Not alone.
Bergsten, C. Fred
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To the Editor:
In his courageous article in the Fall 2015 issue ("Gathering
Storm II"), Philip Verleger recalled his accurate prediction of the
last big upward spike in oil prices in a book that I and a dozen
colleagues at the Peterson Institute published in early 2005 (The United
States and the World Economy: Foreign Economic Policy for the Next
Decade). Verleger erred badly, however, in suggesting that his was the
only correct forecast in that volume ("one out of five").
We warned of the growing backlash against globalization that has in
fact led to a sharp slowdown in world trade growth, the collapse of the
Doha Round, a prolonged delay in implementing the three most recent U.S.
trade agreements, and currently great uncertainty over Congressional
approval of the Trans-Pacific Partnership. We accurately foresaw the
sharp rise in global imbalances, including the U.S. current account
deficit to record levels, and the currency manipulation that helped
produce them, which in turn played an important role in bringing on the
Great Recession as testified by both Ben Bernanke and Alan Greenspan. We
rejected a hard landing for China but projected a possible sharp
slowdown, which is now so evident and so worrisome. Along with with
Verleger's increases in energy prices, all this combined to produce
the somber outlook and need for new policies that was the central
message of our book and clearly eventuated.
The book made other important contributions as well. It quantified
for the first time the impact of globalization on the U.S. economy,
showing that it raised our national income by $1 trillion per year and
enriched the average household by $10,000. It initiated the concept of a
G-2 between the United States and China, which bore fruit in fashioning
the global responses to the Great Recession and more recently to climate
change. It called for new free trade agreements with Korea and Japan, as
were subsequently negotiated, and reinvigorated the idea of a Free Trade
Area of the Asia Pacific, more than half of which will be realized
through the Trans-Pacific Partnership. It proposed that the G-20 become
the chief steering committee for the world economy. Dr. Verleger made an
important contribution to our 2005 volume, but his was far from alone.
--C. Fred Bergsten
Senior Fellow and Director Emeritus, Peterson Institute for
International Economics
