The Governor begins by contrasting the recent performance of the world economy with the first two post-war decades. But the remedy for present ills is not root and branch reform: 'in our efforts to restore balance and direction to our economies, we have ... to start from where we are'. Early post-war success rested on various factors, all now eroded. Energy is no longer cheap; the rise of labour costs became more rapid; and the fixed exchange rate system was abandoned. The Governor points to the need for new efforts in these fields:
- Greater economy in the use of dearer energy.
- Striving to eradicate inflationary expectations-but not by accepting permanently lower growth. Success has gone to countries prepared to adapt in a flexible manner.
- Greater stability in exchange rates, for which the Governor detects a growing desire. Difficult though it may be to achieve a measure of international understanding and agreement, we need to direct our minds to the problem and search for solutions that may only be attainable over time.