The U.S. economy is recovering slowly from recession.

Few are ready to break out the champagne bottles at anticipated growth, but there are encouraging signs:

The job market is improving. The once moribund real estate markets are starting to show signs of life in several sectors of the country. Retail sales are picking up. And inventory levels are at all-time lows.

These factors are expected to help generate gross domestic product growth of roughly 3% a year over the next five years.

This is no call for a fanfare, however. It still feels like a recession.

Global Competitiveness

There are also some longer-term positive signs for the U.S. economy. For example unit labor costs here have become more competitive in global markets.

Total labor costs for U.S. companies are $14.50 an hour, for Spain $13.25, and for Germany, $22.50. These figures, plus the United States' sustained technology edge, mean that our international competitiveness has improved.

Recent U.S. experience with its balance of payments illustrates interesting aspects of a proposition that most would not question: global interactivity.

In a prosaic sense, the first things I want to know each morning are, What did the Nikkei index do overnight? Where's the Bourse? Where's London?

If one were so inclined, versions of these questions could be asked 24 hours a day in the time-continuous financial markets.

A growth spurt or slowdown in one country causes economic changes in other countries. The effects, however, are never equal and opposite. The system is too convoluted to predict what will happen as a result of one country's economic change, or where it will happen.

The strongest certainty is that all parts are, somehow, connected. As major economies open to one another, they become more exposed to one another's internal economic changes.

Japan and Germany

But now, several aspects of the global economic engine are out of sync. The engine is sputtering.

Consider Japan. The influential Nikkei stock average plummeted. Japan's economy is slowing. Banks are feeling the pinch under Basel capital requirements as asset values decline. Consequently, Japanese bank lending may be relatively constrained in the near term.

Moreover, through government efforts, Japanese consumers have shifted saving and spending patterns so that consumption is growing at the expense of saving. While Japan's trading partners view this shift as favorable in terms of trade balances, the downside is a further constraint on capital in a nation regarded as the world's banker.

And Germany, formerly a major capital supplier, is now heavily invested in reunification. Having seen its deficit and inflation rise, the German economy is grinding along under interest rates at the highest level since the 1930s. And Germany's slow growth spreads throughout the European Community.

The United States, the world's biggest debtor, faces crimped capital supplies from Japan and Germany and surging demand for capital from newly democratizing nations and high-growth markets such as Mexico.

The Deficit

Which leads to the big overhang on prospects for the American economy: the federal budget deficit, projected to reach $250 billion in 1992.

Service of this debt annually amounts to 75% of the annual fiscal deficit.

The savings and loan crisis is a major cause of the United States' weak fiscal position. On top of the $250 billion deficit is another $100 billion that constitutes funds needed to support the government's takeover and sale of insolvent financial institutions. This team - which amounts to 40% of the deficit - is considered beyond the fringe of budgetary planning.

Nevertheless, the health of the U.S. financial system is relatively good. While onlookers have seen a crisis, insiders in the U.S. banking industry have seen a shakeout.

Shakeouts in an industry are painful but necessary in times of overcapacity. There are more than 12,000 banks in the United States. By comparison, in Canada there are only 65 commercial banks. Japanese banks number fewer than 150.

In the European Community, about 8,300 banks serve the 320 million-strong market. This means that a bank in the community serves, on average, 40,000 retail customers. The comparable figure in the United States is 10,000.

I don't think we need to call in the management consultants to tell us which industry is operating with higher overhead.

And these comparisons do not include 3,000 savings and loans, 16,000 credit unions, or additional nonbank financial firms that compete for United States bank market share.

Nor do the numbers encompass the realities of the global marketplace. In California, for instance, foreign banks have garnered 25% of bank deposits.

On the other hand, several of the new superregional banks show great promise as viable competitors in their expanded markets. These banks have profit potential that eclipses what once were the money-center powerhouses of the U.S. banking industry.

Further consolidation in the industry can be expected, with the United States eventually fielding larger, stronger competitors in global banking markets.

But even in the travails of the U.S. banking industry, we can discern the promise of consumer market growth, shaped by changing demographics, and the promise of financial market development, shaped by increasing internationalism.

The U.S. economy is blessed with the most developed consumer market in the world. The American consumers' penchants for value and a wide array of products and services have done much to keep the U.S. market one of the most open in the world, despite fearsome protectionist pressures in Congress.

The economic influence of the U.S. consumer market illustrates the momentum that can be generated when market forces are not artificially constrained by geographic borders. This momentum is a key reason for the European Community.

However, the U.S. market operates with an advantage that remains a goal to the community - a smooth-functioning system for cross-border payments at the consumer level.

In the United States, the issue is moot with respect to state lines. So should it be in Europe, to reflect the efficient flow of goods and services in a truly common market. After all, payment is one-half of commerce. If the flow of goods and services is yin, payment is yang.

The technology to achieve cross-border payment efficiency at the consumer level is readily available. Visa has it, and we believe it could be established in the European Community through the cooperation of the European banking community -- and without the need for a massive, centralized, public-sector reinvention of the wheel.

GATT Failures

All nations have a hand in one another's financial fortunes. The connection extends to the commercial side, but here the path is less smooth.

The failure of member nations of the General Agreement on Tariffs and Trade to reach a new treaty is perhaps the most obvious bump in the road.

I do not fault the negotiators. The issues on the table are dauntingly complex. But I do believe that had a trade negotiator been the first to meet Moses coming down from Mount Sinai with the Ten Commandments, the negotiator would have asked two questions:

"Are these retroactive?"

"How can we negotiate waivers?"

Progress on fair-trade practices are temporarily being stalled by special interest groups. But despite their staunchest efforts, I believe that through leadership the idea of comparative advantage will eventually hold sway.

Schools Need Help

Each nation must find and exploit those productive niches in which it has natural advantages. And whatever the current status of global trade talks, it is time to begin to single out and hone those advantages.

In the case of the United States, one obviously needed measure is to shore up our edge in high technology by retooling the educational system, which has been crumbling for nearly 40 years.

We must also revise the management priorities taught at U.S. business schools. The focus must change from balance-sheet manipulation for quick managerial gain to the creation of intrinsic value through emphasis on manufacturing, product development, and better operating methods.

This change is also under way in the United States.

To summarize my non-economist's view of the global economy: If we put our collective ear to the ground, we will hear the march of the market. Where artificial barriers to commerce are removed, links among nations proceed apace.

Mr. Charles T. Russell is president and chief executive of Visa International, San Mateo, Calif.

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