6 
(expectation of extra profit) from such transfers became 
gradually weaker. 
2. The tendency to underutilization of capacity seems to 
have been present long before the apparent break in the 
trend in 1974/75. This tendency preceded each of the 
recessions (1958, 1967, 1974) and it was felt in the early 
1970'ies in several countries in steel, synthetic fibres, 
fertilisers, textiles; only more recently in motor cars. 
I feel that the role of utilization as a determinant of 
investment can hardly be exaggerated. A growing fear of 
excess capacity might be the most general reason for the 
gradual weaking of investment. 
3. The opening of the system by liberalisation of trade 
necessitated in formerly heavily protected industries a 
process of structural adjustment which some countries have 
found it difficult to carry out satisfactorily. The un 
adjusted industries tend to be subsidised in one form or 
another. 
At the same time countries with chronic balance of payment 
deficits found it increasingly necessary to grant tax 
relief to their industries to enable them to compete abroad. 
This strategy has been applied even where it could not 
be justified by the state of the foreign balance.