"The strategies of other nations of the world are political-economic in nature. This requires that we adjust our traditional policies, which have been geared to another world." So wrote former Transportation secretary Neil E. Goldschmidt in his recent study of the U.S. auto industry.
You don't have to admire the precision or grace of Goldschmidt's prose to appreciate the significance of his judgment. For the first time since World War II, important American officials are suggesting a fundamental overhaul of the way we deal economically with other countries.
There's a sort of go-it-alone spirit. Treaty obligations to the contrary, Goldschmidt urges restrictions on auto imports. And the Reagan administration seems eager to curb U.S. contributions to the World Bank and other institutions that lend to developing nations.
We've dawdled on World Bank commitments before, and we've had spasms of protectionism. What makes this different is the broad challenge to the postwar American world vision. We once argued that the free movement of goods and money would serve everyone's interest and mute political conflicts. Now Goldschmidt and others are saying that it's a selfish world and we haven't been selfish enough. o
All this has the seeds of an important debate. But if it is not to degenerate into mere sloganeering, we need to be candid about recent history and our own motives. Otherwise, we risk misunderstanding the past and ruining the future.
There's clearly strong popular pressure for change. We believe that we've been uncommonly generous with other nations and that our only reward has been a global economic interdependence. We feel sorry for ourselves.
This is an understandable feeling but poor history. U.S. foreign aid contributions, as a share of U.S. wealth, long have ranked among the lowest of industrial countries; in 1979 they amounted to 0.2 percent of gross national product against Sweden's 0.9 percent. It's true that we were enormously generous right after World War II and that our devotion to an open world economy gave Europe and Japan virtually free access to our market.
But these steps stemmed from a firm concept of national interest. We could afford to open our market because others needed our exports far more than we needed theirs. We favored freer investment because our corporations (soon to be called multinationals) were in the best position to take advantage. Between 1950 and 1970, direct U.S. oversees investment rose nearly eight-fold to $78 billion.
No less false is the image of interdependence as an unmitigated evil. Excluding oil, we have run only one trade deficit (in 1972) since the end of World War II. Last year the non-oil surplus totaled nearly $50 billion. The world still represents a vast marketplace for our goods.
Look around and you will see that most areas of the world remain far more vulnerable to outside "shocks" than does the United States. The latest evidence of this involves the effort of high U.S. interest rates on European interest rates. In Germany, rates on large bank deposits jumped from 10 percent in December to more than 14 percent at the end of February.
The Europeans faced a simple dilemma. High U.S. rates attracted funds out of their currencies into dollars. The resulting depreciation of their currencies raised the price of oil (sold in dollars) and, therefore, inflation. But blunting this by raising interest rates -- which is what the Germans did -- prolongs economic stagnation. The latest official forcast for the European Community is for output to drop 1 percent in 1981 and for unemployment to rise.
These illustrations are not mere quibbles. Interdependence is not simply a cliche. We have stakes in how the global system operates as a whole. And out actions affect, sometimes powerfully, our allies.
What clearly has ended is a simple era devoid of choices. Our postwar economic vision represented a neat packaging of strategic requirements (to create an anti-Communist bulwark), moral inclinations (to foster democracy in Europe and Japan) and commercial interests. Now we have to think more consciously of how to use our economic power.
It's still considerable. The United States remains the largest import market (one-eighth of the world total) and the single biggest economy (one-fifth of the world total). Having lost our overwhelming economic superiority, the temptation is to use our remaining power for more immediate and overt benefits. This implies toughening trade policies (including more protectionism) and making foreign aid and trade concessions special rewards for our political friends.
But this approach has its own risks. Europe and Japan regard economic security as a central aim of foreign policy. The more we go our own way, the more inclined they will be to do the same and the less they will listen to us on other matters: namely, East-West relations.
The Europeans are particularly upset by the new administration's hostile attitude toward the World Bank and other multilateral lending institutions. Non-oil developing countries buy about one-third of the European Community's exports. Anything that undermines the financing system that sustains these exports is seen as a threat to Europe's economy.
Trying to parlay trade and aid into political loyalty also poses dangers. It creates the most complicated kind of horse trading: If you do X for one friend, do you have to do the same for another? And recent experience with one large bilateral commitment, Iran, was not exactly a smashing success.
So the essential issue comes down to how we define selfishness. Goldschmidt to the contrary, we have had a "political-economic" strategy since World War II. Oour policies aimed, very effectively, to spread U.S. influence, exports and multinationals abroad.
The question now is whether the old apporach still works. Everyone is for America first; no one can argue seriously for a policy that makes America third of 55th. But the case for change needs to rest on more than careless rhetoric.