Financial Policies for Sustainable Growth

8/8/2019 Financial Policies for Sustainable Growth

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American Finance Association

Financial Policies for Sustainable GrowthAuthor(s): Robert B. AndersonSource: The Journal of Finance, Vol. 15, No. 2 (May, 1960), pp. 127-139Published by: Blackwell Publishing for the American Finance AssociationStable URL: http://www.jstor.org/stable/2976162

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t h e J o u r n a l o f FINANCEVol.XV MAY 1960 No.2

FINANCIAL POLICIES FOR SUSTAINABLE GROWTH*HON. ROBERTB. ANDERSON

Treasury DepartmentDURING MY FEW years in Washington, I have become more andmore impressed with the need for better communication betweengovernmentofficialsand economists outside government, particular-ly those in universities and research organizations.We need to en-couragea greater interchangeof ideas. Some of the most perplexingand crucial problems of public policy cluster around the economicproblem. Thus the professional economist, more than ever before,has a significant and unique contribution to make to public policy.In addition, the professional economist outside government canhelp government officials maintain perspective in the approach topolicy. Life in Washington is such that the broaderaspects of policyproblemscan be obscured by day-to-day problems.It is your duty-both to your country and to your profession-to examine criticallyand objectively all the economic policy actions in government andto speak out forcefully on what you consider to be their merit orlack of merit. In particular, we should work together to guardagainst actions designedto cope with short-runproblemswhich maycomplicate the attainmentof our more basic long-run goals.Before we examine the use of federal financial policies to promoteour economicgoals, I shouldlike to discuss briefly the goals as such.Sustainable economic growth-not just any kind of growth-is themajor goal of economicpolicy. A forced, ultra-high rate of growthis not an appropriate objective in a free-choice market economy.Economic freedom means the right to dispose of our incomes as wesee fit-to consumeor to save, to invest or not to invest. These de-cisions, arrived at freely and independently by millions of peopleand institutions, are a controllingfactor in the growth process.

* This paper was presented at a joint luncheon meeting of the American FinanceAssociation and the American Economic Association in Washington, D.C., on December29, 1959. The program was under the chairmanship of James J. O'Leary, Life InsuranceAssociation of America.127


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128 The Journalof FinanceUndue emphasison growth for its own sake can result in growthof the wrong kind, such as the production of goods that people donot want which end up as surplusgoods in governmentwarehouses-

goods which represent inefficient and wasteful use of our economicresources. And heavy emphasis on growth for its own sake cancontribute to distortions and imbalances that would hamper futuregrowth.It is sustainable growth that we seek, not solely as an overridinggoal of policy, but primarilybecause its attainment implies successin achieving other highly important and long-accepted goals. Forexample, we cannot achieve a high and sustained rate of growth ifwe are confronted with serious and long-lasting underutilizationoflabor and other resources. Thus the maintenance of adequate em-ploymentopportunitiesfor those able, willing, and seeking to work-which is highly importantfor its own sake-is also an integral partof the growth process. Nor can we, in my judgment, attain a highand sustained rate of growth in the face of either an actual or anexpectedprogressivedecline in the purchasing power of the dollar.The importance of avoiding inflation deserves special emphasis.Surely, the rate of economicgrowth in the future, which depends soheavily on a high rate of saving and capital formationtoday, will bestunted if fear of inflation is allowed to impair the will to save intraditional,fixed-dollar forms. And surely an unsustainable upsurgein economic activity, based on expectation of inflation, is likely tobe followedby a fall back to a lower level of activity and consequentunderutilizationof our economic resources. Inflation, either in theform of a gradual, insidious upwardcreep in the price level or as arapid upthrust of costs and prices, is the enemy of growth.Some people have interpreted this concern with inflation as re-flecting a desire to roll back prices to some earlierlevel, in order torestore the purchasingpower of the dollar to its status ten or per-haps twenty years ago. This would be a highly unrealistic goal.While there is much to be said for a gradual decline in the pricelevel as productivity increases, so that at least part of the fruits ofgreater efficiency could be passed on to the consumer, we have nodesire to force prices drastically lowerwithin a short period of time.The proper goal with respect to the price level is, first, to stop theerosion in the purchasing power of the dollar that has taken placeover the last two decades and, second, to eliminate in the process anymistaken expectation that the value of the dollar will continue todecline.


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Financial Policies for Sustainable Growth 129Recent developments in the international economy also provideconvincingevidenceof the need for maintaininga strong dollar.Theworldeconomy of today is markedlydifferentfrom that of the early

postwar years. Reconstructionof the war-torn industrial economiesabroad has been largely achieved. These industrial nations havemade impressive and heartening progress in rebuilding, improving,and enlarging their productive facilities. The result has been amarkedincrease in the competitive capacities of industrial countriesabroad.The financialcounterpartof this change in the internationaleconomy has been a remarkablestrengtheningof the currenciesofthese industrial countries and the disappearanceof the foreign-ex-change difficulties that earlierplagued these countries.These important economic and financial developments-coupledwith a large outflow of dollars from this country in the form ofprivate capital, governmentloans and grants, and military expendi-tures abroad-have been reflected in a series of deficits in thiscountry's international balance of payments. The deficits, measuredby gold and liquid-dollargains by foreigners on their transactionswith the United States, have occurred in each year since 1950-withthe exception of 1957-but in 1958 and 1959 rose to a very highlevel. The deficit for 1959 is likely to approach$4 billion. Currenttrends indicate that our deficit in 1960 will be somewhat smaller,reflecting to an important extent a temporary increase in foreigndemand for certain types of exports, but it seems likely that thedeficit will continue to be relatively large. We should not interpretshort-runimprovements n our balance-of-paymentsposition as nec-essarily indicatingthat our problemshave ended.

The circumstancesin which we find ourselves are novel from ourstandpoint.They requirea reorientationof thinking in this countrywith respect to international economic and financial policies. Itwould not be responsible to conclude that the United States cancontinue safely to sustain for a long period of years deficits of themagnitudeof 1958 or 1959 or the somewhat reduced deficit in pros-pect for 1960.The dollar is the majorreserve currency of the world. This func-tion can be served efficientlyonly if foreign holders of dollar claims,who now have a sizable financialstake in the way in which we man-age our affairs, continue to have confidence in the dollar's basicworth and stability. Under these circumstances,a responsible gov-ernment must adopt measures and encourage actions at home andabroad that, over time, will reduce the size of the deficit and have


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130 The Journalof Financeas their long-rangeobjective a satisfactory equilibriumin our over-all paymentsposition. Such steps are essential if we are to maintaina sound basis for providing capital on a large scale to underdevel-oped countries and to meet our other important national and inter-nationalobligations.This Administration'sattack on this problemwill continue to beconsistent with our vital goal of promotingmultilateral world trade.It will, in short, be directed, not toward protectionismand restric-tion, but toward liberalization and expansion of world commerce.Basic to this goal are our efforts to control inflation and thus tomaintaina competitivecost-pricestructure.

During recent months the Administrationhas been reviewing thegovernment's policies of foreign loans and grants in the light ofthe basic shifts in the world's economic and financial situation. Inlight of these same shifts, we shall continue to search out appro-priate ways of encouragingAmericanexports of goods and services,to press for removalof discriminatoryrestrictionson dollar importsabroad, and to encourage other industrial countries to participatemore adequately in the provision of capital to underdevelopedcountries.As a memberof the United States delegationto the NATO meet-ing in Paris earlier this month, I found broad support and approvalfor the actions that this country has taken thus far to improve itsbalance-of-paymentsposition. Responsible European observers andofficials, recognizingthe basic importanceof a strong dollar to thefuture economic and military strength of the free world, have akeen awareness of the practical necessity for improvement in theUnited States balance-of-paymentsposition.Much more could be said concerning the significance of balance-of-payments developmentsfor our internal economic policies. How-ever, the major conclusion is that these developments provide an-other importantreason for maintainingstability in the price level aswe pursue ourgoals relating to growthand employment.Federal financialpolicies, as I use the term today, includegovern-ment actions with respect to the budget, monetarymanagement, anddebt operations. In discussing budget policy, we are not looking atthe tax structure as such but at the over-all relationship betweenfederal expenditures and revenues as reflected in a budgetary sur-plus, deficit,or balance.Governmentfinancial actions have a significant impact on totaldemand. Recognizing this, a sizable group of economists advocatesthe active and co-ordinated use of the policies in an anticyclical


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Financial Policies for Sustainable Growth 131manner. According to this view, a period of actual or threateninginflation, arising from pressures of demand, would call for a sub-stantial surplus in the federal budget. This would be achieved by anincrease in tax rates, a relative decline in expenditures, or somecombination of the two. Such a surplus, it is argued, would helpdampen total demand,inasmuch as governmentspendingwould fallshort of tax revenues. Monetary policy, appropriately directed to-ward restraint, would help prevent excessive credit expansion fromadding unduly to total spending for goods and services.In this scheme of things, debt management in an inflationary en-vironment would play a supporting,but neverthelessimportant,role.Treasury cash and refunding operations would be concentrated insecurities of relatively long maturity. In addition, the proceeds ofthe federal surplus would be used to retire short-termdebt. In boomperiods,therefore, the average maturity of the public debt would besignificantly lengthened, and liquidity in the economy would be re-duced,thereby helping further to dampenspending.Consistent with this countercyclical approach, the programwouldbe consciously reversed during a recession. Reductions in tax ratesand increases in expenditureswould contribute to a large deficit inthe budget. Monetary policy would be directed toward ease, inorder to encourageexpansion in credit and the money supply. Em-phasis in debt managementwould be shifted strongly toward short-term financing,and a large portion of the securities sold to financethe deficit and in refunding operationswould probably be taken upby the banking system.In my judgment, this approach to the problem of counteringcyclical swings in order to promote sustainable growth has someserious shortcomings. I am not referring to the desirability ofachieving budget surpluses in prosperousperiods and deficits in re-cessions or to the flexible use of monetarypolicy to dampen creditexpansion in booms and to stimulate expansionin recessions. WhatI am referring to are difficultiesencountered in the use of budgetpolicy and debt management n the describedmanner.From the standpoint of budget policy, a basic consideration isthat decisions as to taxes and spendingprogramsoften reflect manyfactors other than broad economic considerations. The timely useof budget policy as a conscious countercyclical weapon is also in-fluenced by the fact that authority over taxation and spending isthe joint responsibilityof the Executive and the Congressand is notcenteredin one branch of the government.Furthermore,experience in the postwar period indicates that it


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132 The Journalof Financeis much easier to achieve a deficit in a recession than a surplus in aboom. Large deficits in recessions, only partially offset by modestsurpluses in periods of high and rising activity, tend to complicatethe task of achieving sustainable growth in two ways. First, the netdeficit of the federal government over a period of years adds to in-flationary pressures. Second, flexible and timely administration ofmonetary policy may become more difficultin view of the complica-tions that are likely to arise from Treasury efforts to manage agrowing public debt.We must also recognize the burden that a large public debt canplace on future generations. This burden does not refer to the re-sources used up by government spending financed through borrow-ing; the extent to which such costs can be shifted to the future isexceedingly limited. Rather, the burden consists of the economiceffects of managing a large debt and the impact of the taxes thatmust be levied to service it. The transfer operation involved in in-terest payments on the debt is hardly frictionless; it involves addi-tional governmentexpense, a considerabledegree of taxpayer irrita-tion, and-of primary importance-a significanteffect on incentivesin the private sector of the economy. We cannot, therefore, acceptthe false comfort of the view that, simply because "we owe most ofthe debt to ourselves," a large public debt is of no real economicconcern.Moreover,attempts to vary tax rates and spendingto help smooththe business cycle may well have perverse effects. Changes in taxrates and spending may sometimes take so long to plan, legislate,and put into effect that many months may elapse from the time theneed for action becomes clear until the change in budget positionaffects total spending. By the time the actions become effective, theeconomy may have changed radically, with the result that largedeficits have their major impact during periods of rising businessactivity and vice versa. Any proposals for an arrangement thatwould permit some sort of administrativevariation in tax rates tocounter cyclical trends, such as vesting additional authority in theExecutive Branch, do not seem to be feasible-or desirable-underour form of government.Do these considerationsimply that we are left only with the al-ternativeof attempting to achieve a rigorous balance in the budget,year in and year out? In my judgment, they do not. The goal of asurplusin the budget during prosperousperiodsand, on the average,over a longer period of time also is highly desirable. Moreover, inview of large automatic swings in tax receipts and spending over


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Financial Policies for SustainablcGrowth 133the cycle, budget deficits of moderatesize are probably unavoidable-and, indeed, desirable-during periods of declining businessactivity.

Consequently, we should, in my opinion, give serious considera-tion to operatingundersome variationof the stabilizing budget pro-posal, in which budgetpolicy, year in and year out, would be gearedto the attainment of a surplus under conditions of strong businessactivity and relatively complete use of economic resources.On thisbasis, during a recession, the automatic decline in revenues and in-crease in expenditures-reflecting in part the operation of the so-called "built-in stabilizers"-would generate a moderate deficit. Inprosperousperiods, tax receipts would automatically rise, and cer-tain types of spending would contract, producing a surplus. Then,over the period of a complete business cycle, a surplus for debtretirementwould be achieved, but without the disruptingeffects ofattempts to balance the budget in recessions. Intentional variationsin tax rates or spending programsfor cyclical purposes would thusbe kept to a minimum,althoughconditionsmight well arise in whichsuch variations would be desirable.Monetary policy-the second federal financial policy-shouldcontinue to be administeredflexibly in combating inflation and re-cession. Achievement of a net federal surplus over the businesscycle as a whole would significantly ease the task confronting themonetary authorities and, in addition, would reduce the extent towhich we may be forced to rely on monetarypolicy as a stabilizationdevice. In my judgment, the lack of adequate surpluses in theprosperousyears following World War II, which has resulted in amore than $30 billion increase in the public debt since the end ofwar financing,has meant that monetarypolicy has been called uponto bear more than its proper share of the burden in promotingsus-tainable economic growth. This unavoidably heavy reliance onmonetary policy may have contributed to wider swings in interestrates and capital values than wouldhave been necessaryif budgetarysurpluses had been adequate. But it seems incorrect to argue thatmonetary policy has assumed too large a role; the conclusion israther that the degree of monetary restraint has had to be greaterthan would have been the case if budgetary surpluses had beenadequate.To some economists, Treasury debt management-the third fed-eral financialpolicy-affords a highly useful techniquefor promotingsustainable economic growth. They point out that, in contrast withbudget policy, authority to manage the debt is centered in a single


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134 The Journalof Financedepartment of government, so that many of the problems of lagsinvolved in budget policy are not encountered. The positive use ofdebt management to promote sustainable economic growth wouldbe as describedearlier,involving heavy reliance on long-termfinanc-ing during periods of high and rising business activity and a shiftto short-termfinancing duringrecessions.The difficulties that wouldbe encountered in this approach are by no means insurmountable,but they are certainly formidable.An important practical consideration arises from the overridingneed for the Treasury to meet the government'sfiscal requirements.Under some circumstances,a pressing need for cash may, in effect,force the Treasury to market short-term issues, for which there isa broad and consistent demand, even though spending in the econ-omy may be rising rapidly relative to productivecapacity.It is not widely recognizedthat the marketabledebt has increasedby morethan$20 billion during the last eighteen months.This expan-sion in the marketable debt reflectedthe need to finance, in effect, a$12j billion deficit in fiscal year 1959 and a $5-1 billion seasonaldeficit in the last six months, as well as more than $2 billion inmaturing F and G savings bonds and other debt over the eighteenmonths as a whole. Borrowing requirementsof this magnitude,dur-ing a period of strong economic activity and sharply expandingprivate credit demands, make it exceedingly difficult to use debtmanagement as an active anti-inflationaryinstrument. This is sim-ply another way of saying that an inappropriatebudget situation-such as a large deficit that must be financedduringa periodof vigor-ous economic recovery-can severely complicate debt management.A second complicating factor arises from the current imbalancein the public debt structure and the tendency for the debt to growshorterin maturity simply as a result of the passage of time. At thepresent time, $80 billion of the $188 billion of marketablesecuritiesmature within one year. Even though this is the largest amount ofunder-one-yeardebt since the end of 1953, we must realize that theliquidity requirementsof our economy, reflecting the demands ofcommercial banks, non-financial business corporations, state andlocal government funds, and foreign investors, can support a rela-tively large short-termdebt. This total may be higher than we wouldlike to see it at the moment, but we do not view it as excessivelyhigh from a long-run standpoint.The real problemrevolves around the debt maturingin from oneto five years, which has increased from $33 billion in 1953 to $61billion at the present time. Even if within the next five years the


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Financial Policies for Sustainable Growth 135total marketabledebt and the under-one-yeardebt does not expand,$22 billion of securities will tumble into the one-to-five-year rangesimply as a result of the passage of time.

Debt lengthening must, therefore, continue to be a high-prioritygoal of debt management.Otherwise, we shall ultimately arrive ata position in which the liquidity instrumentsof the economy embodya highly dangerousinflationarypotential and, in addition, Treasurydebt operations will occur even more frequently and in largeramounts. This would severely complicate the attainmentof sustain-able economicgrowth.Rigid application of the countercyclicalapproachto debt manage-ment, as envisaged by advocates of the approach, would involveadditionaldifficulties.Heavy relianceon short-termfinancingto helpcombat a recessionwould contributeto a large buildup of near-termmaturities,which wouldvery likely have to be refinanced n a periodof rapid business recovery.Of even greater importance is the possibility that the liquidityrepresentedby the increase in short-termdebt might unduly com-plicate our efforts to avoid an unsustainable upsurge during thesucceeding business expansion. The existence of a relatively largevolume of highly liquid short-termsecurities provides considerablescope for expansion in the velocity of money as economic activityimproves. This is because the holder who desires to liquidate ashort-term security-whether it be a financial institution obtainingfunds for lending or a business corporationor other holder obtain-ing funds to spend for goods and services-can sell the security inthe market at a price very close to its maturity value or simplyallow the security to run off at maturity. Thus, even though themoney supply may not increase, there would probably be a shift inidle balances, from buyers to sellers of short-term securities, thatwould facilitate an increase in total spending. The greater the po-tential increase in velocity during a boom period-as reflected inpart in the existing volume of short-term Treasury debt-the lessthe effectivenessof a given degree of restrainton the money supplyin limiting inflationarypressures.One method of avoiding so large a buildup in liquidity during arecession is to rely heavily on new government security issues ofintermediate-termmaturity. Such issues tend to be bought by com-mercial banks in their attempts to bolster earnings in the face of aslackeningloan demandand falling interestrates. As bankspurchasethese obligations with reserves made available by an expansivemonetary policy, bank credit and the money supply tend to grow,


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136 The Journalof Financethereby helping to counteract recessionary pressures. If, in a laterperiod of business expansion, interest rates rise and market valuesof these intermediate-termissues decline, banks may continue tohold a large portion of the obligations to avoid taking losses. Mone-tary policy would thereby be reinforced, rather than hampered,asmight be the result of large-scale bank liquidation of short-termgovernmentsecurities. In addition, some badly needed lengtheningin the maturity of the debt could be achieved.Treasury debt managementin the recession of 1957-58 was con-sistent with this approach.Only $3-1billion of truly long-term bonds-over ten years' maturity-were sold in the last two months of1957 and the first half of 1958, but $17j billion of securities matur-ing in four to ten years were marketed. Banks subscribed heavilyto these intermediate-termsecurities; their total loans and invest-ments expanded at a rapid rate; and, as a consequence, a substan-tial amount of monetary growth occurred. In addition, significantprogress was made in lengthening the average maturity of the debt.During periods of rapid business expansion the opportunities tosell substantialamountsof long-termTreasury securities-as wouldbe required under the countercyclical approach-are often quitelimited. This may in part reflect the impact of expectations ofhigher interest rates and rising prices for goods and services. Inaddition, the competition for long-term money may be especiallysevere. Part of this competition has, in effect, been created by thegovernment itself, as reflected in the large expansion in federallyguaranteedor insuredmortgagesand other securities that bear somesort of government support. The competitive position of state andlocal government issues is enhancedby the tax-exemptionprivilege.Moreover, the relative attractiveness of nearly all types of privatesecurities, as comparedwith governmentissues, has been increasedby growing confidence that severe recessions and depressions willbe avoided.These impediments to marketing large amounts of long-term is-sues are likely to exist in any period of strong business activity. Asyou know, however,there exists today a wholly artificial restrictionon the ability of the Treasury to achieve debt lengthening. I referto the 4j per cent interest-rate ceiling on new issues of Treasurybonds, enacted in 1918, which under today's market conditionsprevents the Treasury from issuing any new marketable securitiesof more than five years' maturity for cash or in exchange for securi-ties at maturityor in advance of maturity.Thus the ceiling completely prevents us from any significant


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Financial Policies for Sustainable Growth 137amount of debt lengthening, for the purpose either of reducing thevolume of liquidity instruments in the economy or of contributingto a better balance in the debt structure by selling a reasonableamount of longer-termissues. In addition, the existence of the ceil-ing contributes to higher, rather than lower, interest rates on gov-ernment securities, simply because the Treasury must aggressivelycompete with other borrowers in a limited sector of the market,rather than prudently spreading its issues over other maturity sec-tors. Sole reliance by the Treasury on short-termfinancingtends todrive short-term rates to higher levels than would otherwiseprevail.This not only reacts quickly on the cost of carryingthe public debt,because of the large amount of securities that must be refundedeach year, but also unduly raises the cost of short-termfinancingtoall other borrowers.We in the Treasuryhave attemptedto cope with this situation byrelying as much as possible on new issues in the four-to-five-yearmaturity range; $10 billion of these issues have been sold in thelast six months. But there is a limit to the amount of funds that canbe raised in this sector of the market without driving interest rateson such maturities to very high levels. Moreover, the rates that wehave had to pay on such issues-ranging as high as 5 per cent-are,in our judgmenthigher than the rates that would have been neces-sary to market a moderate amount of longer-termsecurities. In ouropinion, the shift of even a moderateamount of debt from the one-to-five-year area to longer-termstatus, because of its marginal im-pact, wouldhave significantlydampenedthe sharp rise in short-termrates that occurred in 1959.Some of those who oppose removal of the interest-rate ceilingmaintain that, judging by experiencein recent years, the Treasurywould not offer a large amount of longer-term issues even if theceiling were eliminated. This is true. We told the Congress lastsummerthat if and when the ceiling is removed, we would have nointention of unduly competing for long-term funds by flooding themarket with Treasury bonds; the amount of new cash issues orthose offered in exchangefor maturingsecuritieswould probably berelatively modest in amount.

But we do believe that we could make significantprogress in debtlengtheningby engaging in another type of debt operation, referredto as ''advance refunding." In the long-term sector, advance re-funding would involve the exchange of new long-term Treasury se-curities for outstanding bonds which still have a number of years torun until final maturity. Investors participating in the operation


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138 The Journal of Financewouldsimply exchange existingbonds from their portfolios for newlyissued longer obligations of approximatelyequal market value. Al-though the maturity of the debt, on the average, would be extended,this would occur without the disruptive effects of new cash issuesor the marketchurningthat accompaniesrefundingofferings of long-term bonds for maturing issues as the short-terminvestors who holdthe maturing securities sell their "rights" to long-term investors.Similarly, holders of government obligations maturing in two tothree years could be offered the opportunity of exchanging for newissues in the five-to-ten-year range.Legislation passed in the last session of Congress, which permitsthe Secretary of the Treasury to allow holders of securities refundedin advance to postpone for tax purposes any gain or loss on theoperation,will facilitate this type of exchange. Unfortunately, how-ever, this promising techniquecannot be used for refunding beyondfive years until the 41 per cent ceiling is removed or, alternatively,until the cost of long-term borrowing declines below 41 per cent.This is because the true cost to the Treasury of any long-term fi-nancing-whether through advance refunding or other methods-would, under currentconditions,be greaterthan 41 per cent.Last summerthe President,in referringto his request for removalof the interest-rateceiling, stated that no more importantissue hadcome before that session of Congress.The need for removal is evenmore pressing today. In the forthcoming session of Congress, weshall urge action on the request with all the vigor that we cancommand.The economics profession is today confronted with a challengein restudying and arriving at sound and constructive conclusionswith respect to national financial problems. Some of the thinkingabout budget and debt-managementpolicies may not always besufficiently cognizant of certain practical considerations,as well asthe perverse effects that can easily occur as economic conditionsshift rapidly and policies have to be changed. As you reach yourconclusions, I can assure you that your ideas will always receive aresponsive audience from those of us who share responsibility forfederal financialpolicies.

The question of fiscal and monetary discipline-because of bothits domestic and its internationalimplications-may well become agreat issue in the 1960's. This is an issue that should be abovepartisan considerations; the stakes are much too high for anythingother than a non-partisanapproach.This means that you must re-double your efforts in helping to broaden public understandingof


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Financial Policies for Sustainable Growth 139the operation of our fiscal and monetary system. It means also thatthe role of the professional economist in government or as an ad-viser to government,which has expanded so greatly during the lastthree decades, may be destined to become even more important. Theskill and objectivitywith which you fulfil these vital obligations maywell be the determining factor in the world-wide struggle betweeneconomicsystems and ideologies.We have before us the greatest opportunity in history. We are arich country with vast resources. We occupy a leading positionamongthe nations of the world. All that is requiredof us is that wemanage our affairs prudently and abide by the disciplines of eco-nomics that the past has proved to be sound. If we do that, there isno reason why we do not stand on the threshold of the greatestopportunitythis nation has ever known.

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