Look at the world economy as a whole, and you could be forgiven for thinking that the recovery is in pretty decent shape. This week the IMF predicted that global GDP should expand by 4.8% this year””slower than in the boom before the financial crisis, but well above the world’s underlying speed limit of around 4%. Growth above trend is exactly what you would expect in a rebound from recession.
Yet this respectable average hides a series of problems. Most obviously, there is the gap between the vitality of the big emerging economies, some of which have been sprinting along at close to 10%, and the sluggishness of many rich ones. Macroeconomic policy is also weirdly skewed: many emerging economies are loth to let their currencies rise to reflect their vigour, even as fragile rich ones are embarking on austerity programmes. And finally there is a crucial missing ingredient just about everywhere: “micro” structural reform, without which current growth rates are unlikely to last.