THE ECONOMY
Gondolas for seven and a giant photo-call
JOCK BRUCE-GARDYNE
rs Margaret Thatcher is not one of nature's summiteers. Harold Macmillan relished the theatricality of these grand occasions, and knew — none better — how to wring the last drop of domestic kudos from each one of them. I well recall his misery in the Paris Embassy back in 1960 when the ill-timed flight and fall of Mr Gary Powers from his spotter-plane gave Khrushchev a fit of the vapours and wrecked that year's display of East-West mountaineering. Harold Wilson also loved every opportunity to rub shoulders with his betters. Indeed he was so eager that he sometimes had to be told by his projected conferees in no uncertain terms to stay at home. Ted Heath genuinely believed (he still does) that there was nothing like a gathering of the international great and good to make the world go round. Jim Callaghan enjoyed the camaraderie with Valery' and 'Helmut', and fortunately did not seem to notice when they felt it necessary to give him a child's guide to matters in discussion. Mrs T. was different. Sublimely indifferent to protocol and Pomp, she found the rituals of speeches read to impress the folks back home, leading up to nothing more substantial than the ritual endorsement of a wordy Summit statement' which had been teased out word for word by the civil servant `sherpas' weeks before the great men and woman — donned their crampons, a preposterous waste of time. She had better things to do at home. And it showed.
But seniority lends enchantment. In Venice this weekend our Prime Minister is the elder statesperson sans pareil. Most of them were barely out of short pants when she stepped into Downing Street. More- over if ever she had occasion to say 'I told you so' (and it has to be conceded that she has been known to) then this is it. The conventional wisdom of the 1987 summit is that the world would be a better place if only those countries in surplus on their merchandise transactions would make their citizenry go on a collective spending spree, while those which have failed to balance their domestic books made haste to do so. Mrs T. appears as the lone sumtniteer whose books are admirably balanced, whose trade account (if not the account in merchandise) is currently in surplus, and whose citizenry are spending for tomorrow.
It has sadly to be conceded that in these dark degenerate days the Brits in Venice — like the French and the Canadians and the host Italians — have but walk-on roles. The only ones that matter are the Germans and the Japanese — and the Americans. Were the Big Three to put their names this weekend to a specific parity relationship between their currencies, backed up by datelined commitments to specific reduc- tions in the US federal budget deficit linked in turn to equally specific relaxa- tions in German and Japanese fiscal poli- cies, Mrs T. would in practice have little choice but to grit her teeth and sign on sterling with the system. But she would not be amused.
Fortunately it seems most unlikely that she will be called upon to do any such thing. The world has moved on a bit since the spring, when 'currency reference zones' and 'structured reciprocal adjust- ment' were all the rage. The dollar has for a week or two — 'bottomed out'. The Japanese have done a splendid preemptive strike on Venice with their £26 billion tax-cut / fiscal relaxation package. It has its futuristic elements — £2 billion for `emergency relief', for example. What do you do if the emergencies should happen to play truant? Assemble a bunch of undesir- ables and shove them off the slopes of Fuji yama? No matter. Mr Clayton Yuet- ter, the US trade commissioner, declares himself impressed. And that's what counts. The markets have even reacted to the forthcoming departure of that greatest of Central Bankers, Paul Volcker, with little more than a gulp. The heat has gone out of Venice.
Or let's hope it has. US Agriculture Secretary Richard Lyng has been vastly less accommodating about the Brussels Commission's plans to tax us all for eating margarine. Indeed he has threatened im- peachment of the Community in front of the Gatt should this go ahead. And the rationalisation of food support program- mes is supposed to be high on the agenda of the Venice summit. But Foreign Secret- ary Sir Geoffrey Howe would not stand a chance of avoiding banishment to the Woolsack if he gave an inch of ground toward the marge tax. So it would seem rather silly to allow the 'Venice spirit' to be soured by that. The world would be a saner and a better place for all of us if Venice produced agreement that the Japanese would allow their citizens the benefit of world-price rice supplies and that the Americans and the Community would desist from funding the Russian armaments drive with subsidised grain and butter sales. But it won't.
So the signs are that it will be little more than one giant photo-call, from which our Prime Minister will return for the eve-of- poll rallies trailing clouds of reflected glory and international approbation. This will he viewed with infinite dismay by all those who believe that only statesmen now stand between the world and slump coupled with mass debt default. The last straw, for those of this persuasion, has been the decision by Citicorp to take a lead in writing down the value of its sovereign loans. If all the other leading international banks are now obliged to follow suit then they'll be immune thereafter to any pressures to put up new loans for the Third World.
Yes, but . . . for one thing there are several international banks which can't do a Citicorp even if they wanted to. BancAmerica and our own beloved Mid- land, for example. And by a happy stroke of chance these two are currently presided over by ex-Central Bankers: Mr Tom Clausen and Sir Kit McMahon. Central Banks look after their own. So undue eagerness to copy the Citicorp example is not going to be encouraged. Moreover whether or not there were to be a wholesale writing-down of sovereign debt the commercial banks are neither going to be persuadable to put up genuinely new money for the third world until memories of the 1970s have receded a good deal further, nor to be able to resist the bullying of their respective central banks to go on `rescheduling' existing loans.
So when one thinks of all the things the intrepid summiteers could get up to in Venice this weekend — barrack-room abuse (or worse) about protectionism, for example, or proclaiming 'fixed' exchange rates calculated to convince the Congress that there would be no escape from Japanese import penetration unless they locked it out — a gigantic photo-call has much to commend it.
Me, I'm off to Tokyo. To see what it all looks like from the target zone.
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