Sign up with your email address to be the first to know about new products, VIP offers, blog features & more.

Large-scale imbalances: a suitable case for treatment

First published: Financial Times, 07/06/2010

Letter to the Financial Times

Sir, In “A plan to live with ‘imbalances’ ” (June 4), Samuel Brittan embraces the idea of Special Drawing Rights (SDRs) to address the problem. He derides those who “drone” on about imbalances, insisting that Chinese and German citizens are the victims of propaganda, designed to make them consume more and save less.

As one who drones, I’d like to assert, to the contrary, the myopia and danger of pretending that the consequences of large-scale imbalances can be managed away in the way he suggests.

The fault line in Sir Samuel’s case for letting high-saving Chinese and German households off the hook is his insistence that: “Official efforts should not go beyond school lessons in personal finance.” Amen, in theory. But in the case of these two global creditor titans, the reasons that households save so much is precisely because they are encouraged to do so by the state. This happens directly, or as a result of the neglect of structural reforms to the way in which….more