The Economic Big Three

March 24, 1993

"The fact is that the world can't grow if America is i recession. But it will be difficult for us to grow coming out of this recovery unless we can spark a renewed round of growth in Europe and Japan."

So said President Clinton in his Feb. 26 address on the international economy. As he prepares to meet Thursday with German Chancellor Helmut Kohl and next month with Japanese Prime Minister Kiichi Miyazawa, the outlook remains cloudy for the world's three dominant economies.

In recent days, Germany's mainstream political parties and the premiers of all the German states have agreed on a "solidarity plan" to raise taxes, restrain wages and cut traditional government spending to provide the funds to rebuild old East Germany. The Bundesbank has signified lukewarm approval with cut in interest rates to stimulate the economy.

On the other side of the globe, Japanese officials have confirmed their intention to cut business taxes and launch a huge government spending program to stimulate an imploding economy after years of "bubble" prosperity.

Mr. Clinton contended in his speech at American University that his administration had already done what foreign governments had demanded by seeking to reduce deficits and increase investments in education and technology. However, the American effort so far as been mainly rhetorical.

As for Japan and Germany, their responses to hard times are somewhat contradictory. The Miyazawa government is cutting taxes while the Kohl coalition is raising them. Japan is mapping a stimulus to course through its entire social fabric while Germany is mapping a huge transfer of wealth from its western to its eastern sectors.

And, as in the U.S., the success or failure of these policies has yet to be demonstrated. As the economic kingpin of Europe, Germany's record will have to be measured against its ability to revive the entire continent. Its high interest rates have heretofore stifled growth among its neighbors, thereby hurting American exports. As for Japan, past stimulus packages have been notable for their failure to lower horrendous trade surpluses with the United States. Can the package Mr. Miyazawa is bringing to Washington break that pattern?

Hanging over all three economic giants is the dangerous plight of Russia. As they go about fixing their own economies, they have the added burden of sending aid to Moscow, pushing through trade reforms to avert protectionist confrontations and dealing with an increasingly restive Third World. This is a task beyond the scope of any one nation, or even any three nations. But if Americans, Germans and Japanese do not lead, no one will.

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