The world economy is enjoying a glorious run. In 2003, 2004 and 2005, it had its best years since the early 1970s. Yet that is no encouraging parallel. The torrid expansion of the early 1970s led to a period of inflationary turmoil. We must ask whether the extraordinary growth of recent years also hides dangers – different, perhaps, but still significant. The answer, alas, is yes.

To doubt the resilience of the world economy must now look perverse. Since 2000, it has overcome so many obstacles: post-bubble traumas in Japan; the bursting of a global stock market bubble in 2000; the terrorist attacks of September 11 2001; a US recession; years of stagnation in the eurozone; wars in Afghanistan and Iraq; real oil prices at levels close to those of the late 1970s; and the failure to complete the Doha round of multilateral trade negotiations. Yet, in spite of all this, world economic growth was 4.1 per cent in 2003, 5.3 per cent in 2004 and 4.9 per cent in 2005, measured at purchasing power parity exchange rates. In the International Monetary Fund’s latest World Economic Outlook (WEO), it is forecast to reach 5.1 per cent this year.*