Global economy: on course
THE international community enters 1987 on a generally upbeat economic note. The goal for policymakers, therefore, could not be more straightforward: They must ensure that there is coordinated international action to sustain the current expansion. Global action on such seemingly intractable issues as coordinating the monetary policies of the major industrial nations, easing the third-world debt burden, promoting new job growth, putting the chronically unemployed back to work, and stemming protectionism, will not, it must be acknowledged, be an easy task. Would that it were! Most nations pursue their own independent economic policies. Case in point: the US budget imbalance.
Fortunately, economic policymakers have time on their side, although their are serious challenges, such as some signs of economic weakness in the US, where personal and corporate debt levels are high and the trade imbalance shows no major turnaround. The global framework, however, is one of modest growth.
For 1986, most industrial nations averaged growth rates between 2 percent and 3 percent. A number of forecasters see steady expansion. The Organization for Economic Cooperation and Development, for example, sees growth for industrial nations running somewhere between 2.5 percent and 3 percent over the next 18 months. The US-based Conference Board, meanwhile, in a recent report, concludes that the global economic expansion is gaining momentum. Indeed, the main barometer of future economic activity in the US, the Index of Leading Indicators, just registered its biggest increase since early in 1986, shooting up 1.2 percent in November, although the November increases could reflect short-term economic activities.
Still, the larger point still stands: It appears that, barring the unexpected, 1987 will look not too much unlike 1986. Thus, such major industrial nations as Japan and West Germany should more aggressively stimulate their economies. Japan has said it will do so. Yet, the preliminary new budget for Japan provides for little new growth. West Germany, meanwhile, will probably have to wait until after national elections Jan. 25 before it is possible for policymakers there to take steps to rev up their economy.
Where will the leadership for more coordinated global economic policymaking come from? Few national leaders seem to want to take charge of international economic affairs. Prime Minister Nakasone in Japan, and US Treasury Secretary Baker in the US (a non-elected official) are exceptions to that rule.
The global agenda should be primarily fourfold:
Curbing the US budget deficit. Nothing is more important.
Ensuring coordination of the major world trading currencies.
Finding long-range debt relief for third world nations.
Resisting new trade barriers, while easing current restrictions. The US decision this week to impose higher duties on a broad range of European agricultural products is the type of unilateral action that should be avoided.