MONEY: Hard U.S. Line for the Summit

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"The industrial nations are moving from recession to recovery and on to expansion," says Gerald Parsky, Treasury Assistant Secretary for International Affairs. "We have got to prevent re-igniting inflation in the process. Recovery without inflation can only come if we increase our cooperative efforts." But Parsky warns, "Policy in one country cannot serve as policy in another country." Translation: In the U.S. view, the strong nations must not extend financial assistance to weaker ones that do not have the political will necessary to bring inflation under control.

The summit meeting, and these issues, were very much on the minds of the 200 or so public and private bankers from the U.S. and 21 other nations who convened last week in San Francisco for the annual meeting of the American Bankers Association's International Monetary Conference. No one seemed to expect much from the summit, but most thought it a good idea. Everyone seemed to have the same thing on his mind: Inflation is the long-run danger. "You can't escape the reality of an interdependent world through floating exchange rates," said Paul Volcker, president of the New York Federal Reserve Bank. Reasonable monetary stability is possible only with basic stability in domestic economic policies, he said, "and control of inflation is the sine qua non."

Inflationary Pressures. Just what are the prospects for containing inflation on a worldwide basis, whatever carrots and sticks may be used? Few of the bankers were optimistic. Franz Ulrich, chairman of the Deutsche Bank A.G. of Düsseldorf, pointed to a 16% rise in world commodity prices from last year's lows as a portent of things to come. Irving Friedman, Senior Vice President of Citibank, argued that modern inflation has been high and persistent because of fundamental changes in societies around the world, which have increased the demand for goods and services far beyond the ability of the world economy to supply. Governments, Friedman said, have tried to accommodate that demand and in the process have generated further inflation.

Alexandre Lanfalussy, economic adviser for the Bank for International Settlements, sounded only a slightly more optimistic note. "There is a growing awareness that inflation is unacceptable," and that a wide range of policies is needed to deal with it, Lanfalussy said. "The main problem will be a political one: Is there a sufficient social consensus in our democratic society to carry out these policies without major political upheaval?"

The Puerto Rico summit meeting will give no definitive answer to Lanfalussy's question, but it could provide a small push in the right direction.