Versailles 1982

There was another Versailles conference. That was 63 years ago when the Allied powers met to lay the ground for a new political order in post-World War I Europe. The fateful shortcomings of that exercise--including US withdrawal from the Versailles Treaty and subsequent refusal to join the League of Nations--are now a part of history. Ultimately the treaty failed and Europe 20 years later was again at war.

Today the challenges are different--but no less urgent. Will they be confronted with greater vision and unity than were evident six decades ago?

President Reagan will arrive in Versailles for the economic summit at a time of considerable international strain. The world economy is in deep recession.Unemployment is growing everywhere. Trade is stagnating. Nations are bickering over market access and discriminatory practices. Protectionism is on the rise again.

Much of the discussion among the seven leaders meeting in Versailles is certain to focus on such items as high US interest rates, stabilization of currency markets, and credits for the Eastern bloc. But the question is whether the seven will sufficiently consider the larger, longer-range problems that must be faced up to if the world economy is to be given a new lease on life.

While Mr. Reagan insists that his basic economic formula--less government intervention--will be enough to lift United States and other economies out of the doldrums, many economists are skeptical. The West Europeans and Japanese believe that the world economy is going through a structural sea change which will mean many years of social dislocations and require some government guidance. Unemployment, for example, is expected to continue to grow throughout the 1980s as a result of automation and intensified competition among the nations of the West, the East, and the third world.

Where will the solutions lie? All at least are agreed on the need to negotiate a new set of rules for world trade. Talks are in fact scheduled for November under the General Agreement on Tariffs and Trade (GATT), and the Versailles summit will no doubt lend impetus to these talks. The concern of economists, however, is whether these negotiations, which may take many years, will focus on the problems anticipated by the time the new rules go into effect. One warning voice is that of trade consultant Harald Malmgren, who served in the Nixon and Ford administrations, and who this past week told the Joint Economic Committee of Congress that US foreign economic policy usually addressed yesterday's problems--'' based on complaints from enterprises that failed to anticipate what was foreseeable.''

Mr. Malmgren would have business, labor, farm groups, bankers, and others look ahead (instead of at quarterly earnings) to the profound changes inevitably on the way. The information revolution, for instance, will mean enormous economies of scale, creating serious job problems and making new demands on education. New man-made materials will supplant natural resources, threatening such basic industries as steel, nonferrous metals, and chemicals and causing hardship for developing nations that rely on exports of primary products. Advances in biotechnology will challenge present chemical processes in manufacturing man-made chemicals and fibers. Along with such technological changes, there will be heightened competition in the 1980s and 1990s as new energy producers get going and developing nations begin to appropriate the new technologies.

Instead of clashing over policies toward the communist bloc, advises Mr. Malmgren, the United States and the other Western nations need to concentrate on keeping the Western economic system together and building a better framework for cooperation in meeting the technological challenges ahead. In his words, ''If our leaders look forward, they will recognize that the current problems of steel , autos, and microchips are only symptoms of the major changes coming. Better that the Western nations deal with these in concert, than in conflict.''

The Versailles summiteers, in short, face tasks no less far-reaching than that which confronted the summiteers of 1919. Will they do better?

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