Having looked at nations that have gained competitive advantage since the 1970s, Porter now examines two nations that have lost, or are in the process of losing, it. The purpose is to gain a deeper understanding of the factors that determine national advantage. The first of these countries is the UK. Despite being the world’s first industrialized nation and its leading industrial power up until the start of the 20th century, Britain has been on “a long slide” (482) since then. Among the advanced nations, it endured the lowest growth in productivity and per capita income in the post-war period. It also lost competitive positions in a large and increasing number of industries. While maintaining positions in consumer packaged goods, confectionary products, household products such as toothpaste and soaps, and financial services, it has lost ground in sophisticated manufacturing. This decline is especially marked in transportation and machinery.

Porter explores the reasons for this. The UK enjoys extensive reserves of capital, a favorable location, and the advantage that English is “the world business language” (496) due to British and then US economic world dominance. However, UK factor creation is poor. As Porter writes, “The British educational system has badly lagged behind that of virtually all the nations we studied” (497).