There is a growing fear in political and financial circles abroad that the United States--still the most powerful nation in the world--is turning inward, away from its traditional leadership in world economic affairs.
The recent narrow victory of a bill in the House authorizing $8.4 billion in additional American commitments to the International Monetary Fund (and the fight isn't over yet) is an important symbol of a worrisome trend.
In a recent interview with this reporter, Treasury Secretary Donald T. Regan made his position plain: "I'm trying to be pragmatic and indicate to the other nations, both the industrialized and the developing, that there's no sense in calling on Uncle Sam to put up huge sums of money that are not going to be there.
"Because frankly, they don't have the votes any more in the United States. The era of the open largesse for nations around the world in the United States has passed . . . "
That's why World Bank President A.W. (Tom) Clausen fears that a serious roadblock will soon be placed in the way of his institution, which is trying to expand both its normal and subsidized loans. Reaganites blame huge budget deficits. But they clearly have an ideological hang-up when it comes to the World Bank--a preference for private markets over public institutions (even where private markets are almost non-existent), strengthened by a suspicion that the bank stresses quantity over quality.
A deep-rooted fear that the United States over the next several years is likely to hamstring the operations of the IMF, the bank and other multilateral lending institutions is symbolized by two recent events, seemingly unconnected.
The first was the delay by American commercial banks in boosting their prime lending rate (which at 10.5 percent was probably about 1.5 points too low). Because the banks were already on the defensive in Congress, they were convinced that a hike during the debate on the IMF bill would cost enough votes to kill it.
The second was a strategic ploy, a bit of a coverup by the IMF itself: When IMF Managing Director Jacques de Larosiere returned to Washington early in July after an effort to borrow about $6 billion from Saudi Arabia and European governments, the word was passed that he had been given a hard luck story.
Those governments, said a knowledgeable person, told de Larosiere to "dig into your larger quotas"--a reference to an agreed-upon 48 percent increase in IMF quotas, or member deposits, to about $96 billion beginning in 1984.
But de Larosiere, who needs that $6 billion in the balance of this year and early in 1984 to make loans to Third World nations, had actually achieved agreement in principle for the separate advances by the Saudis and the other governments.
Final terms of the loans, which will be made through the Bank for International Settlements and the Saudi Arabian Monetary Authority, are due to be hammered out at a Paris meeting in mid-September.
What is illustrated here is not simple paranoia: on the prime rate question, the banks were probably right that a prime rate boost would have been the kiss of death for the IMF bill, inasmuch as they were already fingered in Congress for imprudent lending and extortionate fees in their Third World lending.
And the IMF wanted to keep word of any successes in its bargaining with the Saudis and other governments quiet, assuming that some congressmen might mistakenly conclude the pressure was off for the $8.4 billion.
If these are the extremes to which one must go to cozy the Congress into passing IMF legislation, imagine what lies ahead for even less popular agencies, or for--God forbid!--foreign aid. Even Clausen has been playing the bank's needs low-key, for fear, he said, of "overloading the circuits."
Take the case of the International Development Association, the soft-loan affiliate of the bank: at a time when the need for IDA money has increased by 30 to 40 percent because of the addition of China, a new client with 1 billion-plus people, the Reagan White House has vowed to put an annual ceiling of $750 million on IDA contributions--or a cut of more than 25 percent.
Having warned, in the interview, that there is no longer an unlimited source of American funding, Secretary Regan insisted that "we're still generous. The amounts of money we put up are huge by anyone's standards. But, more and more, whether this is to be blamed on Vietnam or just a different group looking at these things now--a younger group and so forth--there is no stomach in the Congress, and they represent the views of their constituency, for these large sums for the foreign nations."
Because the U.S. share of the multination IDA program is roughly 25 percent, a $750 million U.S. ceiling will limit IDA to a total of $9 billion over the three years of the IDA-7 program beginning mid-1984, against the $16 billion Clausen says is urgent. Says Andre de Lattre, IDA negotiator: "Such a figure . . . would amount to a major cut in IDA's resources at a time of economic crisis for the developing nations."
Treasury Undersecretary Beryl Sprinkel, in a separate interview, responds that the bank pays too much attention to quantity and not enough to the quality of loans. Emphasizing that the administration will take a "hard" line in the next Congress on a $750 million ceiling for IDA, Sprinkel told me:
"We do not believe that quantity of loans is the only or perhaps even the major contributor to economic progress and growth and development. Some tend to measure concerns about poor countries by how much money you're willing to put into IDA. We think there are many other factors that determine growth over and above subsidized funds. And that certainly includes the kinds of economic policies that the recipient nations pursue. If they do not encourage savings and investment, and incentives in their own country, pumping in subsidized money will not buy them much except a temporary respite."
Sprinkel said that IDA should concentrate on giving aid to those countries unable to attract private investment. Pointedly, he said that both India and China, "if they handle their affairs properly," should be able to satisfy more of their needs by borrowing private capital, leaving a reduced IDA pot to be shared by others.
"We just cannot afford to come up with massive amounts of money in a subsidized form for countries that have potential for raising development capital in other markets," Sprinkel said.
And as to providing more capital for the World Bank's nonsubsidized customers, both Regan and Sprinkel took a sour view, protesting that Congress won't buy bigger appropriations. The bank should spend less money developing energy, and more on general development problems, according to Sprinkel.
America's reduced "largesse," as Secretary Regan put it, will be a key issue at the annual meeting of the IMF and World Bank starting here late next month. But privately, the other nations think there's little chance of breaking through this particular ideological barrier of Reaganomics.