US out of step with partners in wealth

G7 summit: Russia joins world's top industrialised nations in Denver as they share economic troubles and parade successes

Leaders of what used to be the Group of Seven industrialised countries - but are now, with the addition of Russia, judiciously called "The Eight" - gathered for their annual summit meeting yesterday evening in the city of Denver at the foot of the Rocky Mountains. Along with their teams of ministers, dozens of advisers, hundreds of lobbyists and even more journalists, Bill Clinton, Tony Blair, Jacques Chirac and the others were gearing up for two days of discussions directed at airing, if not solving, major problems of the industrialised world.

The drawback is that this year the problems are less easily defined and the leaders more politically divided than for several years past. It is not only, as many analysts affirm, that today's issues blur the borderlines between politics and economics as never before and that economic "globalisation" is starting to melt the demarcation between "domestic" and "foreign".

It is that while the United States economy is booming and its leaders are determined, according to administration officials, to use the summit to pro- ject "with pride" the success of what they call the American economic model, election results in Britain and France, as well as the public mood in Germany, show that this model may not be easily replicated elsewhere.

The US may have historically low unemployment, low interest rates, a declining budget deficit, steady economic growth and a rising stock market, but the labour "flexibility" and relatively low pay that have bought these benefits remain politically unacceptable in many other countries. So even though the Americans go to Denver preening themselves that they have turned the tables on those who once lectured them about the evils of budget deficits and a too-cheap dollar, any return lectures are likely to receive a stonier reception than US representatives appear to expect.

The addition of Russia as an almost full participant this year is a further complication. This was a diplomatic gesture strongly supported by Washington as a psychological boost for Mos- cow as it negotiated the inevit-able decision to enlarge Nato. Politely accepted by the old G7, Russia's participation has none the less been accompanied by much sniping about Russia's qualifications for membership of the top countries' club. If Russia, why not India, China, Brazil, South Africa?

Partly because of Russia's participation, and partly because of the issues on the agenda, this year's summit is seen as more political than economic. The set pieces of G7 meetings - the quest for exchange rate stability and what to do about Third World debt and development - will be far less in evidence than before. Concerns have shifted.

One discussion will focus on demography and the public spending implications of ageing populations (a problem faced by several, but not all G7 countries). Another will consider the future of Hong Kong - with a strong statement anticipated about the need for China to respect Hong Kong's freedoms.

There may be discussion of the single European currency - but not to the point, as US officials stressed, where third countries would appear to be interfering. And - in a session where Bill Clinton and Tony Blair are expected to embody the new "special relationship" sealed in London - the "Summit of the Eight" will promote the idea of employability, the neat compromise that new-style left-of-centre governments have settled on as a chance to reduce welfare spending, cut unemployment and create jobs without appearing heartless.

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