Britain: Debtor Nation

Report Outline
Aspects of the Economic Crisis
British Decline from Prosperity
Threat of National Bankruptcy
Special Focus

Aspects of the Economic Crisis

Coming Economic Conference in London

The international “economic summit” conference that will be held in London on May 7–8 is vitally important to Britain, the world's foremost debtor nation. With more than $20-billion in debts to foreign creditors, Britain appears to have staved off immediate financial disaster by staging a kind of “economic Dunkirk” this past winter. But critical problems continue to plague the British economy—widespread unemployment, a high rate of inflation, a balance-of-payments deficit—and Britain must depend on the other industrial nations of the West to carry it through the current crisis.

Other nations have come to Britain's aid in fear of the untold consequences of letting a major industrial country “go under.” Although many scenarios have been presented about the possible effects of national bankruptcy, no one can say for sure just how badly the world economy might be damaged. Moreover, many of the two dozen advanced industrial nations that compose the Organization for Economic Cooperation and Development are heavily in debt. John Fay, the OECD's chief economist, has estimated that their total debt will deepen by $25-billion to $30-billion this year and in each of the next few years. British Prime Minister James Callaghan has said that “1978 should be one of the most difficult years the world has ever seen.”

In contrast to the United States and West Germany, whose economies currently show strength and stability, many other industrial nations seem unable to overcome the cumulative effects of costlier oil imports. Although the Organization of Petroleum Exporting Countries (OPEC) quadrupled the price of oil in 1973 and 1974, the economic reaction was delayed for many countries. But, apropos of Callaghan's statement, there is evidence of crises developing not just in Britain but elsewhere. Although Britain's economic slide started well before oil price increases were imposed, other nations viewing the country's problem question whether they too may be forced by external factors to follow in the same pattern.