Doldrums or depression? The meaning of the latest economic indicators may be unclear, but at best they are signaling a pause in the economic recovery of the major industrialized nations and a new wave of political malaise. The speeches read by financial officials at the October International Monetary Fund-World Bank meetings in Manila extolled the economic improvements expected in 1976. Regrettably, however, most of these set pieces had been written before the August holidays, and when the ministers returned home many were confronted with the stark reality of economic stagnation, persistent inflationary pressure and balance-of-payments deficits. The first question, therefore, is whether the journalists are correct in labeling the current economic scene as a pause in the recovery or whether, in fact, it is the onset of a premature cyclical downturn.
The economic indicators can be read as part of a temporary loss of steam, but they may also augur a more fundamental downward shift in the potential growth rate of the by-and-large wealthy countries which comprise the Organization for Economic Cooperation and Development (OECD). The postwar economic boom may have finally run its course, and relatively high welfare and consumer satisfaction in most European countries, together with the constraints of ecology and limited natural resources, may now dictate a lower GNP growth rate than has been achieved during the past three decades-perhaps even zero growth. In addition, however dimly the social process may be perceived, increased questioning of the altered role of economic man within the state has itself set in motion modes of economic and political behavior which do not always serve to promote stability and confidence.
The self-interest of governments, which rightly regard economic stagnation as a threat to their tenure, argues against recession scenarios. But whether existing governments can reverse the direction of policy toward stimulation in time is by no means clear. Moreover, even a more positive economic policy is likely to be offset to a large extent by the defensive behavior of consumers and business fearing
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