Expand the global economy, end international stagnation: that's fast becoming the accepted economic policy-making goal for 1983. Whether the powers-that-be can turn it into a reality remains to be seen. But there's a switch in the making from the anti- inflation austerity drive that has dominated the Free World policy response to the second oil shock of 1979.
Perhaps Secretary of State George Shultz was the first to articulate the need for the change. It is critical, he told me in an interview Nov. 5, to get a global expansion under way. Some debtor countries must, of course, tighten their belts, but if everybody is expected to follow an austerity regime, he said, then the global economy could never hope to expand.
And in London last week, winding up his European trip--and cognizant of the deep gloom taking hold in most countries he visited--Shultz told a press conference: "We ought to have as our objective for 1983 economic expansion. We want an economic expansion in 1983, and setting that objective clearly in our sights is important."
One clear route is to assure a further steady decline in interest rates. Given the severely depressed state of the world's major economies, this can occur without fears of reigniting an inflationary spiral.
Shultz, as secretary of state, is drawing on his own experience as an economist to become the dominant force within the Reagan administration on economic affairs, and a key figure, highly respected, on the international economic scene. He knows that in today's environment, it is impossible to divide economic issues from the management of foreign affairs.
Today's overriding problem facing the Western heads of state and foreign, defense and finance ministers is to get an economic revival under way, Shultz suggested. They "have their fingers crossed and hope it turns out that way," he said.
For Shultz to be talking about expansion rather than inflation control as the No. 1 priority presages a dramatic change in Reagan administration policy as it heads into its third year.
At the Versailles summit, as former Undersecretary of State Myer Rashish has pointed out, the Europeans unsuccessfully pushed the United States for a change in its economic policy mix to hasten a decline in interest rates. Such a step might have stimulated economic activity and forestalled the protectionist surge of recent months.
But now, the United States can claim to have won a victory over inflation (the cost being high unemployment, of course). Rashish suggests programming the next summit at Williamsburg, Va., to "temper the commitment to budget austerity with a dose of temporary expansionism."
Exactly in tune with this analysis, 26 leading economists from 14 countries, gathered by C. Fred Bergsten's Institute for International Economics, recently argued that the world economic crisis is so severe that "there is a clear need for an internationally coordinated shift toward expansion in the near- term stance of fiscal and monetary policy."
Later on--say in fiscal 1985--some steps should be taken to reduce the swollen U.S. deficit, the Bergsten group says. This could be a combinatiuon of higher taxes and reduced defense spending. But for now, the focus should be to stimulate economic activity.
Despite many Reagan administration promises that recovery was in sight, or at least just around the corner, the recession in the United States continues unabated, the latest estimate being a GNP decline of 2.2 percent for the fourth quarter (against Treasury Secretary Regan's not-so-long-ago forecast of 4 percent growth).
And last week, the Paris-based Organization for Economic Cooperation and Development put out an exceedingly grim review of economic prospects for the industrialized nations. It said that the situation "has weakened to an unexpected degree since mid- year."
Bergsten puts it succinctly: "When they were pushing austerity programs, at least they got inflation down as a trade-off. But these policies aren't going to reduce inflation any further, only worsen the unemployment totals."
The long and the short of it is that global recovery isn't going to happen all by itself: It needs the sort of push for which Shultz is calling.