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Economic Imbalances and World Politics

C. Fred Bergsten
Spring 1987
Summary -- 

The unprecedented international imbalances of the first half of the 1980s have fundamentally altered the structure of the world economy. The United States, the creator of the postwar economic system and home of the world's key currency, has become the largest debtor nation ever known to mankind--and its red ink will continue to flow at least into the 1990s. Japan, widely viewed as a developing country only a generation ago, has become by far the largest creditor--and its massive buildup of foreign assets will continue expanding rapidly as far ahead as one can predict. The actions taken to date to correct these imbalances have gone only about half the distance needed, so there is now no prospect for their early elimination--and very little for steps to cope with the structural transformation they will bring. The forces set in train by these historic changes will dominate the course of global economic events for the next five to ten years, and may go far to influence world politics as well.

C. Fred Bergsten is Director of the Institute for International Economics, former Assistant Secretary of the Treasury for International Affairs (1977-81) and Assistant for International Economic Affairs to the National Security Council (1969-71), and author of 15 books on a wide range of international economic issues. Copyright © by C. Fred Bergsten.

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