Whole World's Economic Needs Call for Clinton's Quick Attention
No other nation can be locomotive to pull economies out of recession
WHILE President-elect Clinton plans to focus first on domestic economic problems, he may soon adjust his lens for a broader view of the United States in an international arena.
Despite all the US economic weaknesses Mr. Clinton spoke of along the campaign trail, the US is still the world's leading economy: It produces, exports, and consumes more than any nation around the globe.
Much of that strength is derived from overseas, including markets for US products, banks for loans, investors for business development, and foreign capital for government financing. Those elements are all the more crucial during this nation's, and indeed the industrial world's, rocky recovery from recession.
In fact, global interdependence has reached a historical peak. World economic growth during the past two years, however, has been at its lowest level in decades. The International Monetary Fund offers a sober assessment: "Notwithstanding signs of recovery in the industrial countries, the expansion continues to be slow and uneven, and the balance of risks remains on the downside."
Clinton will find much discord on the international scene. Battered by inflation, budget deficits, low business confidence, and high unemployment, the world's leading economies have been pursuing dramatically different courses. Their approaches toward monetary, fiscal, and trade affairs often look like the work of myopic policymakers who think they are operating in a vacuum, with seemingly little care for the international impact of their actions.
Germany, the dominant economy in the still-evolving European Community, maintains interest rates that are perilously high for other European partners to keep up with. Japan's export surplus continues to balloon, despite adverse effects on countries it relies upon for lucrative export markets.
US government spending and budget deficits continue to climb despite the consternation among world monetary officials concerned about a further erosion of the dollar.
Coordination between the Group of Seven (G-7) leading industrialized nations - the US, Britain, Canada, France, Germany, Italy, and Japan - has broken down. G-7 leaders fault one another for self-oriented policies that damage prospects for world economic growth.
While the prospect of agreement in many areas is remote, economists and policymakers assert that the US can buttress its position in world markets and lead other nations by example.
"You won't find Governor Clinton blaming other countries for our own failings," says former Michigan governor James Blanchard (D), whose state has suffered repeated blows to its employment and financial base due to the US auto in-dustry's poor performance against foreign competition. He says Clinton's worker-training and research-and-development plans will enhance US competitiveness.
The nonpartisan Committee for Economic Development (CED) says in a report this fall: "The US has a special responsibility to lay a foundation for cooperation by setting its own domestic economic policy in order.... Only by being an effective model can the United States hope to lead other nations." CED's 250 members - top business leaders and presidents of major universities - call for the US to redress its fiscal imbalances "within a decade."
Economists caution that if Clinton embarks on plans to stimulate the economy and increased government spending without a commensurate reduction in the budget deficit, there will be a gradual diversion of investments in US securities to other countries with stronger currencies, such as Germany, that offer higher returns on investments.
Clinton will be attuned to such risks if he follows through with plans for a White House economic security council and government promotion of American trade and finance abroad.
"I know of no other way to achieve 3 percent real growth in this country [except by] breaking down trade barriers and expanding export markets," says Sen. Richard Lugar (R) of Indiana, who has long watched over US international security interests and trade matters on Capitol Hill.
With the European Community stagnating politically and Japan's finances in a tailspin, "now is no time for the US to retreat from foreign affairs, when the world is looking for a leader," Senator Lugar says. Washington must step ahead "to secure a world in which trade is likely to flourish. If things don't go well in the former Soviet Union, then our peace dividend will be gone long before Clinton can think about his domestic program."
International aid to the former Soviet Union should top the agenda for the world's wealthiest countries, says Anders Aslund, director of the prestigious Stockholm Institute of East European Economics and a senior adviser to Russian economic reformers. Given Germany's self-absorption and Japan's opposition to aiding Russia because of a territorial dispute, the US is the only power to take the lead. "If Clinton blows that" and chaos breaks out in the former Soviet Union, Mr. Aslund says, "then American lea dership in the world is over."