The Pride and the Fall: THE DREAM AND ILLUSION OF BRITAIN AS A GREAT NATION by Correlli Barnett (The Free Press: $24.95; 359 pp.)

Nations panic just as people do. When things go wrong--as they have in Britain--a kind of controlled hysteria seizes even the most coldly reasonable analysts and would-be diagnosticians.

Thatcherism, despite its tone of hardball realism, is a political expression of the sort of panic that has gripped Britain’s top echelons since its economic predicament became clear. Pushing the weak and unlucky off the life raft has replaced Benjamin Disraeli’s (and former Prime Minister Harold Macmillan’s) “One Nation” consensus. The manner of intellectual toughness became a disguise for the soft option, the easy way out of a real dilemma.

At first glance, Correlli Barnett’s scathing exposure of British industrial and social shortcomings is just what the doctor ordered. His argument runs thus: Great Britain, “original engine room of the Industrial Revolution . . . has neglected to adapt and modernize the traditional industries in which she had once been world leader.” Victory in World War II merely hid a long-term slide, starting in the 1930s and before, that culminated in Britain’s gross national product dropping to 14th place in the non-Communist world, with mass unemployment, hideously long dole queues and general demoralization. “The British people’s self-congratulation over their industrial record in 1939-’45 rested on two basic fallacies”: dependence on the United States via Lend Lease and grossly inefficient factories that were too small, too fragmented and old-fashioned to compete with Germany and Japan after the war.

Barnett is at his sharpest and most pertinent when ripping aside the mask of complacency from British industry. He cites facts and statistics that dramatically underscore his view of its built-in obsolescence, stand-patism and stubborn refusal to modernize equipment and mind-sets. He graphically illustrates the penalties of the rigid old class system on an alienated, embittered working class ruthlessly exploited by wicked Victorian masters. He points to the working-class “subterranean reservoir or unwillingness, suspicion and hostility” as a major factor in Britain’s decline. And, with adroit and scholarly use of committee minutes and official reports, he shows how even the nation’s proudest achievements--like the Spitfire, radar and other technological breakthroughs--were marred by inefficiency and downright laziness.

But gradually, I began to sense in all of Barnett’s formidable debunking more than a whiff of special pleading and even a curious, if somewhat authoritarian, sentimentality. My eyebrows raised a little when he blithely contrasted Britain’s wartime industry with Germany’s--to the former’s detriment. It’s quite fashionable these days to admire Nazi Germany’s organizational genius without also pointing out how much easier it is to mobilize a cowed nation whose economy (Barnett forgets this) was based on slave labor.

But Barnett’s real bete noir is precisely the social idealism, “a new-found sense of national community and team effort,” that enabled Britain to face the Nazis and beat them. He despises what I have always regarded as the best thing about Britain: its attempt at social justice, fairness and decency. This “New Jerusalem”--he almost uses it as a curse word--Barnett sees as the poisonous worm in the apple of British industrialism. Exactly what he means isn’t always clear in the murk of his clenched-teeth fury.

As far as I could make out, he’s talking about his own version of Prime Minister Margaret Thatcher’s “enemy within.” Thatcher was referring to the striking coal miners. Barnett probably means the “Enlightened Establishment,” that odd lot of One-Nation politicians, social-justice bishops, Christian Socialists, liberal civil servants and “moralizing internationalists” drawn from the Labour and Liberal parties he sees as the worst thing that ever happened to modern Britain.

Their religious emotion, romantic imagination and impeccable class credentials eased them into positions of power and influence where they could spread their flabby gospel, blinding capitalists to self-interest and further inflaming a trade union-ridden proletariat that is “subliterate, unskilled, unhealthy and . . . hanging on the nipple of state maternalism.”

Bracing stuff, this. I heartily recommend Barnett’s book to fuzzy-minded Anglophiles and Eng-lit majors planning to visit Britain on their junior year abroad. It’s a good starting point for argument. Being a New Jerusalemite myself, I winced painfully while reading his often-accurate indictment. I absolutely agree that the “explanation of the ‘British disease’ has to be sought beyond the confines of industry, in the nature of British society itself, its attitudes and values.” The real question is less the nature of the disease than the sort of patient you want to have survive it.