The United States was the world's economic locomotive, went the popular wisdom. Its sturdy industrial engine would clatter and grind and tow the aspirations of other countries forward with it.
Foreign countries relied on the well-heeled American public to buy their products--in many cases, even more than they counted on their own consumers. Similarly, many U.S. manufacturers--content with the rich market in their own backyard--did not try very hard to sell abroad. But America paid a price: a growing loss of control over its economic destiny in the form of a foreign debt, which could exceed $500 billion by 1990.
This huge imbalance, which has threatened chaos in global financial markets, is now forcing a sweeping change in the role of the United States and other nations in the world economy. America is becoming more of a caboose--dependent on the economic vitality of others--and less of a locomotive. Instead of spending so much on consumer goods, analysts counsel, America's wealth must be directed more toward manufacturing and investment.
And that creates new pressures for other nations to take on more of the responsibilities--and risks--of economic growth. "We're facing an economic adjustment that I think exceeds anything we've experienced in 50 years," Norman Robertson, chief economist at Mellon Bank in Pittsburgh, declared in an interview. "The economic roles in the world have to be reversed. When you think about it, it's an absolutely enormous task."
The changes are expected to come at uneven pace, and they heighten the near-term risks of recession throughout the world. But, already, economists point to early signs that an extraordinary transition has begun.
In a little-noticed shift, Japan has begun to rely more on its own consumers and less on foreign consumers for its economic growth, following years of astonishing export gains. The amount of goods Japan sells abroad actually has dropped for the last two years, its government statistics show. Imports are rising.
At the same time, the United States has conducted its own about-face: American consumers, whose record-breaking levels of buying propelled the world economy forward earlier in the decade, are slowing down. In their place, manufacturing has become the key driver of U.S. growth. This is because the lower-valued dollar has given American companies big advantages in pricing overseas; it also has hurt foreign firms' ability to keep a lid on the prices they charge in this country. The Labor Department reported in January, for example, that import prices shot up 9.6% last year--an even higher 14.8% if oil is included.
But there is more involved here than a mere change in economic statistics: The growing importance of U.S. manufacturing exports means that prosperity in this country increasingly will rely on economic vitality--and policies--in other countries. If they do not buy enough goods made in America, this country will suffer.
Overseas, the changes have a different sort of meaning: As American consumers continue to hold back, other countries no longer can view the United States as a bottomless receptacle for their products.
The Reagan Administration's decision to take away special trade privileges from South Korea, Singapore, Taiwan and Hong Kong is a clear signal from this country to those it has pulled along: "They have to provide little choo-choos of their own," said Robert Z. Aliber, an economics professor at the University of Chicago. He added, "There never again will be a situation like the early 1980s, when we provided the momentum for the growth of the rest of the world."
West Germany Fears Inflation
Yet if there is broad recognition that America's days as lone locomotive have ended, there is far less agreement on just what other countries should do to compensate.
While a lower dollar has made things more difficult for Japanese exporters, many countries have not been affected as much. Other Asian nations with vibrant economies continue to shower America with low-cost products. Indeed, these countries have resisted currency value changes that would make their price tags less attractive to American consumers. They see little choice but to continue, because their own low-paid workers represent only a fledgling consumer market.
And West Germany, the world's leading exporter, generally has resisted U.S. pleas to perk up its domestic economy, despite the fact that it suffers 9% unemployment. German officials harbor deep fears that the sorts of measures U.S. policy-makers prescribe for Europe--such as interest-rate cuts--could ignite inflation.
"We're becoming the caboose and they're (foreign countries) becoming the locomotive," observed Lester C. Thurow, dean of the management school at the Massachusetts Institute of Technology. "The problem is that their locomotive isn't moving very fast."