. confidence that the u. s. political system will act to generate a sustainable fiscal trajectory is important to raising the probability that this process of adjustment unfolds with less risk. a successful conclusion of the doha round of trade negotiations would provide some insurance against the risk that the process of economic integration will be interrupted or reversed. despite the relatively favorable average income gains of the past few years, a common feature of the political context in economies around the world is the fragility or weakness of public support for openness and economic integration. the political challenge of sustaining support for the process of integration may be the most important economic challenge of our time. to paraphrase lawrence summers, it is not enough to explain that globalization is inevitable and that policies that look politically attractive as a response to economic anxiety will only hurt the economy as a whole. nor is it a politically effective strategy to state simply that economic integration is a necessary and powerful force in raising average incomes, or that technological change may be more important than trade or immigration as an explanation for slower growth in real wages for many americans. raising the quality of education and exploring ways to improve the safety net are a necessary part of the solution to this challenge. but these reforms will have a long fuse and they may not yield the hoped - for increase in support. trade does not appear to be more popular in countries with more generous safety nets, universal health care and highly subsidized higher education than it is today in the united states. the political challenges of sustaining support for global economic integration and fiscal sustainability will be more difficult in the united states because of what has happened to the distribution of income and economic insecurity. several broad economic forces substantially complicate an already difficult set of political challenges : the long - term increase in income inequality, the slow pace of growth in real wages for the middle quintiles of the population, the increase in the volatility of income that is a reflection of the greater flexibility of the u. s. economy, and the greater exposure of households to the risk in financing retirement and the burden of paying for health care. more generally, the global financial system and the monetary arrangements that underpin it are in the process of a delicate and consequential transition as the major emerging market economies particularly in asia - move toward more mature monetary policy frameworks, more flexible exchange rate regimes and more open capital markets. this transition will require careful management, and the economic dimensions of getting it right would be complicated

even without the political pressures those governments face. one final note on the financial system. the global financial system is in the process of very dramatic change. the changes of even just the last five years are extraordinary, in terms of the size, and strength, and scope of the major global firms, the role of private leveraged funds, the extent of risk transfer and the increase in the size of the derivatives market, the change in the structure of the credit market, the increase in and changes in the pattern of cross border financial flows. these changes, and others, seem likely to have made the financial system both more effective in moving capital to its most productive use and more stable and resilient over time. but they do not, of course, mean the end of systemic risk in financial markets. they could in some circumstances work to magnify rather than mitigate stress. central banks, supervisors and those running the major private financial institutions need to continue to work to ensure that what jerry corrigan calls the “ shock absorbers ” in the financial system - capital and liquidity and the operational infrastructure - are sufficiently strong and robust to withstand economic and financial conditions more adverse than we have seen in the recent past. thank you.