THE RICH COUNTRIES of the world agreed, in the midst of the blizzard, to increase by more than half the resources of the International Monetary Fund. It was an essential step in the strategy to stabilize the world's economy. Greater lending authority for the IMF means greater strength in the financial lines that keep markets open to foreign trade. For the United States, the world's biggest exporter by a substantial margin, the IMF agreement is, by the way, itself a productive jobs program.
What comes next? Ideally, the rich countries ought to be at work on cooperative action to get economies expanding again and generating still more jobs. The IMF agreement is essentially to prevent financial crises from interfering with recovery from a deep recession. But where is the recovery going to come from?
The Europeans and Japanese are waiting for American leadership, but the White House seems to have turned the whole subject over to the Treasury Department. The Treasury's performance has improved over the past year. In dealing with the Mexican crisis since last August, it has made the right moves quickly and competently. But it does not seem to have any larger sense of direction to guide it beyond day-to-day technical fixes. 2 It is something of a mystery why the secretary of the Treasury, Donald T. Regan, has been so hesitant and grudging in the expansion of the IMF's lending authority. It's not as though the United States did not have a huge stake in the success of the operation. The Mexican rescue should have demonstrated to anyone's satisfaction the necessity of keeping the IMF strong, and well supplied with funds to lend in emergencies.
The IMF's interim committee, as it worked out the agreement, offered a few tactful suggestions on next steps. "Several major countries"--meaning France and Italy---will have to keep fighting inflation. But the others, it suggested, are in a position to begin pushing hard for real growth. In the international division of responsibilities, it falls to the United States to do whatever is necessary to get its deficit under control, fast, and pull down interest rates. The others--Germany, Britain and especially Japan--can afford to use the conventional accelerator of wider deficits. Unfortunately, in the absence of American leadership and example, both Japan and Germany seem to be moving in the opposite direction. The IMF can do a lot, but it can't protect governments from their own mistakes.