Who do you blame for the economic crisis: the bankers, or the Chinese?
Behind all the legalistic wrangling and diplomatic manoeuvrings, the G20 summit fundamentally stalled on this question, crudely put here, but of vital importance.
If you take the view, as the French and the Germans for example do, that the crisis was primarily cooked up by reckless people in dealing rooms, then you need do little more than restrain and regulate them to put the world to rights.
If, however, you also blame "global imbalances" for the crisis, then you must also start to design a new global economic order that will remove them.
What imbalances? Quite simply the vast sums – trillions of dollars – that swilled around the world economy, mainly generated via America's trade deficit with China, and which pushed interest rates to record low levels.
"Blaming the Chinese" is shorthand for that – though we in the West should also blame ourselves for greedily consuming all those wonderful cheap DVD players and the like. The Chinese then lent the money we paid them for their exports back to the West, and it was promptly pumped into a real-estate bubble, which, as we now know, was bound to burst.
The bankers may have built all manner of weird and wonderful financial instruments on top of that wall of money, but the foundations were, as with so many of our imports, made in China.
This is how the British and Americans see recent history. So the aim should be to get deficit nations such as the UK and US to spend less and export more; but, crucially, for the surplus nations – including Japan and Germany as well as China – they are supposed to spend more and import more from us.
We should all be a little more like each other, you might say.
On that point there was fundamental disagreement among the brotherhood of man gathered in Pittsburgh; why, the Germans and the others wondered, do they have to inflate their economies and make them less competitive and more vulnerable, just to oblige we who run our economies so badly?
And who is going to make them do that anyway? The G20? Or the IMF?
On the evidence of the past few days, these global imbalances will reappear as soon as the world economy starts to make a decent recovery. Well, at least we'll know who to blame.Reuse content