“Global imbalances” are currently attracting much attention in policy and financial circles. In most official forecasts the threat of a disorderly correction of these huge imbalances appears as a key risk to the global outlook. While the phrase generally refers to net deficits or surpluses in international trade and investment, when these imbalances are large and persistent, they usually reflect major structural shifts in the distribution of global resources. Frequently cited explanations for today’s historic imbalances range from policy mistakes like ill-advised exchange rate arrangements to a savings glut in Asia juxtaposed with inadequate savings in the United States. Other candidate explanations include the remarkable productivity gains experienced in this country in recent years and the development of large pools of surplus labor released from agriculture and state-controlled enterprises in China, India, and Eastern Europe. Indeed, one of the more basic causal factors, linking others and explaining their current salience, may well be the recent arrival of these giant economies on the global stage. Together China and India—still very poor on a per capita basis—account for almost 40 percent of the world’s population. China is now the world’s second largest economy using purchasing power parity measures, and India is not far behind. ; This conference will gather economists, business leaders, and policymakers from around the world to explore the fundamental structural changes underlying today’s large global imbalances. We’ll consider the pressures and opportunities presented by China’s and India’s recent emergence as important actors in the global economy, and examine how demographic change and the ongoing evolution of the most advanced economies affect international resource flows. Our goal is to gain a better understanding of the required adjustments, the potential correction mechanisms, and the policies most likely to smooth the way.
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