeding out and discarding the incompetent, whether these wore the executive homburg or the workman's overalls or the teacher's gown. They lacked, moreover, the dynamism powered in America by individual and corporate ambition and in post-war Germany by obsession with Leistung (achievement). For long since out of fashion in Britain was the restless energy displayed by British entrepreneurship in the full momentum of the industrial revolution. Instead, in the shrewd diagnosis of a distinguished economic commentator in 1963 (and fully justified by the historical evidence), "The very niceness of the British, the national desire to do the decent thing...has become an enormous force for immobilisme..."