n050  1334  06 Dec 81
BC-FOREIGN-AFFAIRS
(COMMENTARY)
FOREIGN AFFAIRS: The Power of Money
By FLORA LEWIS
c. 1981 N.Y. Times News Service
    PARIS - President Reagan and President Francois Mitterrand of France
are on opposite sides of the political spectrum. They both won office
from an electorate that was fed up with familiar leaders to the point
of accepting the risk of experiment.
    One preached that the way to national well-being was to reduce the
weight of government and set the economy free, while the other
offered greater government controls and more spending on social
justice. Restive and disillusioned with leaders who didn't seem to
make things work, voters decided to give people who said they knew
how, a chance.
    Now both men are in trouble, Reagan more so because he has been in
charge half a year longer. Their theories aren't working either. It
is strange, though, that in both cases the scapegoat has become the
power of money.
    In the U.S., the administration blames Wall Street for not
responding as predicted to the government's indulgence of the rich.
The shock of David Stockman's confessions that supply-
 side theory is really no more than ''trickle-down'' economics isn't
so much the cynicism that kept him saying the opposite in public as
it is the belief that the ''trickle-down'' approach ought to work
better.
    In France, the blame is being put on the business community for
''sabotaging'' the government's recovery plan of spending and taxing.
There have been threats that if business doesn't swallow new
constraints more cheerfully and create new jobs by investing, the
government will ''radicalize.'' That implies more nationalizing, more
taxing and controls.
    This parallel blame, although for opposite reasons, seems strange
until you realize that both sets of theorists are pointing at the
power of money.
    Conservative Americans believe that money is benign and if only it
is set free, it will soar, like a shot from a sling, creating
production, jobs and prosperity for all. Socialist Frenchmen believe
that money is malign and only if the state takes charge can it be
made to create production, jobs and prosperity for all.
    Either way, there is an underlying faith in the Marxist myth of
money as the essential social power that can do anything, or block
anything, if it is handled properly. Either way, there is a belief
that modern economies require only the right formula to function
smoothly and if the formula doesn't work, it's the fault of the money
men.
    The facts are bringing disillusion for both sets of believers.
Neither the U.S., with its hopes pinned on a return to more orthodox
capitalism, nor France, with its hopes pinned on a mixed economy with
a decided tilt to more socialism, is making the promised headway.
    It should be mentioned that scarcely anyone else is doing famously
either. All the communist economies are in grave trouble. West
Germany is no longer the paragon. Only Japan remains relatively
strong, and the Japanese are understandably terrified about what will
happen to the export markets on which they depend for survival.
    So the conclusion should be that there isn't a magic way to manage
permanent growth and economic well-being. Neither pumping money out
in inflationary floods nor squeezing the supply so far below demand
that interest rates are at least double what used to be considered
usury solves the problem. Neither concentrating money in state hands
nor in private hands brings rapid recovery.
    Money is important, but after all it is only one part of the
economic equation. It affects the other two parts - labor and
management (whether private or state-controlled) - and it is affected
by them. There is no way to disentangle the trio and command health
with a single prescription.
    Politicians, making promises, lead people to imagine that some kind
of power can be grasped to drive the socioeconomic machinery, the way
an ignition key and an accelerator are enough to drive a car. They
neglect to mention that the car goes on only if all the parts are
connected and in good order, and if there is enough gas in the tank.
It would be better to talk about the difficult realities. Labor has
been too narrow-minded, too concerned with immediate gains and
rivalries to accept that only greater productivity can bring greater
rewards in the long haul.
    Management has been too short-sighted, too eager to focus on this
year's bottom line and compromise where necessary on dividing quick
spoils with labor instead of enlisting its interests in the future.
And money has been too irresponsible, too easily tempted by
non-productive shuffling of gains instead of developing the sources
of wealth.
    A government policy admitting the faults of all and pushing them
into more sober but effective cooperation, instead of mutely watching
the ''hogs feeding at the trough'' (Stockman's words), would have a
slow but surer chance of success. Alone, the power of someone else's
money won't fix things either for France or the U.S. It's a dangerous
myth.
    
nyt-12-06-81 1634est
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