Busy Rescue Squad

Fact: A good chunk of the world economy has slowed sharply or gone into recession. Among those braked or reversed are such populous nations as Japan, Indonesia, India, China, and Russia.

Conjecture: Alarmists warn that this undertow will soon erode: (1) the vigorous growth and job creation in the world's biggest economy, the US; (2) the recently disciplined economies of Western Europe; and (3) developing nations as distant from the Asian slowdown as South America and South Africa. At stake in all three are jobs and improving living standards.

Reaction: Washington and its allies rush to the rescue with money plus tough advice and conditions.

The closely aligned economic activists east of the White House in the US Treasury and a few blocks west at the International Monetary Fund and World Bank are on a lending spree and economic reform pressure campaign. Treasury is also quietly shepherding new funds for the depleted IMF through a reluctant US Congress.

Are the rescues working? Start with the latest, Russia. There, the IMF's promise of a series of loans through 1999 has reversed what one economist called "a near-death experience" for Moscow. The IMF had to dig into its back pocket, drawing on credit from 11 industrial nations while it waits for Congress to replenish its coffers. Moscow markets quickly strengthened. But real reform remains in question.

On the plus side, the chairman of the Russian parliament's tax and finance committee said he found "many reasonable things" in the IMF's tough demands. Those include (1) lowering tax rates, (2) cracking down on tax evasion, and (3) tightening social program spending. The first will be popular; (2) and (3) will not.

But the rescue gives Moscow's young reformers breathing room. It lifts the oppressive weight of 100% interest on government bonds. Whether it buys real reform remains in doubt.

In doubt, also, is the pace of system reform (and, therefore, growth) in Japan and China. Japan's new prime minister will have a mandate for drastic action (major tax cuts, closing failed banks). He will have to act boldly to wrest support from his faction-ridden party. He will also face rising pressure from the US to stimulate new growth, and thus help pull Japan's Asian neighbors back to vigorous growth.

Without such Asian recovery, China can't resume its closing of thousands of laggard state industries. Prime Minister Zhu Rongji had no sooner started that ambitious program than he had to suspend it for fear of throwing millions out of work just as export-industry jobs took a dive.

Which brings us to the question of whether the US and its friends are serving their own interests with this welter of costly rescues. Skeptics abound. But the bottom line is clear:

Russia has nuclear warheads that must be controlled and oil and resources that will one day be needed. Asian regional peace benefits from mustering troops out of China's Army into civilian jobs. A return to Asian prosperity means jobs for Americans and Europeans. Altogether, a bargain.