Economics Update (January-March 1997)

British Industry Leader Optimistic
About UK's Prospects for Growth

T he United Kingdom is well positioned to take advantage of today's global opportunities, according to Adair Turner, Director General of the Confederation of British Industry. Speaking recently at the Federal Reserve Bank of Atlanta, he said that the United Kingdom seems to have achieved low and stable inflation with very good prospects for growth over the medium term. The United Kingdom has closed the productivity gap that was evident a few years ago; compared with its standing in 1976, the U.K. economy is now world class, he said. In his view, privatization is largely responsible for unleashing this tremendous potential.

Turner listed several measures to capitalize on this opportunity to increase performance:

  • Keep inflation low and stable; and carve out an increasingly independent role for the Bank of England.
  • Continue to improve industrial relations.
  • Maintain the privatization that has been enacted.
  • Most importantly for growth, improve the basic education system.
There is a view, he observed, that the rise of emerging economies will lead to cutthroat competition, a decline in the ranking of countries now most prominent, and the perceived need for protectionism; but Turner's views are more optimistic. World trade is not a zero-sum game, he believes. "We may, of course, see changes in relative standings: for example, China's economy could be bigger than that of either the U.K. or the U.S., given its size," he said, "if it takes off over the next 50 years, but there are no negatives for the developed world if we preserve the foundation of free trade which undergirds free investment flows and the exchange of best practices.

"There is also a threat that the U.S. will try to extend its jurisdiction in an extraterritorial fashion via a secondary boycott of firms acting legally," he continued, adding that U.K. and European business associations hope to pursue other paths to achieve human rights. "If we maintain our commitment to liberal trade and financial flows, the United Kingdom and Europe will prosper," he concluded.

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