President Reagan has quitely ordered a full-scale review of American foreign economic policy, with special attention to deciding whether American interests are being well served by the activities of multilateral lending institutions in the Third World.
To understand the philosophical underpinning for the developing "U-Turn" in Reagan's international economic policy, one has only to turn to a revealing article in The American Spectator by Former Wall Street-Side Foreign Policy." Wanniski's view, in brief, is that the $3 billion Third World debt to the commercial banks will never be paid off.
Therefore, says Wanniski, the United States should quit pouring money down a rathole. Instead, Reagan should encourage poor countries to pull themselves up by their own bootstraps "in an environment conducive to individual enterprise." He (and other right-wingers) see the incoming president of the World Bank, A. W. (Tom) Clausen of the Bank of America, as merely an extension of the "eastern elite" banking establishment that runs the multilateral institutions to its own advantage.
If this conspiracy theory (wrapped, of course, in an irrational fear of the Trilateral Commission) seems farfetched to you, remember that Wanniski and his sidekick Arthur Laffer -- Although they hold no jobs in the administration -- have provided a good deal of intellectual seed corn for Reagan's domestic supply-side economics.
Already, three significant things have happened on the foreign economic front:
Budget moneys for the poorest nations of Asia and Africa have been cut 33 percent, jeopardizing international cost-sharing agreements the United States had already undertaken with Western Europe and Japan.
The Reagan administration had notified the World Bank that, "as of now," the United States will not participate in its plans for an energy affiliate to develop oil and other energy in the poor countries -- an idea the United States helped formulate at the Venice economic summit last year.
As part of an underlying attitude downgrading Third World problems, the administration -- pursuing its hawkish attitude toward the Soviets -- will focus attention on East-West, rather than North-South, issues when it meets its six economic summit partners in Ottawa in July.
The decision to put the energy affiliate on the back burner is the leading edge of a hard new Reagan line toward the Third World. A high Treasury official had a revealing explanation for this reporter: "If there's oil in those less developed countries, you should leave it to the free market to get it out. Why fuss around with the [World] Bank? Why not rely on the multinational oil companies?"
This simplistic free-market approach ignores the fact that the big private oil companies are not anxious to make investments in the backward areas of the globe where there is political risk. But often, those companies are willing to participate under the protective umbrella of a multilateral institution. For a lesson in what goes on in the real world, the Treasury official might consult Gulf Oil, which didn't want to go into Pakistan without having its hand held by the World Bank. (Nor did Pakistan want Gulf there alone.).
Beyond that, the big multinational oil companies these days are not so much producing companies as they are marketing companies: There is little reason for a major oil company to go into say, Turkey, unless there is exportable oil. But there may be lots of oil in Turkey that the Turks could burn, if they can get the help they need in getting it out of the ground.
The battle on the LDC-energy issue may not be over. Some (but not all) State Department officials think the Treasury Department is misguided, to say nothing of being badly informed. Eventually, it is possible that a compromise may be reached that would allow the bank in one way or another to expand its lending for LDC energy production.
The broader review ordered by Reagan and being conducted in the "IG" -- the Inter-Governmental Group under Secretary of State Alexander Haig -- will affect more than the World Bank. It could determine the shape of American foreign economic relations for years to come.
Even if the results are not likely to be as extreme as the Wanniski crowd would like, the supply-side, free-market approach to the economics problems of the poor nations strikes a responsive chord among the radical-right now governing the country. This promises increasing tension, rather than accommodation, in U.s.-Third World relations and the back of the hand for the multilateral institutions, which the Reaganites think have become patsies for radical-left Third World politicians.