DON'T GET LOST in the technicalities of the five governments' declaration about exchange rates. The specifics, and the lack of them, are not crucial at this point. The important thing -- and it is very important -- is the public declaration that something has gone seriously wrong and that the five strongest trading countries have a joint responsibility to do something about it.
For the Reagan administration, that represents quite a turnaround. For four years it disparaged the idea of any intervention in the foreign exchange market and, if the price of the dollar went unnaturally high, that was alleged to be no more than the world's homage to American prosperity. Mr. Reagan himself repeated that line only last week.
But the effects of two years of extremely high exchange rates are now forcing a political change. By making exports expensive and imports cheap, the rates are doing cumulative damage to the part of the American economy that produces goods -- the farms and the factories. Congress is beginning to respond to the cries for protection from imports, and Mr. Reagan is now moving, belatedly, to head it off.
The dollar's price abroad dropped 5 percent in a few hours yesterday following the announcement by the five -- Japan, Germany, France, Britain and the United States. But to keep it moving down, gradually and steadily, is going to take a lot more than announcements. It is also going to take more than export subsidies and countermeasures against unfair trade -- the kind of thing that Mr. Reagan was talking about yesterday.
There is only one way to put the dollar reliably on a trend down to a level consistent with its real purchasing power. That is to begin to bring the basic economic policies of the five countries into harmony with each other. Japan and Germany will have to icrease internal demand and make themselves less dependent on constantly increasing exports to the United States. The United States is going to have to find a way to curb the great boom in public and private borrowing and to get its consumption down into line with its production.
If the five countries continue on their present course, the danger of a great catastrophe to the world's prosperity will increase. It might plausibly begin with a sudden flight from the dollar, and a sudden drastic rise in the yen and the Deutschemark. Among other unpleasant things, that would mean a sharp increase in unemployment in Europe and many parts of the Third World. These events are preventable, but whether they will actually be prevented is very uncertain. It will be no easier for the Japanese and Europeans to change direction than for the Americans to cut down their borrowing. But they have now taken the necessary first step. They have acknowledged that the exchange rates have come to a dangerous place and that it is the job of the five governments, working together, to restore a durable balance.