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These woes climax an unusual period in which the world's major economies have been moving in concert on a wild roller-coaster course. First, in 1972, all the leading economies swung into a boom at the same time—a boom that, combined with poor harvests and price gouging later by the Organization of Petroleum Exporting Countries, aggravated global inflation. By early 1974, price increases in the OECD nations reached an unsustainable compound annual rate of 16.8%. Then, as one government after another moved to curb inflation by dampening demand, all the key economies rapidly tumbled into recession.
The swift spread, first of inflation, then of recession, across national borders has dramatized as never before the growing economic interdependence of all industrial nations. But that interdependence has not been matched by any close coordination of economic policy. The major countries continue to follow individual courses—and sometimes to shift policy abruptly. Canada last month imposed selective wage-price controls that Prime Minister Pierre Trudeau had vehemently denounced during the 1974 election campaign. Harold Wilson last week announced a new British economic program under which, for the next five years, government aid to industries judged likely to grow most rapidly will take precedence over social and welfare spending. Taken at face value, that would reverse the priorities followed by every British government, Labor or Conservative, since World War II.
It is for the stated purpose of exploring whether greater coordination is possible that France's Giscard has arranged the Rambouillet meeting. His initiative is being subjected to wildly differing appraisals. U.S. Investment Banker Henry Fowler, who was Secretary of the Treasury under Lyndon Johnson, says that the meeting will test "the capability of free democratic governments to demonstrate that they are workable in an interdependent world." On the other hand, Europe abounds in cynics who view the summit as an empty show staged by leaders anxious to demonstrate that they are doing something and thus escape blame for failing to manage their own economies successfully.
If nothing else the Rambouillet meeting is an important symbol of world leaders' willingness at least to consult each other on policy and avoid conflicts that might weaken the global economy. The gathering might also produce a useful reaffirmation by the government heads that they will resist growing pressure in every country for import quotas and other self-defeating protectionist measures.
But on two more substantive issues, no agreement is likely. France and some other countries will ask for a revision of the present exchange-rate system, under which supply and demand in money markets determines the value of dollars, marks, francs, yen and other currencies. They want a "stable but adjustable" setup that would pledge central banks to keep fluctuations between the dollar and other key currencies within a limited range, perhaps 7% to 10%.