At the Group of 20 summit in Pittsburgh this week, leaders will spend a great deal of time discussing minor questions that barely touch on the urgent problems facing the world’s leading economic powers. This is partly because many countries — and primarily their political elites — have concluded that the global crisis is ending, and partly because the most important questions are always the most difficult to address.
The general mood is definitely much better now than it was last fall. This is not only because “green shoots” of new growth have appeared in the U.S. and European economies, but also because part of the problem is resolving itself: U.S. homeowners have started saving more and the Chinese government is working to raise domestic demand for its goods. This is serving to correct one of the global imbalances that led to the crisis. However, some problems have temporarily been set aside for the future. Because of their habit of using fiscal incentives to boost their economies, the governments of developed countries will inevitably be forced to raise interest rates to balance their budgets. The Chinese government has its own problems, lacking good examples of large-scale and long-term infrastructure projects when no developed system of political accountability is in place. Down the road, governments will have to cut back on social spending and cope with an inevitable increase in painful bankruptcies.
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