LAST MAY the seven leading industrial nations agreed to work together for stronger economic growth and higher employment. Meeting in London, President Carter and his six counterparts took the pledge for faster expansion. But, as you can see, nothing has come of it. Growth has, on the whole, slowed down slightly. There's not much prospect of improvement soon.
Until recently, the conventional view was that the world went into a great recession in 1957 and, since then, has been slowly recovering. That description fits the situation in this country fairly well, making it easy for Americans to overlook the very different pattern abroad. In Japan and particularly in Europe, there has been a steady slowdown since 1976. For all the industrial countries taken together, unemployment is now slightly higher than it was at the bottom of the recession nearly three years ago. In Europe there was 4.7 million people out of work in 1975; today the number is up around 7 million.
In Western Europe, governments have fallen into the habit of sitting back and waiting for expoer to pull their economies up. After all, that's the way it has usually happened in the past. But the European countries are all each others' best customers, and when things are flat all over the continent, it's hard to see where the wave of export demand might start. This decidedly gray outlook is confirmed in the year - end forecasts by the Organization for Economic Cooperation and Development. The OECD, an international agency in Paris, provides statistics and advice to its members, the world's two dozen most prosperous countries.
The OECD is not always terribly popular among its members, since it has recently been both less cheery and more accurate in its predictions than some of those governments. It now says that, with no change in present public policies, annual growth rates will probably fall to about 3 per cent in the second half of next year, both here in the United States and for the industrial world as a whole. That implies a slow rise in unemployment late next year, with the traditionally low European rates running almost as high as those in this country.
Even that prospect may prove too optimistic.The United States is currently running a very large deficit in its international trade, mainly because of high consumption of foreign oil. Both Japan and Germany are running substantial surpluses. There is a risk, the OECD analysts point out, that these disparities between deficit here and surpluses there may not be substainable much longer, The right way to correct this imbalance, as the Carter administration keeps saying, is to increase American exports. But if that turns out to be impossible, the alternative is to reduce American imports - a possibility with the most ominous implications for the world's economic health.
Politicians in all of the industrial countries have been uneasy about the public reaction to the present unexpectedly high unemployment. But - so far - the reaction has been remarkably restrained. One of the reasons for it is, no doubt, the greatest structure of social benefits and protections that has been built over the past generation. But these social benefits were set up on an assumption fails, a good deal of painful adjustment is going to be necessary. One example here in the United States is the recent Social Security bill, with its sharp increases in payroll taxes over the coming years to meet pension commitments.
The past year has demonstrated that the world economy does not respond much to pronouncements by heads of governments convened at summit meetings. What might it respond to? That's not clear. But, as the OECD observes, the present slackening trend is not likely to turn around by itself.