Like the roayl wedding in London, the Ottawa summit was notable primarily for its ritualistic value. The most highly advertised issue was the discontent of Europe's leaders with America's high interest rates. But, as everyone understood, those lamentations were intended for home-town consumption and would have no perceptible effect on the Reagan administration's economic policies.
What all the keening did emphasize, however, is that our relative decline in economic power has not diminished our economic importance for Europe. Rather than being incomparably the richest people in the world, as we once were, we Americans now have little, if any, advantage in per capita income as compared with the people of several Western European countries. Other comparisons also are reversed. In the early 1950s, economists regarded the dollar as good as gold and described the dollar gap as structural and permanent; now we are confronted by a weakened dollar and an equally troubling dollar surfeit. We are alarmingly behind in the rate of increase of productivity, and in many sectors American technology has been equaled, if not surpassed, by Japan and some European nations.
In spite of all this, we are, as complaints at Ottawa showed, incomparably the largest and most powerful economic power, and the course of action we follow severely constrains the policies available to other governments. Massive American balance of payments deficits contribute to inflationary forces in Europe, while our efforts to restore the value of the dollar and halt inflation evoke cries of anguish from European financial centers. If the dollar is too high, Europeans complain that they must pay too much for the oil OPEC quotes in dollars; if the dollar is too low, Europeans fear that it may inspire OPEC to raise prices. If interest rates are high, Europe is troubled by capital flows to the United States; if interest rates are low, increased American balance of payments deficits can result in excess liquidity.
So long as the world economy consists of a congeries of economies defined by national boundaries and directed toward individual national objectives, we shall continue to trip over one another's feet. Though we have made substantial progress in liberalizing trade and investment, most of our efforts toward the harmonization of other economic policies have had only marginal success.
If the relative decline of our wealth and income in relation to European nations has not materially reduced the impact of our economic policies on other nations, neither has it brought about any substantial redistribution of political or military responsibility outside the European theater. That remains a latent but real source of divisiveness. Europeans continue to expect the United States to stand guard against Soviet aggression whereever it may occur -- and many Europeans seem quite cross when America fails to do so. But because Europe is far less than the sum of its parts, they remain primarily voyeurs. Earlier hopes that Europe would evolve a political structure enabling its peoples to focus their politics and mobilize their resources toward a common purpose have not been realized.
So long as the United States maintained its post-war resilience, most Americans did not mind going it alone. But, after years of self-destructive embroilment in Southeast Asia, followed by Watergate, more and more are beginning to resent what they regard as an unfair burden. Meanwhile, inexperienced governments in Washington have found it troublesome to organize with Europeans a common response to crises; thus, they have tended to act first, consult later and be surprised when the troops do not follow.
All this has contributed to fading confidence on the part of Europeans, intensified by growing doubts as to America's will and the soundness of our judgement. The further we drift apart, the greater the prospects for a creeping neutralism that can insidiously erode our Western defense. Partly to counter their own sense of guilt, Europeans express doubt that we as a people are sufficiently engaged in the total defense effort. Some see us treating our armed forces primarily as a device to ameliorate unemployment, and they know well the statistics of illiteracy and meager education in our services. The fiasco of our helicopters in the Iranian desert gave substance to their suspicious of incompetence. Thus, rather than being overwhelmingly impressed by our increased military expenditures, they fear we are concentrating too much on the wrong deficiency -- buying elegant hardware while ignoring the lack of competent manpower. Nothing could do more to restore confidence in our alliance partners than for our nation to adopt some system of national service.
For many of the European leaders at the summit, the most dangerous potential source of discord between America and Europe concerns the Middle East. Never forgetting that they depend far more on Persian Gulf oil than do we, Europeans are disturbed that America, having preempted Middle East diplomacy, seems disabled by domestic constraints from effectively promoting peace or restraining Israeli adventurism. Any curtailment in the flow of oil that might be related to an apparent failure or bias of American diplomacy could have shattering consequences for European-American solidarity. Should persisting turbulence ever precipitate events that might make Soviet influence dominant in the Gulf, individual nations of Europe would be tempted, one by one, to seek accommodation with Moscow.