Chapter IV. World Economy

Abstract

Last February we suggested that the world economic situation presented governments with two main problems in 1971. One, the problem of world-wide inflation, was generally recognised. The other, the problem of the growing disequilibrium in the balance of payments of the United States, appeared to be inadequately appreciated. OECD, for example, had suggested two months earlier that the United States would combine a real economic growth rate of 4 per cent with a surplus of $2 billion on the current balance of payments. We ourselves predicted a growth rate of 3 per cent and a current deficit of $¾ billion, but even these figures proved over-optimistic. The rise in real GNP reached only 2 ¾ per cent and, partly because of strikes, there was probably a current deficit of the order of $3½ billion.