After slowing down last summer the growth of production in OECD countries accelerated again during the winter. We still expect the total volume of their output to increase by about 4–4 1/2 per cent both this year and next. This, however, implies little change in unemployment, which, though falling in the United States, may on average be even higher in 1977 than it was in 1976 in Canada and Western Europe.

The analysis of the prospects for the UK economy over the next two years is inevitably dominated by the uncertainty about the results of the negotiations on a Stage III pay policy to run from July. The range of possible outcomes is, at the time of writing (mid-May), very wide indeed. At the lower end of the range, the Government has been expressing hopes for the negotiation of an agreement which would give a rise in average earnings at a rate of not more than 10 per cent per annum. It is very much harder to put a figure on the rate of increase which would occur if an agreement were not reached or—as seems more plausible—if an agreement were reached but were progressively to break down during the autumn and winter.

Our view of the world economy has changed little since February. Our impression that the pace of recovery was picking up again appears to have been confirmed, and we still expect expansion to be maintained throughout 1977 and 1978, though at a rate which (except in the United States) will make little impact on unemployment, which is still inordinately high in most developed countries.

It is generally accepted that the performance of the British economy in the last fifteen years has been relatively poor, as measured by the criteria normally used for assessing economic success or failure. This proposition has been widely documented, and it is not the purpose of this article to review the evidence at length. The attempts to accelerate the British growth rate failed. The objective in the early sixties was the modest one of getting the figure up from about 3 per cent a year to about 4 per cent a year. In the event, the rise in real national product from 1960 to 1973 stayed at 2.9 per cent a year. Britain's share in world trade in manufactured goods fell in every year from 1960 to 1973, with only one exception (1971). At the beginning of the period, Britain's share in this trade stood at 162 per cent; by 1973, the figure was down to 9 1/2 per cent. These failures in economic growth and in foreign trade do not appear to have had much compensation elsewhere. Consumer prices rose, if anything, rather faster than the average for other industrial countries; and Britain's record on unemployment was no better than average.