At its most recent meeting in Toronto this spring, theG20 agreed to disagree. Even though the world economy is desperately in need of rebalancing, their declaration was deliberately vague enough to accommodate any set of domestic policies that countries might choose. Everyone came away thinking that they had won, but the world largely lost.
World trade is highly imbalanced. Households in theUnited States, having spent too much, are now weighed down by debt. Exporters in Europe and Asia have become excessively dependent on selling to the US and other, now-weakened, economies like Spain and the United Kingdom. Myopic actions on both sides have helped entrench a longer-term pattern of behaviour that only makes it harder to move away from today's unsustainable equilibrium.
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