The West Has Lost Its Dynamism

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James Callaghan, 70, Prime Minister of Britain from 1976 to 1979 and a Labor Member of Parliament since his defeat by Margaret Thatcher:

President Reagan will be given a genuinely cordial welcome by his six fellow heads of state and government when he greets them at the annual economic summit meeting in Versailles. They warm to his friendly manner and they like the great country he represents, but when the greetings are over they will not allow him as much latitude as they did at last year's meeting. He had then been in office for only six months: his new Administration needed time to play itself in. Some of the Western leaders deliberately muted their doubts, and the theme music throughout the summit was Getting to Know You. Not so this year. The President is now a full-fledged member of the club, and he can expect some firm, insistent, but always polite questioning and discussion.

The reason is that the world is in a worse state than it was twelve months ago. The West has lost its drive and dynamism. Our economies are locked in deep recession. Weak demand leads to a decline in capital investment. Our capital stock gets older and less efficient. The number of men and women out of work grows worse. Interest rates remain high.

So the questions President Reagan will be asked are: Can the West stop things from getting worse? How long before they begin to improve? When will American interest rates come down? Is not the time overdue for the U.S. to ensure harmony between its monetary and fiscal policies? Is the Administration ready to stabilize the value of the dollar? How can the West increase demand and output without setting off inflation again? The President may think it unfair to be faced with such an inquisition, but he will be assured that no one is trying merely to vex him.

The simple reality is that the performance of the American economy has, even today, a larger effect on the rest of the countries gathered at Versailles than any other single factor, with the possible exception of OPEC. If President Reagan convinces the other leaders that he understands that the American economy is not insulated from the rest of the Western world, that the size of the mortgage payments made by the man on a London omnibus is heavily influenced by New York and Washington, that he will take into account the implications of America's economic decisions on other countries and that he recognizes an obligation to coordinate policy as far as possible so that we do not harm one another, then by the modest standards of results expected from these annual summits, Versailles will be counted a success.

The President's visit provides another chance for Western Europe and the U.S. to bridge the differences in their analysis of Soviet policy and aims. This is a necessity if we are not to fall out every time a crisis blows up. Western Europe understands that the state of America's relations with the U.S.S.R. is central to the success or failure of U.S. foreign policy. The President should demonstrate that he understands that Western Europe's relations with the U.S.S.R. are different and more complex. Even though the hand of the Soviet Union lies heavy on Warsaw, Prague and Leipzig, the historic feeling that regards Europe as a whole lives on and will never be absent from the policy of West Germany as long as it is a divided country.