Remarks at a Meeting of the Business Council.

IF WE wanted to celebrate the triumphs of our economy tonight, we would have cause enough.

We are now in the 82d month of the American economic miracle. This sustained prosperity is unparalleled in our history.

But it is not celebration which summons us.

We are here, rather, to look at the other side of the ledger--to assess some of the challenges that now threaten our prosperity.

INTERNATIONAL MONETARY PROBLEMS

America's role in world trade and finance is crucial to our prosperity and that of all free nations.

World trade has quadrupled since World War II. We have helped to create that trade--and we have shared fully in its benefits.

In the world network of trade, America's role is doubly important. Our dollar stands at its center--the medium of exchange for most international transactions.

The recent devaluation of the British pound--with the tremors of uncertainty it stirred--makes it even more imperative that we maintain confidence in the dollar.

In the wake of devaluation, we witnessed a remarkable display of international financial cooperation. A speculative attack on the system was decisively repelled.

It was repelled because we stood firmly behind our pledge--which I reaffirm today-to convert the dollar to gold at $35 an ounce.

It was repelled because the leading governments of the Western World joined with us in that successful defense, at a relatively small cost in reserves.

But we cannot rest on this victory. We must look ahead. As world trade expands, so must the liquidity required to finance it. That liquidity need not rest on the uncertainties of gold production, consumption, and speculation. Nor can its supply be the responsibility of any one country.

So, even as we reaffirm our pledge to keep our dollar strong--and every ounce of our gold stock stands behind that pledge--we must look beyond gold.

We will press the case for other reserves which can strengthen the international monetary system of tomorrow.

We are joined with other nations in this venture.

Already we have laid out a blueprint. The agreement reached at the International Monetary Fund meeting in Rio is a first important step. It points the way to the creation of supplementary reserves backed by the full faith and credit of the participating nations.

BALANCE OF PAYMENTS

A healthy balance of payments is essential to a sound dollar.

After a decade of deficits, our balance of payments problem still challenges the best efforts of government and business.

In recent years we have made some very real progress. But we find some of that progress offset by the cost of our defense efforts in Southeast Asia, and by events surrounding the devaluation of the pound.

This calls for special effort--by both government and business--to press even harder for progress.

Our investments in defense and foreign aid are vital to the security of every American. But, for our part in government, we are reducing to the barest minimum the drain of these essential activities on our balance of payments.

Business, too, has responded to the challenge.

In the voluntary balance of payments program, we have seen one of the finest examples of cooperative effort with government. Many firms have helped to reduce the deficit. They have borrowed funds overseas to finance foreign investments rather than borrow here and export our dollars abroad. Others have chosen to defer or scale down their investments.

We ask for even greater voluntary cooperation in 1968.

Before your dollars flow abroad to another industrial nation, ask yourself: Is this for an essential project? If it is, why can't you finance it overseas?

I know that borrowing overseas may cost an extra point or so in interest. But it is a necessary investment. It will strengthen the economy in which we all have a share.

EXPANDING OUR EXPORTS

The best way to strengthen our balance of payments is to expand our exports.

We used to talk of the world market in terms of billions of dollars--and more recently hundreds of billions. Now the economists tell us those measures no longer suffice.

The size of the economy outside the United States today exceeds $1 trillion.

American business has only begun to fight for this market.

I hope you will take this message back to the board rooms of America: Get going on exports.

We in government have helped you to promote and finance your sales to other markets abroad. We hope to do even more in the future.

But I ask business to remember this: Trade must be a two-way street. Trade must be a fair and competitive race.

You cannot win this race confined by the quotas or high tariff walls the protectionists demand. Those walls have always been barriers to profits. You will win the race with time-tested American business methods"efficiency, better products, lower costs and prices.

Even though we know that a key to balance of payments is to export more, we also know this:

If our prices rise faster than those of our overseas competitors, our exports will suffer and our imports will grow.

A growing export surplus demands that we maintain a higher degree of price stability than our competitors. We have done that over the past 7 years.

THE RESPONSIBILITY OF BUSINESS AND LABOR

The challenge to business and labor is no less compelling than the challenge to government.

We know that wage and price changes are inevitable--and desirable--in a free enterprise system.

But those changes must be restrained by a recognition of the fundamental national interest in maintaining a stable level of overall prices.

If strong labor unions insist on a wage rise twice the nationwide increase in output per man-hour--even where there is no real labor shortage--we are bound to have rising prices.

If members of an industry attempt to raise prices and profit margins--even when they clearly have excess capacity--we are bound to have rising prices.

Nobody benefits from a wage-price spiral. Labor knows that it does not. You know that business does not. And surely the American people do not.

Yet business says it is labor's responsibility to break the spiral, and labor says it is yours. I say it is everyone's responsibility.

It is the responsibility of government, of labor, and of business.

I intend to urge labor to restrain its demands for excessive wage increases.

I am urging business tonight to refrain from avoidable price increases, and to intensify its competitive efforts.

To both I say: It is your economy--your jobs and profits we need to protect. It is your dollar whose strength we must maintain.

For the first time, America is fighting for freedom abroad without resorting to wage and price controls at home.

Voluntary restraint has made involuntary curbs unnecessary.

This is the way it should be done.

This is the way it can be done--if business and labor meet their responsibilities.