David Cameron, the UK prime minister, states that “red warning lights are once again flashing on the dashboard of the global economy”. The lights are not as red as in 2008. Nevertheless, the difficulties caused by the fiscal austerity that his government recommends have become particularly evident in Japan and the eurozone. These stagnant high-income economies are the weakest links in the world economy. To understand why, one needs to analyse today’s most important economic illness: chronic demand deficiency syndrome.

Jack Lew, US Treasury secretary, provided a sobering overview in a speech delivered in Seattle, en route to last weekend’s summit of the group of 20 leading high-income economies in Australia. As he noted, the world is far from achieving the “strong, sustainable, and balanced” growth, promised at the 2009 summit in Pittsburgh.

Global recovery has been “uneven, with sharply different trajectories,” he said. “In the US, domestic demand surpassed pre-crisis levels in the first quarter of 2012 and is now about 6 per cent higher than before the crisis. Domestic demand in both Japan and the UK is about 2 per cent higher,” he added. “But demand in the eurozone has yet to recover the ground lost during the crisis, remaining more than 4 per cent below its pre-crisis level.”