Price Vs. Policy: A Tale of Two Markets

Wriston, Walter B.


Living Within Our Means


During those 30 years I mentioned earlier, when you might have been trading oil for gold and gold for oil without much to show for it. the rest of the world was getting rich. The average growth of the gross national product in the advanced industrial countries from 1951 to 1973 was 4.8 percent in real terms. It was not until 1975 that output actually fell in the non-Communist world as a whole, and then by only 1 percent. That prosperity was fueled in large part by cheap energy. It is easy to forget that it is only 20 years since the United States imposed quotas on imports of oil to keep up the price of its domestic oil. But the fact is that between 1950 and 1970, the real price of oil-as measured by practically anything but gold - not only did not rise, but fell by at least one fourth.

What really happened in 1973 and 1974 is that we finally got a long-overdue bill. We paid it, and now we are engaged in a process of learning to live within our means. It is not the end of the world. In fact, the old copybook maxim used to tell us that it was the first prerequisite for getting rich. It still works. By 1978, for instance, the combined surpluses of West Germany, Japan and Switzerland were many times greater than the OPEC surplus a result that was due to their own behavior, not OPEC's.

The lesson seems to me quite clear. It can be found in a famous line of Shakespeare's: "Men at some time are masters of their fates: The fault, dear Brutus, is not in our stars but in ourselves...."