It's no surprise to anyone who watched him operate in his earlier Washington incarnation that George Shultz, as secretary of state, is emerging as the strong man of the Reagan Cabinet.
Lou Cannon, Reagan's Boswell, reports the comment of a top White House aide: "Shultz is like the E. F. Hutton man (in the television commercials): when he speaks, Reagan listens."
Equally, it seems only natural that, given the times, a secretary of state would take a leading role in shaping international economic policy, if he were professionally equipped, as Shultz is, to do so. And since it's pretty hard to disconnect international and domestic economics, it is understandable that Shultz is also -- at the president's invitation -- sitting in on discussions of tax and budget policies for fiscal 1984.
"The most important thing in our foreign policy" is to make sure we do not reignite inflation, he said at a Washington Post breakfast last week: "If we have a strong economy and a strong defense, then we'll have a strong foreign policy -- it just comes right down to that. . . . If you don't have those two things, you're in trouble."
This focus on economic issues causes a little bit of grumbling among the stuffier State Department careerists. But it is viewed as an 11th- hour reprieve by our major allies in Europe, who are deep into the worst postwar recession, and mired until now in a series of disputes with the United States over the Soviet gas pipeline and trade problems.
"I just wish our own foreign minister had as good a grasp of economic issues as your Mr. Shultz," sighed an admiring European diplomat this week.
Out of his skilled, labor-negotiating past, Shultz decided that the only realistic approach to the surfacing economic warfare with our allies was to defuse the pipeline fiasco. His strategy was to abandon the sanctions, and put in place a new set of principles on East-West trade, however generalized, that everybody could live with. That he was successful -- despite a new spat with the French on the form of the announcement -- can be measured by the sputtering fury of implacable hawks like columnist William Safire.
To a visitor, Shultz repeats what he has been saying in State Department staff meetings: he views things as an economist. When he is working on a problem, he immediately sees the economic implications.
Thus, Shultz was able to convince the president that the pipeline sanctions were not only having an adverse economic impact on Europe, but were costing American companies billions in current and prospective sales. To Safire, this represented "caving in." But Shultz and Reagan have cooler heads.
Shultz's guideline is that the American economy, although not so dominant as it was before the spectacular rise of Japan and the group of newly industrialized countries, is still big enough -- and the dollar is still strong enough -- to have a major impact on everybody else.
His own biases are on the free-market, noninterventionist side. Thus, when he deals with the problem of the "overvalued" dollar vis-Ma-vis the Japanese yen, his instinctive response is that it's hard to find evidence that the exchange markets are distorting the relationship. The fundamental reason for a strong dollar, Shultz told me, is that the United States looks to many to be the safest place to store their money.
When he and Treasury Secretary Donald T. Regan delivered that message -- sympathy but no action -- to a group of important American businessmen the other day, the businessmen were disappointed.
Something needs to be done, they argued: auto manufacturers, for example, have applied more efficiency to their operations, but the Japanese are killing them with cheaper prices based on a yen that has depreciated at least 25 percent against the dollar just since the beginning of this year.
But Shultz is no hip-shooter. Arguments that somebody ought to fix exchange rates, perhaps in "target zones," as suggested by former Assistant Treasury Secretary C. Fred Bergsten, do not appeal to him. And he doesn't feel it's necessary or wise to apply protectionist rules, as some in the defense establishment urge, to safeguard the U.S. high-technology companies from competition under the guise of formulating a new national industrial policy. American technology, he feels, will be able to do well on its own.
Shultz's guiding hand will be nonintervenionist; not dramatic, but cautious and thoughtful. At the meeting with The Post, he predicted a stronger U.S. upturn than forecast by most economists, provided the government doesn't "lose its nerve and go inflationary again." Only time will tell whether the Shultz "steady-as- you-go" philosophy works.