A strong and sustainable global recovery needs to be built on balanced global demand. Significant weaknesses exist across G-20 economies. I am concerned by weak private sector demand and continued heavy reliance on exports…. Our ability to achieve a durable global recovery depends on our ability to achieve a pattern of global demand growth that avoids the imbalances of the past…. In some countries, strengthening social safety nets would help boost low levels of consumption. In others, product and labor market reforms could strengthen both consumption and investment. I also want to underscore that market-determined exchange rates are essential to global economic vitality.
This excerpt from President Obama’s letter to his G-20 colleagues ahead of the summit highlights many of the themes that global financial leaders discuss at such gatherings, but it is also notable for its tone of scientific certitude. There are readily identifiable characteristics of poorly functioning economies (“weak private sector demand”, “heavy reliance on exports”, “low levels of consumption”), and specific policy interventions that will cure these problems (“strengthening social safety nets”, “product and labor market reforms”, “market-determined exchange rates”). Fixing economies, in this view, is much like fixing a car. Take your car to the best mechanic you can find, and he or she will identify and correct the problem. Take your economy to the best economist you can find, and he or she will—in just the same way—identify and correct the problem. So how do we find the best economist for the job? It turns out that this isn’t so easy.