To avert the growing threat of "a financial collapse" of the world's economic system, the United States and four other major powers must join together to regenerate economic growth, 26 leading economists from 14 nations said here yesterday.
In a report that participants acknowledged was exceedingly grim, they said there is "no prospect" of an automatic recovery from the deepest recession in 50 years, and charged there is now "a paralysis of policy" among the major Free World nations.
"There really is some risk of a breakdown in the system, which is apparent when you look at the international dimensions," said C. Fred Bergsten, director of the International Institute of Economics, which had called for a conference here three weeks ago, leading to yesterday's call for action.
The need to move on an emergency basis was urgently stressed. One participant, Rimmer de Vries, Morgan Guaranty Trust senior vice president, speaking of "patchwork" efforts to keep Third World borrowing countries afloat, said at a press briefing:
"We are all gloomy for 1983--it's pretty much written off; there's nothing much we can do change 1983. And unless we act now, we may fritter away 1984."
The main thrust of the report by the Bergsten group was that the United States, Japan, West Germany and the United Kingdom are strong enough to take actions to stimulate their economies, while Canada, which is not yet in position to take such steps alone, "should be able to join a concerted move."
Inflationary and balance-of-payments pressures in France and Italy were deemed to be dominant enough to exclude them from the expansionary effort.
The economists said a key goal is to get interest rates moving further down. They believe this will improve the income of developing nations, automatically reduce their cost for servicing existing debt, stimulate economic recovery, and ease protectionist pressures.
The basic fear they expressed was that, unless the five major nations act together in this way, there will be "an outbreak of trade warfare and competitive devaluation, or of a financial collapse, that could destroy the interdependent world economic system that emerged in the postwar years."