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Germany or Japan rise significantly faster than in England, while the trade deficit is in the reverse order. If the economic potential is utiliz-ed by 60°/o, and the foreign trade deficit represents 5% of national income, then the country in fact is living singificantly below its pos-sibilities. Business cycles with the resulting reduction of the ratę of growth represent precisely such a situation. In our situation the key condition of stabilization is control of the trade deficit instead of the periodic explosions up to now. One component of that control is ex-port expansion. Another component consists of holding import elas-ticity below export elasticity. That can be attained by making imports morę expensive (which is indeed done but, unfortunately, inadeąuate-ly thought out as the reactions of the economy show) and by direct administrative control. The pressure of the deficit with the convertible area will ease the reorientation of certain categories of imports to the clearing area and especially to undeveloped countries (which in 1964 accounted for 14.1% of our imports, and in 1967 10.1%, compared with 22.1% from the OECD countries).

6.    By leaving the interest on business Capital to enterprises, the State remains without a significant source of revenue which should be replaced by the usual solution of fiscal policy for a period of recession. a budgetary deficit.

7.    The overindebtedness of the economy means primarily that there is not enough money in the economy. In so far as injections cited under 2(c), 3. and 6. are insufficient, the National Bank should in-crease credits selectively until a satisfactory degree of liquidity of the economy is achieved, along with implementation of a whole series of obvious measures which should accompany that process. The proposal to convert credits to constant working Capital also has its justification in so far as it is carried out so that enterprises without futurę prosp-ects are eliminated.

8.    In the present concrete situation, credit injections necessarily lead to price increases, which again necessarily disorganize the entire economic policy. lncreasing the extent of administrative price control cannot prevent the rise in prices, and would only lead to additional

disturbances in the economy. This solution is possible:

(a)    Introduce a moratorium on increasing personal incomes of priv-ileged industries. By this means a breathing spell for preparation of a lasting solution is obtained.

(b)    Change prices (and simultaneously personal incomes) by agree-ment in industries which are obviously hurt and accompany this with tariff and other measures.

(c)    Successively abandon administrative price Controls.

(d)    Increase personal incomes quarterly or semi-annually by agree-ment and in dependence on productivity of łabor.

9.    Point 8. represents the most delicate task in the entire system and ?herefore it should be thoroughly prepared. In connection with this at

.ast three factors can be observed:

(a) The criteria which will be applied in the agreed-upon correc-tions of prices and incomes must be scientifically founded.

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