Steering in Crowded Waters

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The leaders of the world's great industrial powers do not always share common views on economic policy issues these days. But on one subject they are certainly agreed: there has rarely been a time when the art of governance was more demanding and the choices of policy more circumscribed.

In the field of international economic policy, the going seems especially hard. Accordingly, it helps to go back to fundamentals: to ask what the nature of the underlying problem may be; to redefine the main goals; and to lay out broadly the directions toward these goals.

II

Practically all countries, whether industrialized or developing, capitalist or socialist, have been caught up in a common set of forces that are shaping and complicating their international economic policies.

First and foremost is the fact that the rate of global economic growth has been slowing down. Some see that slowdown as a long-term process which began in the 1960s and continued into the 1970s. Others attribute the slowdown to the vast changes in the world's energy situation that surfaced in the early 1970s, when prices rose by 400 percent and a portion of the world's savings was abruptly diverted to the world's oil-exporting countries.

Whatever the causes, the result has been that most governments have had a much harder time finding the resources to provide some of the things that their people have been demanding. Everywhere, governments are being asked to deliver a lengthening list of so-called public goods, including health services, educational opportunities, clean air, and police protection. And everywhere, they are being asked to reduce the risks to which their people are exposed, including the risks of disaster, unemployment and old age...