The second session, chaired by Axel Weber, President of the Bundesbank, will analyse the impact of these developments on international capital allocation and global imbalances. The third session, chaired by Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), will consider economic policy responses and the spontaneous adjustment of markets and economic agents. Lastly, the round table, chaired by Roger Ferguson, will draw out the consequences in terms of international financial stability. Stanley Fischer has agreed to take on the difficult task of summarising this symposium. Stanley, like a few others here, is a symbol in himself of the diverse backgrounds of the participants in this symposium: he is a former Professor at MIT, an ex-Deputy Managing Director of the IMF, ex-ViceChairman of Citigroup and currently Governor of the Bank of Israel. As an introduction, I will touch briefly on a few of the questions raised by each of these sessions. The first session will consider some of the decisive changes in trends in productivity and competitiveness that occurred in the 1990s. First change: as from the mid-1990s, productivity growth accelerated in the United States as a result of the gains arising from the production and use of information and communication technologies (ICT) but slowed down in Europe and Japan. For instance, over the last ten years, productivity growth in Europe has been more than one annual percentage point below that of the United States.
The new international division of labour thus affects every stage of the production process; it influences the localisation of added value and raises the question of the financing of the external imbalances of economies that focus on the design and marketing of products rather than their manufacture. The second session will deal with the impact of trends in productivity and competitiveness on international capital allocation and global imbalances. These trends may have contributed to the increase in global imbalances reflected in current account balances, and highlight several paradoxes. The first paradox is that of the US economy, which combines the structural surge in its productivity with a possible loss in competitiveness illustrated by the increase in its external deficit. This paradox is perhaps only apparent if we consider that the improvement in the US’ relative productivity performance is mainly in the non-tradable sector and as compared to the industrialised rather than the emerging economies. In addition, while this pick-up in productivity does boost the profitability of investments, logically, it goes hand in hand with an excess of investment over national savings that calls for increasing foreign capital inflows. However, the predominant nature of capital inflows to the United States changed at the start of the 2000s, switching from mainly purchases of equities and foreign direct investment by the private sector to purchases of government securities by central banks, which are not motivated by the search for increased profitability. This leads us to the second paradox, a twin to the first, i.e.