First published: ft.com, 10/11/2010
Will the Group of 20 leading nations summit in Seoul address the global imbalances that underlie the drift towards increased currency, trade and capital account protectionism? Diplomatic manoeuvring prior to the conference seemed to lift the chances slightly, small acts of diplomacy alone will not substitute for the demanding economic and political changes that must occur for the imbalances issue to be worked out.
What is missing is what Mervyn King, governor of the Bank of England, recently called a “grand bargain”. This is code for a binding multilateral agreement to manage external imbalances, by addressing their causes, namely excessive savings relative to investment in surplus countries, and deficient savings in deficit nations. It requires debtors and creditors, specifically the US and China, to accept that they share the responsibility for the smooth functioning of the global system…. more
