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Economists: Summiteers Didn’t Do Much To Prevent Market Instability With AM-Reagan-Reversal

June 25, 1988

Economists: Summiteers Didn’t Do Much To Prevent Market Instability With AM-Reagan-Reversal Bjt

WASHINGTON (AP) _ Leaders at the Toronto summit congratulated themselves on forging an economy able to withstand last year’s stock market crash, but economists agree they did little that could prevent future instability.

″I think they announced in advance that they weren’t going to accomplish anything, and therefore they fulfilled all expectations,″ said Robert Kleimann, an expert on economic summits with the Center for Strategic and International Studies.

″It was a summit of little consequence in terms of the overall debt and budget problems that we face,″ said Jeff Bergner, a fellow with the Hudson Institute, a moderate-to-conservative think tank based in Indianapolis.

President Reagan and other leaders at the seven-nation summit painted a somewhat rosier picture.

″I know many people question the summit process,″ Reagan told the Business Table of Chief Executive Officers Wednesday night after his return from his 14th and last economic summit meeting. ″What do the summits do? Are they just so much sound and fury?″

″Well, not on your life,″ he answered himself. ″Today, all year round, the summit countries are working more closely together than ever before and the summits are a key reason why. One payoff is that last October, when the world markets began to shake, the international economy stayed steady. Working together, we guided the world ship through the storm.″

In their final communique, the leaders of the United States, Canada, Britain, West Germany, France, Italy and Japan said that since last year’s meeting in Venice ″our economies have kept up the momentum of growth″ and were still expanding.

British Prime Minister Margaret Thatcher said that ″the very clear message that goes out from Toronto is one of confidence coupled with a commitment to build on and reinforce our success.″

Even the chairman of Reagan’s own Council of Economic Advisers, Beryl Sprinkel, however, gave only a modest assessment of the summit gains in a post-summit interview.

Asked if the summiteers had made any concrete progress toward their objectives, Sprinkel said, ″If this were the only summit that were ever held, or ever had been held, I’d say, ‘Yes, a lot.’ But it builds incrementally on prior summits.″

″We are not at the end of the process,″ Sprinkel added. ″There is a lot more to be done.″

For instance, he said, marginal tax rate cuts being proposed by West Germany ″seemed very small to me.″

As for the United States, he said, ″We are happy that the budget deficit seems to be on a downward trend and the trade deficit is coming down. But you don’t want to look only at trends; you need to check levels, and they are still unsatisfactorily high.″

Robert Z. Lawrence, senior fellow in economic studies with the liberal Brookings Institution, said, ″No attention has really been focused on the financial markets and little on the potential sources of underlying instability, which basically are related to the U.S. budget deficit. And since they kind of all took it as given that the president wasn’t going to do anything on that one, they really couldn’t get an American commitment on that one, it wasn’t worth talking about.″

″It doesn’t mean to say they won’t be back about that question,″ he said, when they meet again in France with a new U.S. president in office in 1989.

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