ACTION SoCiAlist necessary to repeat the figures regret its impact.
But the key economic question is how long the government can continue in boom conditions the ed real wages to increase hv more than 12 per cent since Thatcher came to provided the Dower alla backdrop to her election victories in 1983 and 1987.
Here the most relevant facts the rapidly actenoraung situation or the balance of payments with a record monthly deficit of f905 million in December - and the continuing consequences of October's Wall Street crash. It is the latter which will be decisive and will form the background to the government's economic policy throughout the coming year.
The first phase of the crash in itself. was the collapse of share prices. The value of world SOCK exchanges £2,000 billion. Its cause was the unsustainable US balance of payments GenC The second phase, which through November and December, was the rapid devalution of the dollar -• I occ a huge price adjustment seek to wipe out the US balance of payments Between September and the end of December the dollar fell in against the yen, 18 percent value cent against the deutsche mark and 13 per cent against the substantial devaluation that had already taken place earlier in 1987. While the dolla has recovered marginally since its low point it nas still gone through a 10 per cent devaluation against its major competitors since the crash.
The third wave of the crisis, which is just beginning to work through, the effects of the dollar devaluation - although it is still only the effects of the earlier dollar devaluation which are being felt and the consequences of the autumn's fall will come through only later in the vCal Despite the fact that the full force of the dollar devaluation has not yet been felt, the US balance payments swinging round rapidly. US exports In volume terms expanaca by per cent in 1987. Calculated parative purchasing per cent cheaper than those of their competitors. The US trade deficit fell from $17.6 billion in OcLONCE to $13.2 billion November, and to $12.2 billion in December. NIGEL LAWSON'S is the most openly class budget presented in Britain for a generation. It is almost un— £1.80 a week gain if you earn f4,000 a year and f250 a week if you earn £100,000 a year. The reduction of the highest rate of tax to 40 per cent, giving Britain the lowest top rate of taxation of any country outside the United States, is so blatant that even Lawson may live to politically The Cost quence this turn around in the US balance of is, however, going to be very different in the differing parts of the which is what directly connects the crash the deteriorating British balance of payments.
The countries least afbalance payments are the Newl Industrialising Countrie (NICs) of South East Asia Kong, South Korea, Hong Singapore Taiwan. These have been deliberately devaluing met the dollar While thr with the lollai dollar devalued by 83 pel cent against the Japanese yen between Septembe 1985 and January 1988 and by over against the deutschemark it fell in value by only 8 per cent against the South Korean® won 42 per . cent against he against are per cent against the Singapore dollar and by zero against the Hong Kong dolla The result is that exports from the NICs have represented an ever he vis balanctio OI the U payments deficit - the US deficit with the East Asian industrialising The JS is now beginning to ac against them with Reagat announcing on 29 January the withdrawal of their tarriff privileges to enter the US market.
The significance of this for Western clear. With the Statest theirs they will States action redirect their exports to Wester Europe their trade surplus with the EEC already increased by 20 per cent in 198/ the Nics wil be added mon the export competition from Japan which running surplus with the at a current rate of $20 billion a year.
The consequences for Western Europe of the devaluation clear. Western Europe has DeCI financing deficit with Japan East Asia by surplus the United States thus with the bie trace : surplus with the in 1987 was $24.3 billion The devaluation of the dollar ensures this surplus with the US will disappear shifting Western Europe, on the best estimates, IntO billion trade deficit next year the so uceLe from Japan and East Asia on the one side United States on the other West German will almost end 1988 certainly be the only West European country with a balance of payments surplus. The rapidly deteriorating British OT payments West will respond