I think that Daniel Alpert’s claim that the problem with the world’s economy is that there’s just too darned much supply is far too America- and Euro-centric:
Countries that were once poor now find themselves with huge surpluses of wealth. And the rich countries of the world, while still rich, struggle with monumental levels of debt—both private and public—and unsettling questions about whether they can compete globally.
[…]
It is time to recognize that the central challenge facing the global economy is an oversupply of labor, productive capacity, and capital relative to the demand for all three.
I think that view is too much from 30,000 feet. Although China and India now have more rich people than they used to each country continues to have hundreds of millions of people with very great material wants. Each country maintains a sort of one-way autarky in which goods or services are exported but relatively few are imported. The difference between exports and imports is held in the form of U. S. Treasuries, which results in the benefits of trade accruing to relatively few individuals in all of the countries involved.
The problem is nothing near as intractable as Mr. Alpert makes it sound but solving requires that the mercantilist approach to trade presently being used by large developing countries be modified and they will need encouragement to do that.
Update
Michael Pettis supports my contention.
The difference between exports and imports is held in the form of U. S. Treasuries, which results in the benefits of trade accruing to relatively few individuals in all of the countries involved.
What a shock, then, that the elites of all the countries tell the poor and middle class of their respective countries that this is the only way it can ever be.