So there is evidence that at least some of the necessary structural adjustment has taken place, though in all likelihood it still has further to run. What sorts of policies would facilitate the required adjustment without relying on sustained weakness in the indebted countries? At Pittsburgh, in 2009, the G20 identified five ingredients. First, surplus countries should take steps to boost domestic demand. Second, deficit countries should implement credible strategies to support private savings and restore fiscal sustainability. Third, exchange rates need to be allowed to reflect underlying  6  See for instance: Broadbent (2012), Miles (2012) and Dale (2013). 4  BIS central bankers’ speeches  fundamentals. Fourth, financial regulation and supervision should be strengthened to prevent the re-emergence of financial sector excesses. Fifth, structural reforms should be pursued, not only to boost long-term growth but also potentially to boost demand in the short run. This sounds straightforward, but why has it in practice proved so difficult to achieve? First and foremost, the actors have not always shared the same diagnosis of the underlying problems. Second, in circumstances like the present, when there is still a significant margin of spare capacity in many economies, an expansion in activity in one country generates beneficial spillovers onto other countries (the opposite would be the case if there was excess demand and overheating). But policy makers typically do not take account of these spillovers when judging how much to stimulate their economies. Consequently uncoordinated decision-making can lead to inefficiently low demand.

Big suppliers viewed them as unreliable given the costs and difficulty of small suppliers executing real-time inventory management. Only large firms with big IT budgets could afford the sunk costs of such systems. Today, a real-time inventory management system can be built using GS1 standards for a few thousand dollars. Small firms can connect to global product webs, through nodes such as Wal-Mart’s central inventory system, in the same way they might connect to a Facebook friend. A common language has levelled the playing field between the corner shop and the supermarket. The transformative powers of a common language have been even more striking in such well-established industries as publishing, music, advertising, news and retailing. For decades, large incumbent firms dominated these markets – EMI, Borders, Tower Records. Yet in less than a decade, new entrants with new business processes have completely reshaped the industrial landscape. Take publishing. Until 2007, publishing was an industry essentially unaltered since Gutenberg. The printing presses, while bigger and faster, would have been recognisable to a fifteenth century printer. 18  Vise and Malseed (2005). 19  McLaren and Shanbhogue (2011), Choi and Varian (2011). 20  Jorgenson et al (2010). BIS central bankers’ speeches  7  Copying and distributing a book to the public involved a complex chain of printers, wholesalers and retailers. This lengthy supply chain added both risk and cost. It also created a significant barrier to entry for new authors who were reliant on publishers to get their physical books onto physical shelves.