The U.S. Deficit and the International Problem

My Lords, I am in substantial agreement with the general contention that, other things being equal, and at any rate from the purely technical point of view, the present prospects of our economy may be regarded as considerably more hopeful than they have been in the recent past. Whatever we may think of the responsibility for the events leading up to devaluation—and I adhere to the view that, at any rate from July 1966, onwards, the Government had very bad luck in that respect—I suspect that we should all agree that the fact of devaluation is providing a useful stimulus to export. I know that appearances are somewhat deceptive. Because of the rise in the cost of certain imported materials and the abolition of export rebates, the magnitude of the advantage of devaluation is exaggerated by the percentage change in the rate. But when all account has been taken of the necessary subtractions, there still remains in many fields an advantage of perhaps between 8 and 9 per cent. And if the pressure of domestic demand is sufficiently restrained, this should surely prove a powerful influence to introducing a balance-of-payments surplus.