The difficulties in achieving the sort of global rebalancing required are evident in the U.S.-China relationship. U.S. exports in June ticked up for the second-consecutive month, but by a modest 2.2% from the month before. And the value of total shipments remains deeply depressed compared with the year-ago period.
Rising exports, aided by the slumping dollar, have whittled away at the U.S. trade deficit. China's corresponding trade surplus also is shrinking, but bigger reductions depend on getting Chinese consumers to buy more.
Chinese household consumption is among the lowest in the world, amounting to roughly 35% of economic output, vs. nearly 70% in the U.S. Chinese consumers save rather than spend, in part, to guard against unexpected medical expenses in a country that lacks a health insurance system.
Until China can put in place a national health care system, household consumption is unlikely to rise. "We need to be aware of the difficulties and should not be over-idealistic," central banker Zhou Xiaochuan, head of the People's Bank of China, said in a July 3 speech.
But reorienting China's producers to serve local consumers rather than distant markets also would require far-reaching changes in several other national policies. An undervalued currency, rock-bottom interest rates set by government fiat and a lack of labor rights all effectively subsidize producers at the expense of consumers.
"There's a whole bunch of policies that constrain consumption and boost production," says Pettis, a former investment banker.
Former World Bank economist Uri Dadush, now heading the Carnegie Endowment's international economics program, says any recovery in growth must emerge in countries outside the epicenter of the financial crisis. Roughly two-thirds of the world's $50 trillion gross domestic product is produced in countries such as Brazil and South Korea, which did not have highflying banks but are suffering from the downturn in global trade, he says.
Clouding all forecasts of the emerging global recovery, however, is the likelihood that the past will not be prologue in the current episode. Banking crises occur with some regularity in modern economies, but each is unique in its ultimate costs and duration, according to a study by three economists at the Bank for International Settlements in Basel, Switzerland.
Based on a study of crises in 35 countries since 1980, the BIS team concluded that the current financial trauma will have "lasting negative impacts" on output for years. In one-quarter of the crises, the cumulative lost output exceeded 25% of gross domestic product. One-third of the countries saw their economies continue shrinking for more than three years.
The U.S. may be more fortunate. Most indicators point to growth returning this year, and output should be back to its pre-crisis peak by the second half of 2010, according to the BIS paper. But all such predictions are cloaked in unusual amounts of uncertainty. "This is not a classic business cycle," says Magnus. "Therefore, it doesn't have a classic aftermath."