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US to World Partners: Time to Do It Our Way

But at Denver summit, Europe, Japan, and Canada will be hesitant to follow US lead, despite huge deficits and high jobless rates

By Daniel SneiderStaff writer of The Christian Science Monitor / June 20, 1997



DENVER

In the school of international economics, the United States had been the naughty student, chastised by the rest of the world during the 1980s for its yawning budget deficit.

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Now, the US gets to thumb its nose at everyone else.

Here in the shadow of the snow-crested Rocky Mountains, the world's seven leading industrialized nations and Russia will meet this weekend to discuss everything from global financial markets to Bosnia. But this time, the US will likely do the lecturing.

America has enjoyed a year of unprecedented economic growth while Europe has struggled with its own huge budget deficits and high unemployment, and Japan's sluggish growth has been compounded by out-of-control spending.

Against this backdrop, American officials are clearly eager to promote the benefits of the "American model." Basically, the American model is an economy that is less regulated, fiscally austere, and has a flexible labor force unburdened by the restrictions imposed by trade unions or government protection.

But despite a soaring stock market and an enviable job-creation rate, not everyone is lining up to eagerly follow the US road to economic Oz.

"The American model is contested in Europe right across the board, not only by the socialist left but by a solid bloc of [conservatives]," says Tony Judt, head of New York University's Remarque Institute.

European leaders are worried about the consequences of deregulation and global markets, particularly by the prospect of severely cutting back the generous benefits that have been the hallmark of European social-welfare systems - and for good reason. Socialists opposing "globalization" and calling for more public spending to create jobs scored a stunning victory over conservatives in recent French parliamentary elections.

But these concerns are not solely continental.

* The Canadian prime minister scratched out a narrow victory in recent parliamentary elections after practicing fiscal austerity.

* While Japanese Prime Minister Ryutaro Hashimoto talks of deregulation and reform, there is serious opposition to undoing Japan's social safety net to be more competitive worldwide.

What all these nations share is a commitment to an economic model in which the state plays a much greater role, both as a protector and as a planner. "The role of the state in Europe is much deeper and culturally much more built in than it is in Anglo-Saxon culture," says Mr. Judt.

This fundamental debate is not evident in the formal agenda of the Denver summit, but given recent events in Europe, American officials and others predict it will occupy a good part of the informal talks among the leaders.

It is most visible in an American and British desire to make job creation a core issue at the summit. Summiteers plan to hold a global summit on this problem within the next year.

But Europeans are concerned that opening economies to global competition - including making it easier for business to hire and fire workers or to lower wages to compete with foreign producers - will only mean impoverishment and more inequality.

"They want to have a more compassionate system when it comes to helping less-fortunate workers," says Prof. Robert Lawrence, a specialist on international trade and investment at Harvard University's Kennedy School of Government.

But like many economists, he argues that Europe and Japan can no longer afford their social benefits.

He points to the examples of Britain and the Netherlands. They have trimmed budgets and introduced more-flexible labor markets and have economic growth and relatively low unemployment to show for it. "My suggestion to the French is - don't be like the Americans, be like the Dutch," says Mr. Lawrence.