In 2007, worried about the growing size of current account imbalances, the International Monetary Fund organised multilateral consultations to see what should be done about it. There was wide agreement that the solution was conceptually straightforward. To caricature: get US consumers to spend less. Get Chinese consumers to spend more. This would be good for the US, good for China, and good for the world. (There were messages to the other players – Japan, Europe, Saudi Arabia – but they were less important.)

Good for the US: it was clear even then that the consumption binge US consumers had embarked on was unwise, and that many of them would face problems in retirement. Good for China: it was clear that much Chinese saving reflected the absence of a social safety net. Providing health and retirement insurance was desirable on its own, and would naturally lead consumers to spend more.