The Economy: The Dollar: A Power Play Unfolds

  • Share
  • Read Later

(6 of 6)

As a result, people in many countries can easily buy Volvos, Nikons and Lowenbrau, invest in the stocks of Sony and Unilever, travel and change their money with ease. American corporations have set up plants abroad; Ford, Pepsi

Co., Du Pont, IBM, General Foods and thousands of other U.S. companies decorate foreign landscapes, creating jobs and contributing to the host country's prosperity.

Foreigners' Pique. Now all three of those major postwar developments—free trade, free exchange of currency, free investment—are threatened by a strong rise of economic nationalism. The present crisis endangers the free exchange of money and goods, and casts a shadow on the unimpeded flow of people and ideas.

Free trade is also threatened by the greatest surge of protectionism in the U.S. since the Smoot-Hawley tariff bill of 1930; last week, for example, the traditionally free-trading United Auto Workers Union announced that it was in the process of seriously reconsidering its position. Meanwhile, the growth of multinational corporations is threatened by foreigners' fears of "the American challenge" and their pique at President Nixon's unilateral actions last week.

Thus it becomes all the more important for nations to solve the current crisis quickly. The basic aim is not to figure out ingenious new ways to put more restrictions on the flow of goods and money but to reduce or remove altogether the obstacles to free trade that now exist.

Gnomes of Manhattan. There is an opportunity for sensible compromise, for example, by allowing the Japanese to sell more textiles or steel to the U.S., provided that they dismantle many of their trade barriers and permit American manufacturers to build plants and sell products in Japan. In the tough bargaining that lies ahead, there is equal opportunity for the U.S. to persuade the Europeans to eliminate some of their stiff trade restrictions by offering in return to remove some of its own. Among the candidates for repeal that are most unpopular with trading partners of the U.S. are the so-called "Ship America" act and the many similar expressions of the "Buy American" mentality.

Some sensible regulations will have to be devised to limit the completely free movement of capital across borders. As matters stand, the treasurers of multinational corporations—the gnomes of Manhattan—can and do send billions of dollars leaping across frontiers in a matter of hours.

In such transactions the receiver country becomes inundated with unwanted dollars, which aggravates its inflation and creates the kind of crises that broke out last May and this month. The time has come to conceive of international machinery for wisely regulating the money flow in order to prevent sudden, sharp disruptions.

In struggling toward some new mechanisms, however, the U.S. and its allies above all need to avoid sacrificing the freedoms that they have won over the past 25 years or so. The hard re-examination of the monetary and trade systems caused by the new Nixon plan will prove disastrous if it feeds the forces of isolationism. The crisis of the dollar is real and disturbing, but it also offers a fresh opportunity to promote international cooperation.

  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
  6. 6
  7. Next Page