Different economic drummers
THE finance ministers from Europe and Japan have been affirming their fraternity with Washington in the attempt to forge a common economic policy. But for all the talk of mutuality, it is clear that the industrial West is marching to different drummers. Officials of West Germany and Japan have indicated that, no, they would not cut their interest rates to stimulate their domestic economies, as urged by the United States. Now, it may be presumptuous to suggest that one nation is more ``right'' than others on global economic matters at a given point in time. The West Germans and Japanese, for reasons of history as well as internal domestic policies, have genuine concerns about taking short-term steps that, as they view it, could reignite inflation. And, they correctly note, the US has contributed to the current global economic challenge by failing to reduce its massive budget deficits. Still, it must be acknowledged that division over economic policy, with the global economy just plodding along, increases the possibility of adverse economic consequences. There needs to be far greater economic unity within the Western community.
Current US economic policy is twofold: Lower domestic interest rates to spur growth, while forcing down the value of the dollar to promote American exports. The dollar has now come down substantially. Yet there is little indication that the trade deficit -- projected to hit $170 billion this year -- has been much reduced. The US, according to IMF analysis, is now expected to grow only 2.7 percent this year, and about 3.5 percent next year. Global growth, meantime, will be about 3 percent next year. That type of modest growth won't slash existing unemployment rosters -- or find jobs for all the new job seekers.
The push-down-the-dollar campaign has probably gone far enough for the moment. It seems reasonable for Bonn and Tokyo to speed up their own economies somewhat. Fair is fair. In the case of Tokyo in particular, it must be remembered that US taxpayers are paying the costs of the Asian defense umbrella, a cost factor that -- because the Japanese don't have to pay it -- has allowed Tokyo to divert economic resources into building its private-sector economy.