Joseph Chamberlain: Entrepreneur in Politics.

Joseph Chamberlain was the most important English politician in the last century never to be prime minister. He was more powerful than most party leaders and had more impact on policy than most prime ministers. In reviewing the first of Chamberlain's biographies, Winston Churchill marveled at his legacy: "He lighted Beacon fires which are still burning; he sounded trumpet-calls whose echoes still call stubborn soldiers to the field." Six decades later, reading Peter T. Marsh's thorough, highly intelligent, and well-written biography, one realizes that the embers still glow and the music lingers on. Too bad, for Chamberlain's legacy is a decidedly mixed one. And despite the many differences between Britain then and America now, the story has more than a passing relevance to some of today's debates.

Chamberlain's importance in late-Victorian Britain is obvious. He occupied high posts, first in the Liberal government of 1880-85, and then in the Conservative government a decade later. He was at the center of the two most divisive political battles of his time - over Irish Home Rule and free trade - and managed to split both of Britain's national parties (the Liberals over Ireland and the Tories over free trade). As colonial secretary (1895-1903) he launched a crusade for imperial unity which, while never realized, deeply affected Britain's foreign policy for decades. He founded a political dynasty; one son (Neville) became prime minister and another (Austen) foreign secretary.

To an observer today, however, what is most striking about Chamberlain's political life is that it is an allegory for Britain's journey from towering glory to slow decline. From dramatic success to noisy frustration, Chamberlain's rise and fall mirrored that of his country.

Joseph Chamberlain was a product of the Industrial Revolution - almost literally. "As far back as the records go," writes Marsh, "the men in his family earned their living in businesses of the kind that gave rise to the Industrial Revolution." The grandson of a malt brewer, the son of a shoe-factory owner, himself a prosperous screw manufacturer, Chamberlain moved from the world of business to politics when he was 38 (with a fortune of around 120,000[pounds]), becoming mayor of Birmingham. In two years he had established himself as the greatest mayor in all of England. From slum clearance and public hygiene to school reform and the founding of the University of Birmingham, Chamberlain never ceased to attend to his home town. "The monuments of the traditional elite are at Westminster, writes Mr. Marsh. "The memorials of Joseph Chamberlain are all over Birmingham."

An entrepreneur, he was an interloper in Britain's high politics, which had been - and remained - the preserve of landed elites. His politics were the product of his small-business past - Enlightenment liberalism and religious nonconformism. He added, however, a zealous concern for the welfare of the industrial working and middle classes with whom he had so much contact. This concern for the working man and woman he maintained throughout his career; on everything else he changed his mind. He began his national career as one of William Gladstone's purest free-traders; he ended it by resigning from Arthur Balfour's Conservative government because it was insufficiently enthusiastic about his scheme for "imperial preferences," a proposal to turn the British Empire into a protectionist trading bloc. As Churchill remarked, "An immense force was exerted with complete sincerity in different phases in opposite directions."

What explains this strange journey? It is not lack of intelligence, for Chamberlain was brilliant; nor lack of learning, for he read deeply and broadly; nor a casual political opportunism, for his patriotism was deep and real. The key to Chamberlain's conversion lies in his theory of British decline. By the early 1890s Joseph Chamberlain had come to recognize something that few British statesmen did, and this recognition changed his entire outlook on politics. He realized that Britain was in serious relative decline; while it was growing at a brisk enough pace to raise living standards, its growth was, in comparison to that of other large industrial countries (principally America and Germany) actually slowing down. More importantly, scientific and technological innovation, inventions and patents, the growth of new industries - all these were shifting across the Atlantic and the North Sea. Many free-traders refused to concede any problem, but Chamberlain understood that Britain had to do something or else it was destined to descend gradually from being the industrial superpower of the world to being a small island off the coast of Europe.

There ended his wisdom. Brilliant in diagnosing the problem, Chamberlain was not so farseeing in his solutions, which were either unfeasible or misguided. By the early twentieth century, imperial unity had become impossible; it would have required an element of coercion the British public neither wanted nor could afford. Even his proposal for common tariffs for all colonies and dominions failed to recognize that the dominions - Canada, Australia, South Africa, etc. - were emerging industrial nations in their own right. They would not accept a tariff system that locked them into selling cheap raw materials to the mother country and buying expensive finished goods from her.

Those solutions that were feasible ended up aggravating the very problems Chamberlain had identified. The oldest, most uncompetitive sectors of Britain's economy got the greatest protection from foreign competition. High taxation and elaborate subsidies further eroded the British spirit of enterprise so that Churchill would ruefully say in 1937, "We have reached the period when Joseph Chamberlain's main effort is triumphant. Great Britain has at last joined the rest of the world as a protectionist country. . . . The elaborate measure of social reform, the pensions and insurance systems which this country has seen created on this island, the high taxation of wealth enforced in different degrees all over the world but nowhere at such a pitch as in Great Britain [are all his legacy]."

After World War II these measures only intensified. In fact Britain's "solutions" for most of this century were tariffs, punitive taxation and regulation, and government by trade unionism. The country's leaders have generally chosen the Chamberlain route to "maintaining Britain's world position," i.e., dashing off to distant colonies, proposing new imperial schemes, and hosting Commonwealth conferences.

The fundamental solution to the problems Chamberlain diagnosed was to raise domestic productivity. This approach was proposed by one of the few people who agreed with Chamberlain's diagnosis (yet disagreed with his solutions), the eminent economist Alfred Marshall. In a memorandum to Prime Minister Balfour (quoted in Aaron Friedberg's splendid book, The Weary Titan), Marshall acknowledged that Britain had indeed declined in relative terms. This was, in part, unavoidable. New industrial nations rise and, coming from a lower base, can inevitably rise faster than mature economies. But part of the problem lay in Britain's own success. "The sons of the mid-century manufacturers had become content to follow mechanically the lead given by their fathers. They worked shorter hours, and they exerted themselves less to obtain new practical ideas than their fathers had done. And part of Britain's leadership was destroyed rapidly."

Marshall's solution was clear. If Britain hoped to retain a "high place in the world . . . everything [must] be done to increase the alertness of the industrial population in general and her manufacturers in particular." Exposing British industry to competition from the leading industrial nations - especially America and Germany - was "absolutely essential."

This analysis implied painful measures, requiring less government intervention in many areas but more in some - like keeping tariffs and taxation low, reducing government spending and regulation, increasing national savings, improving technical education, funding scientific research, making society more meritocratic. Much of British society, especially its elites, had been suspicious of the culture of capitalism. They believed in birthrights, not merit; land, not factories; classics, not engineering. The sons of the commercially successful, moreover, aped their values as they attempted to become proper gentlemen. Following Marshall's proposal would have required a social and cultural transformation, moving society back from the world of Evelyn Waugh to that of Adam Smith.

Chamberlain - and much of Britain - searched for an extravagant external fix to the problem of British decline. But the answer lay at home. Britain had become "the workshop of the world" in the eighteenth century because of the inventiveness, hard work, and frugality of its people, not its particular set of tariff policies. Empire was the result, not the cause, of Britain's greatness. Britain had spent time, money, and energy on pacifying, annexing, and governing vast stretches of land in Asia and Africa and, with the exception of India, gotten little from it in return.

The irony of Chamberlain's tale is that it was the entrepreneur who forgot about the importance of entrepreneurship, the scion of the free-market revolution who became enamored of the power of the state, the skeptic of empire who was seduced by its brass bands and bayonets. He should have known better. If Joseph Chamberlain had worried more about the productivity of manufacturers in his beloved Birmingham and less about the constitutional arrangements of Dutch farmers in the southern Transvaal, Britain would have been better served.

Joseph Chamberlain died the week that Archduke Franz Ferdinand was assassinated in Sarajevo. With the First World War, Britain's slow slide from economic supremacy accelerated irrevocably.