The fabled "unseen hand" of the free market is supposed to guide people to make choices that are good for themselves and good for the greater economy.
But there are times when an action that one person, group or nation, sees as good for them, at least in the short run, is not good for all. That's when leaders need to stop counting on invisible appendages and take substantive action to fix what's wrong.
President Obama tried to take such action last week at the G-20 Summit in South Korea. But, while he convinced his fellow world leaders to issue statements that decried large swings in financial surpluses and deficits from nation to nation, the consensus required to get real action did not materialize. That's unfortunate, because the administration and its central bank are on the right track.
Over the decades, different nations have evolved different economic niches. Germany and China, for example, are full of people who don't spend all that much money, but who save a lot, make a lot and export a lot. The United States remains the world's biggest customer, maxing out its credit card to buy the goods made in those nations while selling them little in return.
So when the leader of, say, Germany says the answer to the world's economic woes is frugality, she's just asking the Germans to keep doing what they excel at, perhaps creating a situation where the average German isn't even aware of the economic collapse.
It is also why German and Chinese leaders bluntly accuse the United States of hypocrisy when it, through the Federal Reserve, sets out to basically print $600 billion through a bond-buying scheme called "quantitative easing," in an attempt to pull the American economy out of the mud. From afar, the tactic indeed looks a lot like the currency manipulation that China is so reviled for.
The United States still needs the stimulus the Fed is attempting. Other nations may think other approaches â austerity in Germany, huge spending cuts in Britain â are better for them. That's their right, but not just their business.
The United States still leads the world economy. If it flags, the rest of the world cannot be far behind. A key route to reviving the U.S. economy without printing money or driving the federal debt deeper is to ease our seemingly eternal trade deficit.
That means nations that are used to selling to Americans are going to have to start buying from them, too. For their own good.