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The World Economy

Volume 929: debated on Tuesday 29 March 1977

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Other countries have found difficulty, like ourselves, in achieving all their various economic objectives at the same time. At the moment, a significant improvement is also required in the outlook for the world economy if any of us are to achieve our national aims in full.

The world-wide explosion of inflation in recent years has led most Governments to pursue exceptionally cautious demand policies: and in many countries there is no easy way of combining higher levels of activity and employment with a further fall in inflation. So the leading countries must work together in seeking ways of improving the prospects of the world as a whole. The Prime Minister and I will be pressing for this over the next two or three months—in the European Community, in the IMF, and at the Downing Street Summit.

If the stronger economies increase domestic demand and reduce their external surpluses, they would help greatly to sustain activity in the world as a whole. President Carter has recently given his support to the views of the OECD and IMF in this regard. On the other hand, countries with higher inflation rates and weaker balance of payments positions face more painful adjustments. They will need time to adjust their economies to the many shocks they have suffered over the last few years. In particular, they will need access to adequate finance on appropriate terms, so that they are neither forced unnecessarily to deflate their economies nor tempted into trade restrictions—either of these courses would be damaging to the world as a whole. This will be a major topic at the meeting of the Interim Committee of the IMF in Washington next month.

Many countries also need to achieve higher investment. As the Prime Minister made clear in Rome last weekend, we are exploring with our European partners the scope for co-operative efforts to stimulate investment and to maintain or create jobs, particularly in the field of youth employment. I look forward to the opportunity to review with our Community partners our progress in fighting unemployment in a further tripartite conference of Governments, trade unions and employers before the end of June.