BRITAIN: A Lesson for the U.S.?

Much like the U.S., Britain is struggling with what the English call "stagflation": a stagnant economy accompanied by unacceptable rates of unemployment and inflation. Prime Minister Heath's Conservative government had hoped that the economy would recover without major government intervention. Last week, with the slump continuing, the Tories abruptly and courageously switched policies.

To stir demand, the government cut taxes on many consumer goods by an average of 18%, or an estimated $564 million a year, and removed all consumer credit controls. It also raised tax credits for capital spending to boost productivity and cut the 3.4% jobless rate.

Most significant,...

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