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World: Analysis From Washington -- Integration And Uncertainty

  • Paul Goble

Prague, 8 July 1998 (RFE/RL) -- Expanding economic ties among nations are increasing political uncertainty in many of them not only because problems in one place quickly become problems elsewhere but also because ever fewer countries feel they are in control of their own destines.

And that largely unexpected result of the dramatic increase in international trade and financial flows over the last decade has exacerbated an old debate over what both individual countries and the international system should do to overcome current difficulties.

One side, most often articulated by officials in international agencies such as the International Monetary Fund and in some large countries, holds that the cure for the current difficulties is to be found in even tighter economic integration and standardization of fiscal policies and economic approaches.

Such officials argue that the benefits of trade and integration are so great that individual countries must bring their policies into line with international standards regardless of the impact such changes would have on their political and social systems.

The other side, which consists primarily of the increasing number of people in many countries who believe that they are suffering from problems that are not of their own making, completely rejects these arguments.

Some of its proponents argue that the international system should take care of them because they are not at fault for the conditions that have overwhelmed them. But most simply demand that their governments do less to help others and instead adopt protectionist measures so that events abroad will not have such a great impact on them.

In recent years, the internationalist position has generally won out over the protectionist one. But a mounting series of problems, catalogued in the UN Economic Survey of Europe made public on Tuesday, suggests that the balance between the two may soon change.

That report says that continuing economic uncertainty in the Russian Federation poses a major threat to economic recovery in Eastern Europe and the post-Soviet states and that the recession in Japan could overwhelm economic growth in Europe and elsewhere.

And it says that Russia and Japan must pursue a series of specific policies in order to limit the negative impact that their economies are having on others, telling Moscow to improve tax collections to lessen the budget deficit in the former case and Tokyo to pursue an expansionist monetary policy.

While this may be good advice, there are three reasons to think that it won't be followed.

First of all, both of these countries see themselves as victims of economic forces larger than themselves.

Russia is suffering both from sometimes misplaced Western advice on how to make the transition to a market economy and from dramatically lower commodity prices. And Japan's economy has been hit by the economic collapse of other Asian states.

As a result, both are likely to expect significant help as the price for following these suggestions of the international system.

Second, they are unlikely to get all the help they clearly want and may genuinely need. Increasingly, people and governments in major donor countries are asking themselves whether further loans and other contributions to these countries will actually have a positive impact.

Some people in this group have even begun to argue that providing assistance simply allows the countries involved to continue to avoid facing up to their problems.

And third, people around the world are increasingly blaming others for their problems. Officials at the UN point to Russia and Japan as sources of difficulties for others, but people in those countries blame others as well.

And in both sets of countries, those who call for protectionist, even isolationist policies are gaining support. One example of many is in Germany, a traditional donor country, where Chancellor Helmut Kohl has taken an ever more nationalist line after pursuing an internationalist agenda for most of his career.

Consequently, at least some countries are likely to shift to more protectionist policies in the next few years. Given the current level of international economic integration, such shifts could also quickly cycle through the international system and thus create a different but equally serious kind of economic and political crisis.

And that possibility, one the world has lived through several times before in the twentieth century, suggests both that protectionism will not give the benefits its proponents claim and that the debate over how best to deal with an increasingly integrated but insecure world will continue.