Business: Britain's Struggle with Stagflation

ONLY last year it seemed to many Britons that their long-sought economic turn-around was finally at hand. The balance of payments showed a handsome surplus, foreign debts declined, and even the country's laggard industrial productivity gave signs of recovery. The euphoria turned out to be shorter than an English summer. Britain is once again tumbling into one of the periodic economic crises that have made the country the chronic invalid of Europe.

The British have dubbed the current malady "stagflation"—a combination of stagnant consumer demand and almost runaway wage-price inflation. During the first...

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