Economic balance
ANYONE who has ever been in one of today's highly technological industrial factories -- with its vast array of whirling computers, electronic communication systems, and careful attention to time clocks and quality-control monitoring -- knows just how crucial synchronization is to the production process. A split-second timing of interrelationships -- and proper balancing of the parts to the whole -- are absolutely crucial, whether the product is an automobile, a personal computer, a spacecraft -- or the launching of a spacecraft.
We mention all this because what is true for the industrial process in today's space-age economy is also true for the functioning of the economy itself, as Federal Reserve Board chairman Paul Volcker reminded Congress this week. In testimony before lawmakers, Mr. Volcker argued that the Fed alone cannot take all the actions necessary to bolster the giant but sluggish US economy. Noting the massive budget deficits that now mark American fiscal policy, as well as the huge trade deficit, Mr. Volcker maintained that the United States is faced with an economic situation ``marked by gross imbalances that can neither be sustained indefinitely nor dealt with by monetary policy alone.''
One hopes that lawmakers heard the message coming from the Fed. For its part, the nation's central bank has sharply expanded the money supply in past months, thus helping to bring down interest rates and stimulate the economy. Indeed, by now setting new and slightly higher monetary targets, the Fed in effect is ratifying its recent expansionary policies, while giving itself slightly greater leeway in promoting an additional easing of credit if that proves necessary. But beyond that, the Fed is basically holding the line on its current policy -- watching and waiting, as it were, to see the future direction of the economy before taking any additional steps that could inadvertently drive up the inflation rate.
Which brings us back to Mr. Volcker's remarks about ``gross imbalances.''
Certainly, the Fed cannot act alone in righting the distortions and imbalances in the American economy. Congress and the White House have their part to play in bringing down the deficit. And they are not alone in having a job to do. The American business community needs to be far more aggressive about marketing goods abroad. Granted, the lion's share of the export problem is the high value of the dollar -- which makes US goods expensive compared with overseas products. But at the same time, who could really say that the US has been as imaginative as it could be in selling abroad? For starters, Congress and the business community should consider establishing a unified foreign trade office, as is common in most industrial nations. And US companies need to develop products that are applicable to overseas cultures -- and not just attempt to ``recycle'' products that work in the US market. Can such a tailoring of product lines be done? You bet. Just ask the Japanese!
Finally, labor must also do its part in helping to restore a better sense of balance throughout the wage sector. US wage levels continue to be far higher than comparable wage levels abroad -- helping to keep US goods overpriced in world markets. Nor are productivity gains, in general, offsetting growth in labor costs.
The upshot of all this then, is twofold:
The Federal Reserve Board is on target in staying on its present course -- ratifying past monetary expansion, not tightening credit, and providing the framework for further expansion of credit.
But other key players must also take appropriate steps if the nation's economy is to function harmoniously, and grow. That means Congress and the White House, as well as business and labor.
