National self-interest is becoming the main determinant of economic policy in leading countries, despite the rhetoric of the recent economic summit in London about "interdependence" of the industrial world.
One consequence, despite the summit's pledge "to respond collectively" to the world's problems, is that economic recovery in Europe from the worst recession since the great depression of the 1930s is likely to be slowed further.
Another is that transfers of real wealth from the rich to the poor nations will continue for a while to be token in nature.
These are among the conclusions of a week of intensive reporting in Britain, West Germany, and France following the Downing Street summit in London, May 7 and 8.
The summit paid lipservice to collective attack on the problems of inflation and unemployment, and the assurance of growing world trade without protectionism. All countries promised that they would meet their economic targets - the announced growth goals for the strong nations, and the stabilization goals of the weaker ones.
But after talks with European officials in London, Bonn, Frankfurt, and Paris, and with Americans at the summit sessions, the conclusion seems that the idealized goals expressed by the heads of state have already taken second priority to economic nationalism.
To cite a few examples:
Although everyone, including the West Germans, agrees that expanded economic activity in West Germany would help recovery in Italy, France, and Britain, a pervasive fear of inflation in West Germany puts an effective lid on West German economic growth.
In France, beset by high unemployment and the threat of a socialist-Communist takeover in next year's parliamentary elections, the government is taking steps that are highly protectionist in substance, if not in name. "Can we face the collapse of our steel and shipbuilding industry?" a high French official asked angrily.
Throughout Europe and in the United States, efforts are being made, by "voluntary" quota or agreement, to resist what is bitterly called "the Japanese invasion."
In Britain, where the influx of North Sea oil is giving at least a temporary new gloss to a still gloomy economic situation, the pressure on London to develop a "European policy" on the North Sea oil has brought no response. The rest of Britain's Common Market members would like to be assured they will be cut in on the gusher.
Despite elaborate efforts at the summit to "do something" for poor countries that would regenerate the dialogue between the North and South (rich and poor nations), the only concrete results is a $1 billion,; one-time "special fund" for the poorest nations.
As a result, the wind-up conference on International Cooperation (CIEC) in Paris at the end of the month will be able to boast only of this small amount, plus an agreement to negotiate "a common fund" to stabilize commodity prices against the poor nation's much broader demands for "a new international order."
Informed sources agree that it may take as long as two years to make such a common fund a reality, in view of the rich nations' reluctance to make substantial commitments beyond present levels of aid to the poor nations.
Behind most of these inward-looking concerns is the fact that no industrial country is yet back in boom times. In fact, the higher unemployment associated with the 1974-75 recession still plagues all economies. A new report by the National Bureau of Economic Research in New York shows that the jobless rate in France, Italy, and Canada is now even higher than it was when industrial activity began to pick up again.
The increase in unemployment in the United States and Japan has been cut by only a third, in West Germany by about 20 per cent, and in Britain almost nil.
The general conclusion, at the summit and in the countries I visited, was that there is a new dimension to the unemployment problem. That is, it is "structural" in nature, meaning that it is not susceptible to reduction by the classical method of tax cuts and government spending. A special problem for everyone is high rates of unemployment among young persons.
With that conclusion as a starter, the drive launched last fall by private economists in the Western economic powers - the United States, West Germany, and Japan - into faster growth to "pull" the weaker nations out of their recession, as a locomotive pulls cars, was doomed to failure.
The drive was accelerated by the Carter administration in its early days, largely through statements by Under Secretary of State Richard Cooper and Treasury Assistant Secretary C. Fred Bergsten.
But it was dropped like a hot potato when West German Chancellor Helmut Schmidt raised strong objections, and cited, instead, the danger of creating a new inflationary wave that would do little to relieve unemployment.
A leading banker in Paris says reflectively: "West Germany is not going to change its policy just to please us. Sure, faster growth in Germany, our most important trading partner, would be helpful. But I don't think one country can solve another's problems. You have to do it yourself."
Otmar Emminger, President-designate of the West German central bank, agrees: "(There will now be) no particular exhortations to produce a little more inflation in Germany to make life easier for other countries. That corresponds to our thinking and our experience."
Under a tightfisted regime installed by Prime Minister Raymond Barre, France's main goal is to cut an inflation rate that was 13 per cent eight months ago to about 8 per cent or less by the time of the elections next March, mostly by putting a squeeze on automatic wage inflation that France has accepted since the 1968 riots.
But this policy does little to cure what for France is a high level of unemployment - about 4.5 per cent - and has tended to feed protectionist sentiment throughout the country.
Barre, a former vice-chairman of the European Economic Commission, is a strong free trader. He warned publicly, as recently as a March 2 speech to the American Club in Paris, that the current economic crisis produces "a greater temptation to tamper with free trade in order to protect jobs." This, said Barre, must be resisted because "such responses have only made matters worse."
At the summit, however, French President Valery Giscard d'Estaing argued that a free market in world trade must be made subject to certain guidelines. Giscard and Barre believe that Japan's technique of concentrating its exports on a few highly visible (and profitable) products, such as cars and color television sets, must be challenged, so that domestic industries will not be ruined.
Barre himself notes somewhat tartly that the United States is attempting to protect its domestic television manufacturers through the device of "orderly marketing agreements." Within the French government, there is the view that the international community may need to apply the same kind of "anti-monopoly" practices to Japan that are applied internally to companies within domestic economies.
U.S. Special Trade Representative Robert Strauss, who negotiated the agreement under which Japan will cut back its color television sales here, defends the deal as the "second best" approach. Strauss' view, stated simply, is that the U.S. Congress would force something worse if the Carter administration had not yielded at least that much to domestic pressures.
In London, British Transportation Secretary Edmund Dell said in an interview that his country is being forced to take steps to reduce Japanese penetration of the British market, and would continue to do so "so long as the Japanese market is not open (to our goods) in the same way that European markets are open."
Looking at the world as a whole, Dell confesses there is a reversion to mercantilism - "the expression of the ordinary human feeling that one's nation must come first."
Complaints about new protectionism are not ledged only against Japan. The Italians have started a "Buy Italian" program. There is great criticism of Carter's proposal to make tax rebates on cars imported into the United States on a less favorable basis than for domestic cars. The American concern over nuclear proliferation is seen in some places, notably West Germany, as a coverup for commercial protection.
If the weak status of the British, French and Italian economies has brought the world somewhat closer to a "beggar-neighbor" policy, the fear of inflation appears to have ended chances of significant changes in the economic prospects of the key countries visited.
The French economy is limping along at a real growth rate of about 3 per cent, with unemployment over a million and a trade deficit of about $4.8 billion in 1976.
The Barre austerity program has already reversed the outflow of a French monetary reserves, permitted a drop in interest rates from about 12 per cent to 9.2 per cent, and cut the annual rate of wage increase from 15 per cent in 1976 to a projected figure of about 9 per cent for this year. Most significant, Barre feels, a drastic trade deficit has been sharply reduced.
The goal of one "Barre Plan II" is to achieve a gross national product growth of 3.5 per cent in real terms in 1977, a reduction to an inflation of 6.5 per cent in 1978, which would allow a 4.5 per cent growth rate and a slow, but perceptible reduction in unemployment.
The West Germans have not had to put the economy through a wringer because, they say, they were smart enough to begin their anti-inflation program much earlier, immediately after the oil price shock in 1973.
In Britain, there is a mild emphoria accompanying the first flush of North Sea oil, but candid officials admit that the oil revenues can be dangerous if the government allows the real problems of the British economy to be forgotten in the excitement over the potential of a balance payments surplus.
"Oil is a finite resource," says a British Treasury civil servant, fearing that the revenues will be poured into consumption, and not steered into productive investment, urgently needed to make British industry more efficient.