World Leaders Meet to Plan Economy--But What Do They Control? : Summit: Gathering to plot the global economy, heads of the leading Western nations try to chart their brave new world--but who has the map?

In ancient times, the Egyptian priests would gather each year in the temple of Isis, where they collectively invoked the prescribed incantations that, the faithful were assured, would facilitate the springtime rising of the Nile. The Nile, of course, sometimes rose and sometimes didn’t, and contemporary scribes no doubt speculated on the qualities of priestly leadership that gave rise to successful or unhappy outcomes.

The leaders of the seven mightiest nations in the Western world are gathering today in Houston to decide, not in a temple, but on a “summit,” the future course of the world economy. No fewer than 4,000 journalists will attend the three-day occasion. Displays of bronco-busting will lighten the serious “working sessions” of the great men and woman--there must have also been entertainments in ancient Egypt. The entire assemblage will smile giddily as they punish their stomachs with Texas barbecue.

Probably few ordinary Egyptians wondered whether the priests really had the power they said they did. In our less polite age, doubts seem more widely spread.

The first, and possibly the most controversial, summit item will be whether the Western nations should save the Soviet Union or, as it is sometimes phrased, “bail out” Soviet leader Mikhail S. Gorbachev.

The West German--and putatively, pan-German--chancellor, Helmut Kohl, has already promised $3 billion in trade credits for the Soviets. President Francois Mitterrand of France hopes the whole Western alliance can cough up $15 billion. Pundits argue that if the United States doesn’t evidence comparable open-handedness, it will no longer be viewed as a leader.

There should be no confusion here with America’s postwar Marshall Plan for Europe. Hard as it is to believe, the Marshall Plan commitments were greater than the annual defense budget. The recipient countries qualified for the aid by proposing specific plans for jump-starting their economies that, on the whole, worked. It was possibly the last episode in history of practical statesmanship on the grand scale.

Whether that sink of corruption and confusion that is the Soviet economy will “survive” or not, or whether Gorbachev will maintain his grip on power will be determined by dark and tumultuous forces ripping the Soviet Union, which no Western analyst can pretend to understand. Surely, however, in a country that spends $300 billion on its military and sends $5 billion each year to Cuba, some shipments of Western TV sets and camcorders will hardly sway the outcome.

In contrast to the Marshall Plan era, the issues surrounding aid to the Soviets are ones of ritual and self-interest. In a post-Cold War world, can Europe chart a foreign policy independent of the United States? Should the United States care if it did? Which country’s merchants will get government financing for selling goods in a potentially huge, if murky, new market? How far can the West Europeans get away with using their budgets to finance exports to Eastern Europe, while the United States uses its budget to finance the military defense of Western Europe?

From the great issues of world diplomacy, the leaders will turn to more mundane matters, where, collectively, there is a rare opportunity for positive accomplishment. The current bout of trade negotiations, the “Uruguay” round, is likely to founder on the issue of agricultural protectionism--a kind of Berlin Wall of economic policy-making.

It is conceivable, if by no means certain, that if all seven leaders denounced such policies, their trade negotiators might actually succeed in knocking a few chinks out of the agricultural wall. But in all likelihood, the issue will be passed over in an embarrassed silence, or with a few windy phrases reminding us that the seven leaders are, after all, just politicians trying to do their jobs.

Considerable attention will be devoted to the economic reunification of Germany. For the last two years, government experts, economists and central bankers devoted much thought and effort to careful analysis of that problem, almost unanimously recommending measured caution and a long, slow process of gradual integration.

Kohl, no economist, just a pit bull of a politician, ignored them all and reunification happened last week. The seven leaders, with Kohl’s cooperation, will busy themselves constructing a record to prove that that was how they planned it all along.

Finally, the leaders will turn to that most treasured illusion of post-Keynesian policy-making. What sort of economic growth rates, inflation rates and currency values should the assembled governments prescribe for the industrialized countries?

President Bush will receive considerable praise for his reversal on taxes. Presumably, if the United States increases its cigarette or gasoline taxes by, perhaps, $25 billion, and reduces its budget deficit, world savings will rise and everyone will march forward to a brighter, richer future.

Baldly stating the proposition exposes its silliness--$25 billion, even $50 billion, is less than the counting error in a $15 trillion industrialized economy. In any case, the combined budget deficits of the industrialized countries have been reduced sharply during the past decade, from 4.2% of combined output in 1983, to only about 1.2% this year. Oddly, savings have dropped at the same time, not as rapidly, but substantially.

The economic discussions at the summit are like the foam mosquito larvae make on a pool. The real economic forces run deep and massively. Patterns of work and savings are driven mostly by demographic change, such as the rapidly aging population of Japan and the maturing U.S. work force. The globalization of major industries, the decentralization of manufacturing--Ford factories in Spain, Honda factories in Ohio--the revolution in information services will determine the course of economic growth.

Leaders, like parents, can do real damage if they work at it with both energy and malice. The recent lurching toward demagogic protectionism is, hopefully, a near-miss case in point. Summitry is a harmless enough illusion. It is probably better for world leaders to be friends and acquaintances than not. But the Nile will rise or not regardless.