What the US wants from the Williamsburg summit
As the personal representatives of the seven industrialized nations began to plan the economic summmit meeting at Williamsburg, Va., it was quickly realized that even an informal, consultative summit would have to have a message. Current economic conditions do not allow the leaders to meet and simply say they met. So we put our minds to an appropriate message for Williamsburg. The search was not long, nor was it difficult. What the economy of the world needs most is recovery. Unemployment, slack trade, and burdensome debts all call out for a revival of economic activity.
Indeed, as we have prepared for the summit during the past six months, recovery has become more and more evident. There is now good cause for optimism and confidence about the recovery. Confidence, then, will be a major part of the message of Williamsburg.
Some weeks ago, after the first meeting of personal representatives, I was asked to sum up in one word. I said: ''Jobs.'' Indeed the ultimate judgment about the economic policies now being pursued will depend on whether they create jobs. Not quick, empty jobs which drain resources for no purpose. Not jobs which destroy more jobs than they create. But a healthy growing economy which creates viable jobs based on a rational evaluation of demand by the actors in the private economy. The key to new jobs is investment.
The confidence necessary for a revival of investment will come not from more government action but from less; not from new ''employment programs'' but from fewer; not from greater management of the economy but less; not from more protection for industry but less; not from more intervention in exchange markets but from less. This is not a prescription for do-nothing government - but a prescription for government which deals only with those few matters that are best handled by government: for example, defense, law and order, and the infrastructure.
The confidence which will revive investment is confidence in the free market system. Efforts by government to manage the economy over the past 20 years have brought us to where we were two years ago. Cutting back on government, both spending and regulation, and projecting those cuts into the future by indexation of the tax schedule are first steps the Reagan administration has taken to restore private confidence and establish the conditions for a durable recovery.
What about the debt problems of the developing countries? At Williamsburg the leaders can be expected to explore the debt issue not as an isolated problem but as one thread in a fabric of growth, trade, and finance. By pointing to economic recovery and by committing their countries to rollback restrictions on trade, the leaders at Williamsburg can contribute to renewed confidence in the economies of the developing countries. The developing countries will have an opportunity to make their contribution to renewed confidence at the meeting of the United Nations Conference on Trade and Development (UNCTAD) which begins in Belgrade a few days after Williamsburg.
East-West economic relations pose an entirely different set of problems. More than in any other ''economic'' relationship, economic relations with the Soviet Union and Eastern Europe have a security dimension which cannot be overlooked. The necessary intrusion of government into this relationship is caused primarily by insufficient confidence in the political realm between East and West. This results from the dangerously threatening behavior of the Soviet Union. The West must find a way to deal with the adversarial relationship in the political and security dimensions, and still enjoy the benefits of trade in the economic dimension. We have come a long way in the past six months toward better understanding of the economic and security aspects of East-West economic relations. Work in the Organization for Economic Cooperation and Development (OECD), the Coordinating Committee for Multilateral Export Controls, NATO, and the International Energy Agency has been intense and productive. Each government must now examine the evidence and adopt the policies appropriate to its circumstances.
How will the message of confidence emerge from Williamsburg? A message requires a medium, and the news media will not be absent from Williamsburg. We expect about 3,000 ladies and gentlemen of the press to attend. But it remains to be seen whether the true message will be heard. The press must look for activism, for drama, for conflict. If Williamsburg goes as we expect, it will be a ''dog bites man'' story, not the more dramatic ''man bites dog'' story that would make good headlines.
We have experienced 20 years or more of looking for government to solve economic problems. But the US economy cannot be dominated by government and be strong. The message of confidence will be based on clear signs that economic recovery is under way. Tough and often unpopular policies in the US (and in Great Britain) are paying off. Inflation has been nearly eliminated, consumer and business confidence stand at their highest levels in nine years, the leading economic indicators are strong and positive.
This is not the time, as some would suggest, to use the so-called ''room for maneuver'' to give the economy a kick. This is the time to acknowledge that a return to market principles, a lower government profile, and a commitment to sound long-run economic policies have been the source of the recovery. The same policies can assure the confidence that will sustain noninflationary growth for a long time to come.