The Conditions for High and Stable Growth and Employment

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I would like to thank the Royal Economic Society and the Scottish Economic Society for inviting me to speak today. It is a pleasure to be here in St Andrews to express my appreciation of the leading role that British economists, the Royal Economic Society and the Scottish Economic Society in particular have played over the years in the development of economic theory and practice. This paper discusses the conditions for stability and growth in the national and global economy, and the new policies, and new approaches being pursued in Britain and Europe to make stability the platform for high and stable levels of growth and employment. The paper includes an overview of the reforms to the international financial architecture being undertaken to improve the prospects worldwide for prosperity and growth. These discussions of the conditions for stability and growth should not be seen as a retreat into treating economics as a dismal science. Let me begin by affirming the high ideals and public purpose which ushered in the post war economic era and which, for economic policy makers, characterised the creation of the IMF and World Bank, as well as the domestic ambitions of post-1945 governments, and these ideals underlie our Government's aims for British economic policy. Indeed when the Bretton Woods conference met in 1945 it defined a new public purpose characterised by high ideals. Economics was about more than exchange rates, the mechanics of financial arrangements or even new institutions. At the very start of the opening session, the American Secretary of State said that: 'Prosperity like peace is indivisible. We cannot afford to have it scattered here or there amongst the fortunate or enjoy it at the expense of others ... prosperity has no fixed limits it is not a finite substance to be diminished by division. On the contrary the more of it that other nations enjoy the more each nation will have for itself . . .' The post-war arrangements were founded on the belief that public action on a new and wider stage could advance a new and worldwide public purpose of high ideals rooted in social justice. The aim was to achieve prosperity for all by each co-operating with every other. This meant new international rules of the game that involved a commitment to high levels of growth and employment. In short, the job of every economy was to create jobs for all. To seek in our generation the high ideals of the 1940s requires four conditions for high levels of growth and employment to be met: