Britain Voted for Public Ownership. West Germany Didn't. Thirty Years Later, the Gap Was Clear.

In July 1945, British voters gave the Labour Party 393 of the 640 seats in Parliament. Labour's manifesto promised public ownership of the means of production.

On New Year's Day 1947, the promise reached the coalfields. The government took over Britain's coal industry, 1,200 pits worked by 700,000 people, and merged it into one state-run body, the National Coal Board. Railways, electricity, gas, and steel became government property over the next four years.

West Germany made the opposite choice about who would own industry and set prices. The two were alike in most other ways, which makes the comparison particularly useful. Both were democracies with free elections, free courts, and a free press. Both belonged to NATO, both received American aid, and both came out of the war with bombed cities and rationing, though Germany's damage was worse.

The comparison of the two economies measured economic output per person, a basic gauge of how prosperous its people are. On that measure, the country that chose private ownership and free prices grew far faster. From 1950 to 1979, West German output per person grew 261 percent to Britain's 90 percent.

Today the Democratic Socialists of America's platform calls for public ownership of the largest corporations and essential industries, as did Britain's Labour Party platform. What makes this comparison so interesting is that, unlike other comparisons in which the country that chose state ownership was also a dictatorship, UK citizens chose these policies and stuck with them for almost thirty years. The UK also stayed a democracy the whole time, and it still fell behind.

The program of nationalization in the UK continued over this period. By 1951 the Bank of England, civil aviation, the canals, and long-distance trucking had also passed into public ownership. Steel returned to private owners in 1953 but was nationalized again in 1967. In the 1970s, the government added Rolls-Royce, British Leyland, aircraft, and shipbuilding to the industries it took over. Top tax rates climbed too, and in 1974 the rate on the largest investment incomes reached 98 percent.

West Germany's turning point came on June 20, 1948, eleven months before it became a country. The Allies governing the West German sectors issued a new currency, the Deutsche Mark, and a German economic council lifted most price controls. Until then, shops would not take the old Reichsmarks, and goods moved through barter and black markets. Ludwig Erhard, the council's director of economics, believed recovery needed free prices and stable money. Once sellers could set prices, stocking a shop was worth doing. Within a day, goods began to reappear on empty shelves.

From 1949 to 1999, German inflation averaged 2.7 percent a year, against just under 4 percent in the United States.

West Germany was no economic free-for-all. The 1951 Co-Determination Law required worker representatives on company boards, and the system's founders called it a social market economy, a middle way between unregulated capitalism and central planning. But where Britain kept adding to public ownership, West German governments spent the 1960s selling state shareholdings.

Britain's head start took two decades to disappear. In 1950 the average Briton produced 79 percent more than the average West German. The two drew level in 1970, and by 1979 West Germany was 6.3 percent ahead. Of sixteen Western European countries with economic records spanning 1950-1979, Britain’s economic output per person grew the least.

The obvious explanations for this difference in performance do not fit. Political freedom was not the difference, as both countries sat near the top of rule of law and freedom of expression scales throughout. Aid was not the difference, since Britain received about 2.3 times more Marshall Plan money per person than West Germany. Nor was the size of government: By the mid-1970s, West Germany's government spent a larger share of national output than Britain's.

It is true that West Germany started far behind. Its educated workers and wrecked factories would naturally grow faster for reasons unrelated to policy given adequate inputs. Yet it kept pulling ahead after catching up, so something more than catch-up growth was likely at work. Britain carried heavier defense costs, and millions of Germans expelled from the east swelled West Germany's workforce, which likely helped West Germany. North Sea oil also lifted Britain's figures from 1975 on.

Yet, the UK’s poor economic performance is likely not explained by these factors. Public ownership in Britain survived four changes of government. Its voters got the coal board, the railways, and the steelworks they voted for. What no ballot could deliver was an economy that kept pace with the neighbor that chose differently.