Slow Growth and Massive Layoffs Stymie Meeting of Top Financiers
WHEN the world's leading economic policymakers emerged from talks here this weekend, they abandoned their customary joint communique for more sober assessments.
A host of problems confront finance ministers and central bank governors from the Group of Seven (G-7) richest nations - the United States, Britain, Canada, France, Germany, Italy, and Japan -
who are here for the annual meetings of the International Monetary Fund (IMF) and the World Bank, which begin today.
Trade tensions have mounted, aid budgets are imperiled, and G-7 partners bristle at one another's prescriptions for growth, such as interest-rate cuts, greater domestic spending, and slashed budget deficits.
As a result, the G-7 leaders are focusing on country-specific, not broadly defined, answers to the industrialized world's economic malaise.
Bank of Japan Governor Yasushi Mieno said that today ``the spirit of international policy coordination primarily lies in putting one's own house in order, but not in telling others what to do.''
After meeting for four hours, the G-7 nations failed to muster even the familiar boiler-plate statements about progress in coordinating fiscal and monetary moves or the need to resolve the seemingly endless bickering that blocks eight years of efforts to reach a global trade accord.
But the group also refrained from laying blame. As German Finance Minister Theo Waigel said with some relief, ``There was not a hint of criticism.''
Treasury Secretary Lloyd Bentsen, who separately called for lower European interest rates and greater Japanese spending, stressed that the top G-7 concern should be how to create jobs.
World unemployment is on the rise - in the G-7 countries alone, 24 million people are jobless. And no reversal is in sight given the barely perceptible gains in economic performance among the G-7.
Recession in Europe and Japan and slower-than-expected growth in the US economy forced the IMF to revise its economic forecast downward, and put industrialized world growth at an anemic 1.1 percent for 1993 (down from 1.7 percent in 1992). Some recession reprieve
Financial institutions, including the IMF, the World Bank, and the Organization for Economic Cooperation and Development (OECD), forecast a reprieve from recession next year, but their economists stress that the outlook is not impressive.
According to IMF projections, for example, the US economy will experience 2.7 percent growth this year, and can look forward to only 2.6 percent in 1994.
The Conference Board of Canada projects 3 percent growth in that country this year - not enough to help shake off its nagging 11 percent unemployment rate.
In Japan, IMF officials says, the economy will contract by 0.1 percent in 1993 and expand by a modest 2 percent next year. During the past two weeks, Tokyo tried to boost consumer and business spending by cutting interest rates to historic lows and introducing a $57-billion economic stimulus package.
Germany, accused by European partners and the US of being a drag on European recovery by keeping a tight rein on its money supply, also pushed its rate down a notch to a level that Bundesbank officials call ``exceptionally low.''
But the recent moves by these two powerful economies may fall well short of what is needed to spur growth and generate employment, says Michael Mussa, the IMF's director of economic research.
Clinton's call for a jobs summit at the last G-7 meeting underscored the international scope of the problem. The US unemployment rate remains high at 6.7 percent, in part because the US, like other leading economies, is shackled by a number of constraints:
* Government budget deficits eliminate federally funded jobs;
* Corporate restructuring is taking a bite out of both the blue-collar and white-collar work forces;
* And tight credit conditions limit business development.
Europe's jobless rate now hovers around 10 percent. According to OECD and other projections, it may reach 12percent by 1994.
Massive layoffs like those experienced in North America and Europe do not show up in Japanese unemployment statistics, but joblessness in the Asian economy that once promised lifetime employment is higher than the official government numbers suggest. Japanese companies have begun sharp reductions in their hiring. Private firms that have resisted layoffs will cut their work forces by not replacing departing workers and enacting early-retirement plans.
An increasingly competitive job market has made difficult trade relations even more prickly. Treasury Undersecretary of International Affairs Lawrence Summers, for example, says future trade ``concerns between the US and Europe will have more to do with protection and barriers....'' Washington's efforts to reduce its $50 billion trade deficit with Japan by creating more export opportunities there and more jobs at home have been unsuccessful. Agreement only on Russia
These days, the areas in which the G-7 nations find broad agreement are outside their own economic orbits. One is financial help for Russia, the basis for the only joint statement from the G-7 this weekend. The group praised embattled Russian President Boris Yeltsin's ``commitment to pursue the path of market-oriented reform.''
Russian Finance Minister Boris Fyodorov, who met with the G-7 and promised continued economic reforms, was assured of continued G-7 support. But future installments of the $44 billion international-aid package will forthcoming only when Russia demonstrates resolve to curb inflation and runaway government spending. Of the total, some 20 percent will come out of IMF and World Bank coffers, while the balance is to be provided by individual countries.