THE TENSION over the falling franc and the rising deutschemark is not merely a French embarrassment or solely a European concern. France's foreign minister, Claude Cheysson, was absolutely right in warning that a recovery from the recession is not in the power of any one government. It will take careful coordination among all the major industrial countries. The possibility of independent economic policy no longer exists. Neglect of that truth will only create more instability among currencies, leading to trade disruptions and then to the erosion of political relations. You can see the same process at work between the United States and Japan.
The currency row among the Europeans originated in the determination of France's Socialist government, when it took office two years ago, to reflate and create jobs. The policy certainly succeeded in raising consumer demand--but an unexpectedly large part of that demand was for imported goods. Imports shot up, and the value of the French franc started to drop.
The French government had to devalue twice at a high cost in prestige to the Socialists. Under great pressure last week to devalue a third time, the French bitterly protested that it was an increasingly strong German mark that was causing the trouble. Eventually the Germans reluctantly agreed to a compromise in which they raised the value of the mark while the franc was dropped a little farther. It was hardly an opportune time for the Germans to revalue. Their own unemployment is now 10.4 percent, and they are counting on exports to assist their own recovery. A higher mark, making their exports more expensive abroad, won't help.
Why did they agree? For the Germans, their close political relationship with France has been the foundation on which postwar Europe was built. They have repeatedly made economic sacrifices to protect it. In the long run, their economy has benefitted--and not only their economy--from the stability of Western Europe. The Germans have the good sense to know that much more is involved in monetary policy than money alone.
Do Americans realize it? Do the Japanese? They are now running national monetary policies inconsistent with each other, and with the Europeans, generating trade quarrels that threaten to incite wider political friction. It will get worse unless the trading nations, led by the United States, begin to work toward more careful harmony in monetary decisions. Doesn't that mean some sacrifice of national sovereignty and independence of action? Not really. As the French example demonstrated, that independence has become an illusion. The trading nations are already tightly tied together, to their own common benefit, by the realities of their prosperity.