Despite a brief revival, the world economy is slowing again. A more sustained recovery will require international cooperation to reduce external imbalances in a way that reduces unemployment and maintains low inflation.
I have written before on the role of global imbalances in the crisis of 2008 and the relative economic stagnation that has followed. Michael Pettis (The Great Rebalancing) and Yanis Varoufakis (The Global Minotaur) have written very readable books on this theme and their ideas have often featured on this blog.
This post explores the role of the role of internal and external balance (or lack thereof) in helping us find a return to a more sustainable prosperity. These ideas form much of the theoretical content of The Leaderless Economy by Peter Temin and David Vines, which was published in 2013.
So do we need another policy scheme for restoring global prosperity? I would argue that we do. Global growth picked up in 2017 but, apart perhaps from the US, has begun to falter recently, not least in the UK, but also in continental Europe. Many economies have accumulated high levels of private and public debt, and have made little progress in reducing them. Continue reading