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ning of 1970 by a strong export expansion (which was basically a function of a world boom) and by credit injections (which helped but did not evoke inflation). In that way there appeared a peak in the movements of production in the first quarter of 1970, and inventories of finał products began to fali again. Soon the export expansion reached its maximum and began to slow down. and at the same time imports enormouslv increased, so that after a delav of about two quarters the recessive movements continued. As usual, industry slow-ed down morę gradually, and construction activity faster. In the third quarter these paths fell to zero ratę of growth. In such a situation it is predictable that price rises accelerate, and thus producers’ prices rosę even faster than in a similar situation at the end of 1964. It is also predictable that the expansion of nominał personal incomes acceler-ates and the rise in productivitv of labor slows down. Ali these mov-ements can be clearly seen in the graphs.

What can be expected in the following months and years?

Since in 1970 there was no analysis of the economic situation work-ed out in the Institute - there were no funds and the fate of the previous year’s Memorandum was not stimulating - only some generał assertions can be presented. The stimulative effect of exports is on the whole exhausted. With the weakening of the world boom and the abolition of the fund for crediting exports of equipment and shins it can be expected that the export retardation of 1967 and the first half of 1968 will be repeated. Inflation also operates in the same direction. Accordingly the recessive movements will continue, losses will appear and the economy will again become extremely i 11 i q u i d. Hidden devaluation bv import duties and export stimulation can be carried out somewhat longer, but soon open devaluation will become unavoidable. The arbitrariness in distribution of personal incomes has become intolerable. The large failure of agricultural production will increase pressure on the balance of payments, which is in any event close to an eruption. In that situation the economic policy bodies have these three altemative possibilities for action:

1.    Administratwe interuentions. That would mean crude intrusion on the selfmanaged autonomy of economic subjects and liquidation of the basie goals of the economic reform.

2.    Continuation of morę or less laissez-faire policy along with liberał credit injcctions. That would mean inten$ification of the inflation with price inereases of 15-20% annually in 1971, and later even morę. Because of the deformed distribution of income and International economic relations, this yariant would sooner or later have to be replaced by yariant 1.

3.    Restrictive monetary policy. With stabilization of prices this policy would lead to contraction of production and massive unemp-loyment, as in 1967. The difference is only that repetition of 1967 is

no longer politically feasible.

As is well known, the government decided on the first yariant. The reasons for that choice are obvious from what stated under 2. and 3. Howeyer, price freezing recalls ominously the improvisations ot 1965.

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