DURING the first part of this century, Britain basically managed the world economy. ``Britannia rules the waves'' was a line from a patriotic song. Exhausted by World War I, Britain was gradually replaced by that growing industrial power across the Atlantic, the United States. After World War II, the US dominated the international economy.
Now the global economy is headed toward ``management by committee,'' says C. Fred Bergsten, director of the Institute for International Economics. The members of the committee will be three roughly equal economic powers: a newly competitive America, a newly internationalized Japan, and a truly United States of Europe.
This historic transformation to a ``multipolar global economy'' will probably take a decade or so. The idea won't be entirely popular in the less-developed countries or among the smaller industrial powers. But Dr. Bergsten believes the efficiency of a small group of leaders getting together to coordinate world economic strategy makes this trilateral system necessary.
``That is the way we are headed,'' he says.
The United States will no longer be able to manage the system alone. Nor will any other single nation.
A Trilateral Commission was formed in the early 1970s to explore international economic issues. But this influential private group, bringing together political and thought leaders from the US, Japan, and Europe, has tended toward ``legitimizing US leadership'' rather than creating a partnership of equals, according to Bergsten, a Trilateral member.
Bergsten sees the seven-nation economic summits as the nascent steering committee of the future world order. He was disappointed that the Paris summit of the seven leading industrial democracies last month did not do more to tackle key economic issues, such as the huge international current account imbalances of the US (a deficit) and of Japan and West Germany (surpluses). Bergsten has long been arguing that the US dollar must fall further against the Japanese yen and West German mark. Otherwise the US payments deficit could start growing again from its current level of around $120 billion.
A recession in the US would slow imports and reduce the deficit. But this would be temporary unless the slump was accompanied by a weaker dollar.
Tackling such economic issues on a case-by-case basis would pave the way for more comprehensive management structures at a later date, he says.
A trilateral system assumes that Europe genuinely unifies its economic policy. Already for some 30 years the European Community has worked out common trade policies for negotiations with the rest of the world. This practise would have to be extended to other economic matters. Presumably the European members of the summit (Britain, Germany, France, and Italy) would normally speak as one.
One motive for Europeans to agree would be fear of a G2 managing the world - a ``group'' composed of the US and Japan.
Canada, also one of the seven summit nations, would be ``the odd man out'' in such a system, admits Bergsten. ``In a sense, the US would represent its interests.''
Similarly, Japan would try to represent the interests of Asia's newly industrialized countries, such as South Korea and Taiwan.
Bergsten doesn't expect the Soviet Union to join the Big Three anytime soon. ``It will be a long time before the Soviets are a big player in the world economy,'' he says. Indeed, it will be some years before Soviet exports or imports match those of Sweden or Switzerland, even if its internal economic reforms are successful.
However, Bergsten would like to see the Soviet Union welcomed into the international economic agencies, such as the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade. He believes China's membership and participation in such bodies encouraged its leaders to undertake market reforms that have promoted that populous nation's rapid economic growth in the last decade.
These memberships could similarly encourage the Soviets into developing free markets domestically and working with the international economic system.
``We want to wean them as fast as possible in our direction,'' he says.
Bergsten insists that the Big Three should not try to dictate economic policies to the rest of the world, including the developing countries. They should be an ``informal steering group.'' They should attempt to develop common positions on trade, finance, developing country debt, environmental issues, and so on. Then these should be bought to the existing international bodies (and perhaps a new one for the environment) for compromises and decisions.
``But the world economy is in trouble unless there is some central steering mechanism,'' he maintains.