Chapter 5: The International Payments Problem and British Economic Policy

If there were no external payments problem, the British Government could safely encourage a considerably faster rate of domestic economic expansion than in fact seems likely during 1961. It could do so without straining the productive capacity of the economy and without causing any more rapid increase in prices than is likely to occur in any case. Yet, because of the desire to reduce the risks to the international position of sterling, it is probable that the Government will once again consider it impossible to encourage economic growth.The most important policy questions for 1961 are to ask what action the Government can take to solve two fundamental and closely related problems. One is that of the underlying disequilibrium in the British payments position; the other is that of the difficulties caused both to Britain and to the United States by the present system for settling international payments, involving the international use of the national currencies of these two countries.