New Deal for World Economy?

Analysts try to focus on outlines of `new world order' as seen through an economic - rather than political - lens

ECONOMISTS and others are putting on their thinking caps about what historian Walter W. Rostow calls the ``new world economic order'' - the economic side of what President Bush calls the ``new world order.'' Greater freedom in Eastern Europe, political and economic turmoil in the Soviet Union, and now the Gulf war and its consequences in the Middle East have prompted some speculation as to the evolution of the world economic system.

Mr. Rostow, an economic historian at the University of Texas in Austin, sees a long-term evolution of power away from the United States and the Soviet Union. He says this diffusion of power, which could lead to chaos, requires the creation of a framework through which each country is ``tamed'' by the rule of law and order.

Nations must be given an ``appropriate stature'' without their having to try for it by shooting their way across borders, Rostow says, and Saddam Hussein ``was sent among us to warn us of the task ahead.''

With the end of the war, economists expect the attention of world leaders to return to domestic economic issues, the debt problems of developing nations, and managing a successful conclusion to the Uruguay Round of trade negotiations, which resumed earlier this month after their collapse last December. In the US, the unemployment rate jumped last month to 6.5 percent from 6.2 percent in the previous month.

Also, European leaders will be concentrating more on strengthening the 12-nation European Community and working out ties with the European Free Trade Area and with the east European nations. The US, Mexico, and Canada will devote more effort to negotiating a North American free trade area. And the US will need to explore further its Enterprise for America Initiative with Latin American nations.

Rostow suggests that in this decade Germany, Japan, India, and perhaps even Indonesia should be made permanent members of the United Nations Security Council. With the US, Britain, China, France, and the Soviet Union, the new members would attempt to exercise greater control in world hot spots.

In the Middle East, Rostow calls for a political settlement, more arms control, and a development bank financed out of the region's oil revenues to spread prosperity to the oil-poor nations in the region. (US debates energy strategy: Page 8.)

He hopes that the radical nations in the region will ``realize there is not much to be gained by the old-fashioned use of force in the world that has emerged.''

John Sewell, president of the Overseas Development Council, suggests that the US could use much of the $20 billion in the Department of Defense budget allocated to ``national security and promoting American interests abroad'' for economic development and humanitarian purposes around the globe. That money is now being used for such purposes as renting overseas military bases and military aid to developing countries.

Victory against Iraq puts President Bush in a marvelous position to turn to world economic problems, Mr. Sewell says. Included are developing country external debts, excess population growth, environmental degradation, and extreme poverty.

Further, Sewell would like Bush to work toward a reduction in military spending by the developing countries. Too often, he says, industrial nation arms makers are encouraging sales to these poor countries. The latest report by the US Arms Control and Disarmament Agency shows that developing nations' military expenditures amounted to $167.3 billion in 1988, down $25.1 billion from a year earlier and the lowest level of the '80s decade.

Nonetheless, Sewell says, ``They are spending much to much on arms as a percentage of gross national product.''

The developing countries imported $77.8 billion in arms in 1988, with the Middle East countries taking 31 percent of the world's market for arms and military equipment. That sum compares with world foreign aid running about $50 billion a year. Iraq alone imported $29.7 billion in arms between 1984 and 1988.

Sewell's think tank is devising an alternative budget for the US that would include funds for regional reconstruction and conflict resolution in Central America, Cambodia, Afghanistan, the Horn of Africa, and Angola.

ON the oil frontier, Thomas Ferguson, a professor of political science at the University of Massachusetts, Boston, contends that the US now could dictate the world price of petroleum.

Since the US rescued Saudi Arabia from Iraq, Washington will have more clout in Riyadh, he says.

Many Washington officials agree that US influence in Saudi Arabia, now pumping 8.5 million barrels a day, has risen.

But the view is not shared by all. ``We will have no influence to speak of,'' says Morris Adelman, an oil expert at Massachusetts Institute of Technology. He maintains that the US protected the Saudis for ``its own sake,'' that the Saudis know this, and thus the Saudis ``will serve themselves and nobody else'' in deciding their oil production levels, which presently determine world oil prices.

Thomas Stauffer, a Washington oil expert, says the Saudi government ``cannot afford to be too closely identified with the US.'' Should it become so identified, it would endanger the political position of King Fahd. ``So US influence may well be precarious, as it proved with the Shah of Iran,'' he says.

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