Balancing Act

Mr. Obama's wise message for the Group of 20

WE DON'T expect too much in the way of results from the gathering of Group of 20 leaders that begins Thursday in Pittsburgh. Any assembly of leaders from North America, Europe, China, Japan and Brazil -- as well as sundry other nations and international organizations -- would have a hard time ordering dinner, much less fixing the world economy, which is the G-20's purpose.

And yet it would be equally mistaken to dismiss this meeting, and this group, as just another multilateral gabfest. The last two G-20 meetings, held amid economic crisis in November and April, led to relatively well-coordinated, short-term anti-recession policies in developed and emerging economies. They also quadrupled the International Monetary Fund's resources for battling economic collapse in Eastern Europe and other stricken regions. Today, though the crisis may be easing, the G-20 remains the best available forum for tackling its global repercussions and for discussing, if not actually deciding, long-term strategies.

As conference host, President Obama has chosen to emphasize the global imbalances in trade and investment, which, even if they did not cause the current crisis, certainly complicate the task of ending it. His interest in a "framework for sustainable and balanced growth" is rooted in reality: For many years, Germany, Japan and China have grown by producing more than they consume and by exporting their goods to the United States, which has chronically consumed more than it produces. Oil-exporting nations have had a similar unbalanced relationship with the United States. The result is exporters' accumulation of dollar reserves and their investment in the United States -- subject to occasional bubbles and busts, an especially damaging example of which we have just experienced. You could say that the recession, which has spurred a major increase in U.S. household savings, was nature's way of smoothing out these imbalances -- albeit at tremendous financial and human cost.

U.S. consumers will need years to recover from the impact -- and may never again drive global growth as they have in the recent past. It is therefore in both this country's interest and that of its trading partners to adjust their growth models. The United States must save a bit more and become less dependent on imports; Germany, Japan and China must consume a bit more and reduce their export dependence. As Mr. Obama told CNN on Sunday: "We can't go back to the era where the Chinese or the Germans or other countries just are selling everything to us, we're taking out a bunch of credit card debt or home equity loans, but we're not selling anything to them."

And so Mr. Obama is wisely spending some political capital on asking the G-20 to commit to such adjustments in Pittsburgh. Obviously, even a strongly worded agreement wouldn't be enforceable, and some export-dependent countries, including China and Germany, balk even at strong rhetoric. A sudden shift in global growth strategies would do more harm than good, even if it were feasible. But it would be useful to establish a system for monitoring imbalances, perhaps overseen by the IMF, to nudge countries gradually to change course. For Washington, of course, the key change is to set the government on a path to fiscal viability, lest China and other dollar-accumulators begin to demand higher interest rates. So far, Mr. Obama has been short on specific plans in this regard. If this week's effort is meant to show greater seriousness, then it is doubly welcome.