The growth of output last year is now estimated at 4.7 per cent. This is higher than the rate recorded in any postwar year except 1960, 1964 and 1973. We ask in this chapter whether the ‘Lawson boom’ is different in character from earlier periods of rapid expansion. As in most periods of rapid growth, unemployment is now falling fast, helped on this occasion by significant changes in the administration of benefits. The boom is also running true to form in that the balance of payments position is deteriorating. But this time the rate of inflation has not so far accelerated.

Output figures for the second half of 1987 suggest that the world economy has been growing more rapidly than we were anticipating in November. We now expect that output growth in the major seven reached almost 3 per cent last year. This strength has been concentrated largely in the US and Japan, with growth in continental Europe only slightly above our previous forecast levels.

Following the Institute's previous studies of the training and qualifications of craftsmen in Britain and Germany, this article compares foremen in the two countries. It draws attention to the greater numbers qualifying in Germany, the higher standard of qualification required there, and differences in economic incentives.

In the context of economic management, with final targets for money GDP, wealth and the foreign exchange reserves, the exchange rate can be treated as an intermediate target. Monetary policy is used to keep the exchange rate close to its target and the target itself adjusts in response to information about the final targets. The target exchange rate can be used with main emphasis on either money GDP or on wealth. The latter is not possible if the wage—price loop is powerful. Two reruns of history are presented. The first uses the exchange rate mainly to look after money GDP with wages following their historical behaviour. The second uses fiscal policy to look after money GDP and the exchange rate to look after national wealth. It requires a reform of wage bargaining to be successful.

The object of this article is to examine the behaviour of the price level in major world depression, mainly for the sake of any light that may be thrown on the process of price formation in general and on the present situation in particular.

It is universally acknowledged that imports in the UK economy have risen very rapidly; import penetration in manufacturing has risen from 26 per cent in 1980 to 34 per cent in 1986. It is felt that any reflationary programme will have little impact on domestic employment since much of the extra spending power will be spent on imports, especially imports of manufactured goods. This has led to the firm belief that a reflationary programme has to be directed towards activities which have a lower import content and hence a higher domestic output and employment multiplier. This was the belief that made infrastructural expenditure such a popular option in the political discussions before the 1987 election.