Glum Drums from Nairobi

The cars of the other dinner guests already lined the hilly drive when French Finance Minister Valery Giscard d'Estaing arrived at the Japanese ambassador's palatial home on the outskirts of Nairobi. Giscard's plane had been delayed, but he need not have hurried. The representatives of the world's five major financial powers dining there on tempura and steak would conclude no agreement on how to overhaul the international monetary system. Indeed, they would decide that the differences between France, the U.S., Britain, Germany and Japan were so great that there was no point in even trying to resolve them immediately. In effect, the much touted week-long meeting of the 125-country International Monetary Fund, which ended last week, was over before it officially began.

As recently as midsummer, Nairobi seemed likely to be remembered as the birthplace of a new financial system that would replace the crisis-shattered one tied to a U.S. dollar. But all the top powers were able to bring forth was a deadline of next July 31 for really, truly agreeing on reform. Otherwise, the IMF delegates had a week to listen to speeches; gape at lions, zebras and giraffes; wander around what may be the world's most beautiful conference center; and try to avoid rip-offs on the streets.*

Two factors have taken the urgency out of the drive to create a new monetary system. First, the world has stumbled into a de facto system of "floating" exchange rates in which the dollar price of the German mark, French franc, Japanese yen and British pound is set by supply and demand--and it has proved stable enough. Second, as a result of two formal dollar devaluations, a further downward float, and ravenous worldwide demand for the farm products that the U.S. grows, America is no longer spilling out dollars abroad at an alarming rate.

Free to Haggle. With the pressure relaxed, moneymen feel free to haggle --and haggle they are assuredly doing.

Everyone agrees that the rules of a new system should make countries that run persistent international deficits, like the U.S., and those that pile up huge surpluses, like Germany, bring their accounts into balance. But the U.S. wants far more compulsion in any new rules than the Europeans do. There is widespread agreement also that government banks should be able to exchange any foreign currency that they accumulate for other reserve assets. That means, among other things, that foreign central banks could sell dollars back to the U.S. in exchange for gold, Special Drawing Rights (S.D.R.s or "paper gold" issued by the IMF) or something or other.

But in this case, it is the U.S. that is resisting compulsion. American officials do not like the idea of being forced to buy back most of the more than $80 billion that foreign central banks now hold.

No one even argues much with the idea that S.D.R.s should be the main "reserve currency" of the new system--the asset that nations use, rather than gold or dollars, to pay debts to each other.

But poor countries insist that they should get a disproportionate share of S.D.R.s as a form of aid. To the extreme annoyance of U.S. Treasury Secretary George Shultz, Alden W. Clausen, head of the Bank of America, backed this position in a speech. Almost alone, the U.S.

officially contends that S.D.R.s should be issued to nations in proportion to their financial strength.

The world no doubt can bear with such deadlocks for a while, since floating rates have brought more stability than chaos. But businessmen, investors and tourists do need some rules that will determine how many marks, francs or yen can be exchanged for a dollar tomorrow. The moneymen would be well advised to stop trying to come up with an agreement in which every t is crossed and i dotted--as the U.S., in particular, demands--and attempt instead the approach favored by Canada: seeking to sign on limited points on which there is no basic conflict. For example, they could set up explicit rules for intervention by central banks to stabilize exchange markets. Probably, though, even that will not come unless the moneymen set themselves a genuine deadline.

They should agree to meet somewhere, probably next spring, lock the doors, and not go home until they have signed a document, however long it may take.

* One was suffered by U.S. Monetary Expert William Dale, who encountered two men who said that they were plainclothes policemen and told him that all his foreign currency had to be "registered." When Dale obligingly dug dollars out of his wallet, the men grabbed them and fled.

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