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World: Denver Summit May Show Desire For Concensus Fading

Washington, 19 June 1997 (RFE/RL) - With the recent change of political leaders in France and Great Britain, and continuing disagreement within the European Union (EU) and in Japan on what needs to be done to get economies growing again, the summit of major world leaders in Denver starting tomorrow may find their long-running consensus has ended.

The summits, started in 1975 with the G-6 -- France, the U.S., Britain, Germany, Japan and Italy, and expanded by Canada to the G-7 in 1976, and now expanded by Russia at this year's Summit of the Eight -- have had a remarkable consistency of view on the world economy.

While there have frequently been major differences among the leaders during the 21 years since 1975, there has been a measure of political and economic consensus in support of more open trade, support for technological change, corporate restructuring, increased government deregulation, reduced budget deficits, drastically cutting inflation, and reduced welfare spending by the state.

Robert Hormats, who was the "sherpa," or official representative of the U.S. President for the first six years in setting up the summits, calls it a "sort of general market-oriented consensus."

Hormats, now vice chairman of the New York-based investment firm Goldman-Sachs International, says that long-running consensus may be missing from this summit.

"It now appears that while that consensus may have existed and may have been strong among leaders, it was not nearly as strong among the populations of the industrialized countries, among their voters," says Hormats.

Speaking at a pre-summit briefing sponsored by the private U.S. Council on Foreign Relations in Washington recently, Hormats said election results in France and Great Britain were "very concrete manifestations of voter discontent with this consensus."

This �resistance by voters" has been seen in Germany as well and showed up in the recent Canadian elections. It is a "growing resistance to further cuts in the role of government, to further cuts in the welfare state," and to fiscal austerity, says Hormats.

The consensus toward unleashing market forces was "very useful" for the leaders at the summits, he says, but is now encountering more and more resistance from voters.

At the summit in Denver, Hormats says, there's apt to be a "philosophical difference" between the United States, which has a booming economy and is pushing ahead full-force on market oriented reforms, and the Europeans, who are saying the idea of reforms are fine, but with high rates of unemployment and barely growing economies, no one should talk about further cutting safety nets.

France, for example, is now pushing for increases in the minimum wage and reducing working hours to try to expand the number of jobs available. The EU summit in Amsterdam this week added a new jobs chapter which includes small-scale job creation with public monies, a step exactly opposite from the reform agenda pushed by the U.S.

Hormats says that's understandable because the U.S. has already undertaken "a number of very substantial structural reforms, which have led to a lot of job creation." Over the past seven years, the U.S. has seen cumulative private sector employment growth of over 30 million jobs, while Europe recorded barely five million in the same period.

But, in creating those new jobs and carrying out the reforms, the U.S. saw a lot of people pushed out of jobs and the whole employment dynamic changed.

Europe, which has a greater reliance on the role of the state, has, by and large, says Hormats, "a lower tolerance for risk, a greater tradition of providing security for jobs and a certain high degree social safety net" not known in the U.S. or Canada. Japan falls in between, he says.

What may be most interesting, however, will be Russian President Boris Yeltsin's reaction to this European-American debate. While Russia has been pushed by the international financial institutions to more market based reforms, Yeltsin is hearing the same arguments for creating state-funded jobs and expanding government social security measures at home. For the first time, Yeltsin will be a full participant, even as the old consensus fades.