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1962]
1. INTRODUCTION
Since the end of the second world war economic policy and con-
troversyin Britainhave been directedto ways of attaininga number
of related objectives,prominentamong which are the maintenance
of a high and stable level of employment,reasonablestabilityof the
averagelevel of final productprices, a fairly rapid rate of economic
growth,a satisfactorybalanceof foreigntradeand reasonablestability
of foreign exchangerates. It can hardly be claimed that there has
been complete success in the attainmentof these objectives. It is
true that employmenthas been maintainedat an extremelyhigh level.
The averagelevel of unemploymentsince 1948 has been little more
than 12 per cent. of the work force. This is probablya lower level
of unemploymentthan that attainedin any single year in peace time
during the previous century, except perhapsin 1872. Even in the
boom yearsof the pre-wartradecyclethe percentageof tradeunionists
unemployedrarelyfell below 2 per cent. and over the 53 years from
1861 to 1913it averaged42 per cent. The actions taken to improve
the stability of the system have also had some measureof success.
Beforethe first world war there was a fairly regulartrade cycle with
an averageperiod of about eight years, during which trade union
unemploymentfluctuatedbetween about 2 and 10 per cent. Since
the second world war the cyclical movementsin economic activity
have becomemore rapid,with a period of four or five years, but the
fluctuationshave been smaller. Unemployment,indeed, has only
fluctuatedbetweenabout 1 per cent. and 21 per cent., that is, over a
range of about 12 per cent., but the percentagefluctuationsin gross
nationalproductabout the growth trend have been about five times
as large as this,2the range of the fluctuationsas a percentageof the
trend being about 7 or 8 per cent. Between 1948 and 1960, gross
national productincreasedat an averagerate of about 2i per cent.
per annum and productivityper man hour at perhaps 1l per cent.
per annum. Thoughthese rates of increaseprobablycomparefavour-
ably with those in earlierperiods of British history they are lower
than those of a number of other industrialcountries in the same
period. The averagerate of rise of the retailpriceindex between1948
and 1960was 3.7 per cent. per annum. Therewould be fairlygeneral
agreementthat this rate of inflationis undesirable.It has undoubtedly
1 Inaugural lecture given at the London School of Economics and Political
Science on 28th November, 1961.
2 See F. W. Paish, " Output, Inflation and Growth ", to be published.
1 A
2 ECONOMICA [FEBRUARY
b. Price
Price
c
Production
Figure 2