Pressed by its allies and worried by the October stock market crash, West Germany reluctantly has undertaken a modest expansion through a government loan program and a reduction in key interest rates.
These moves were welcomed by the American government, which wishes they had been undertaken earlier. But they are hardly enough to give the West German economy a big boost. On a scale of 1 to 10, the steps taken by the West Germans rate perhaps a four.
A new book published by the Brookings Institution, "Barriers to European Growth -- A Transatlantic View," suggests that West Germany, as the strongest power in Europe, should be doing a lot more to bolster its own economy and cut an oppressive rate of unemployment. The book argues, as well, that there is enough slack in France and Italy to warrant stimulative programs.
The suggestion that West Germany should be "the locomotive" for the European or the global economy sends West German politicians up the wall. Ignoring some of its own best private economists, the Kohl government worries that any expansion fueled by easier monetary and fiscal policies will be inflationary.
Brookings' Charles A. Schultze and Robert Lawrence, principal coauthors of the book, don't think so. They argue that Europe as a whole needs a solid dose of expansion, accompanied by reforms scrapping some old habits, customs and rules that impede business and labor mobility.
Schultze calculates that West Germany could aim for a growth rate "over 3 percent and under 4 percent" for a couple of years, slicing its high unemployment rate by about 2 percentage points, before serious inflationary problems would begin.
In other words, there is plenty of room in which Bonn can maneuver. But even the timid steps of the past few weeks have not had total acceptance within Germany, a country indoctrinated to worship zero inflation. The conservative Frankfurter Allgemeine Zeitung, in a snappish editorial, said recent decisions to start a loan program and by the Bundesbank to cut rates were political, "a German ornament for the conference table of international economic diplomacy." The prescription, the paper said, "is inappropriate for growth."
Considering Europe's economic distress, such attitudes need to change. At a news conference, Lawrence pointed out there has been a dramatic deterioration in Europe since 1973: Unemployment, which used to be about 3 percent, has risen every year.
By 1986, European unemployment had hit 11 percent. An Economist poll in Britain showed that some jobless teen-agers there -- who've never worked -- despair of ever getting off the dole. And the experts at the Organization for Economic Cooperation and Development in Paris see no prospect for significant improvement anywhere in Europe.
In the United States, unemployment has fallen steadily after rising to 11 percent in the 1982 recession. It was only 5.9 percent in November.
Many reasons are usually cited for the sorry European performance, compared with results here. First, it has been said that European wages got too high; second, that the several governments, after two oil "shocks," failed to stimulate consumer demand; third, there is the "Eurosclerosis" theory (welfare states don't generate incentives to work); and fourth, some contend that Europe simply couldn't sustain the growth enjoyed from the end of the war to the first oil shock in 1973, especially against the competition from Japan and other Asian countries.
The conclusion of the Brookings work is that each of these explanations may have something to do with Europe's low growth-high unemployment syndrome, but altogether don't constitute an adequate explanation. Mostly, the Brookings team suspects, America (and Japan) are leaving Europe behind because of declining labor mobility in Europe, and the unwillingness of employers to meet increased demand by taking on new workers.
It's not much of an exaggeration to say that the typical German employer won't add to his payroll, even when business warrants it, for fear that he won't be able to lay them off when demand falls.
The big danger, as the Brookings authors see it, is that if West Germany persists in its minimal approach to growth, unemployment will shoot up even more. As the U.S. trade deficit falls sharply -- as it inevitably will -- the export surpluses on which West Germany and Europe have been relying will fade away. If there is no expansion in domestic demand to replace the export stimulus, the jobless numbers could explode and shake all governments now in power.