69. Memorandum From the Special Representative for Economic Summits (Owen) to President Carter 1
- Policy Implications of Summit Follow-Up
I sent you recently a memo describing the International Summit Group’s follow-up meeting and report.2 I have since been discussing with some of my foreign colleagues what the implications of this report are for their countries’ policies. It suddenly occurred to me that I should also be worrying about what the implications are for US policy. They are twofold:
1. We should take early steps to assure strong US growth in 1978. The Summit Group’s discussion brought out that if US growth falters, the weak countries (UK, France, and Italy) will be tempted to give up painful stabilization programs, and the strong countries (Japan and Germany) will do less to achieve growth and to reduce their surpluses than they might have done otherwise. Timing is important: The sooner it becomes clear that US policies will be such as to produce a strong US 1978 growth, the more likely other countries are to be influenced by that prospect in shaping their own 1978 policies.[Page 232]
2. We should make greater efforts to improve the trade-off between inflation and unemployment. The Summit Group’s discussion kept coming back to the fact that most of the industrial countries have unacceptable levels of inflation, and that fears of inflation hinder the efforts of all these countries to reduce unemployment. If the US could show the way in reducing inflation while pursuing steady growth, it would have made an enormous contribution to the economic prospects and confidence of the industrial world. I have a simple-minded suggestion: Why not tell your chief economic advisors that you find 6% inflation unacceptable, and want a report from them as to the actions that would be needed to bring it substantially lower by 1980. The measures they propose may turn out to be politically infeasible, but that’s a decision only you can make. Whether we can get inflation below 6% will do as much as anything else to shape domestic and international economic prospects, and it is not clear that this is going to happen by itself.
- Source: Carter Library, Staff Office Files, Council of Economic Advisers, Charles L. Schultze Subject Files, Box 49, [London] Summit 1977 . Confidential. Sent for information. A stamped notation reads: “The President has seen.” Carter wrote at the top of the page: “cc Schultze. J.” A copy of the memorandum was sent to Schultze under cover of an October 31 note from Hutcheson. (Ibid.)↩
- See Document 65.↩