Why do we seem unable to get out of this rut? In short, our policy makers are still fighting the last war. We are no longer faced with a world in which supply-side economic remedies — easy money, reduced taxation, fiscal belt-tightening and deregulation — can spur new capacity and the creation of well-paying private sector jobs.

A “reverse supply shock” that resulted from the sudden emergence, especially in the 1990s, of the productive potential of enormous, previously walled-off populations from Eastern Europe to Latin America to East and South Asia, helped fuel successive bubbles.

Hundreds of millions of people who once lived in sleepy or sclerotic statist and socialist economies now compete directly or indirectly with workers in the United States, Europe and Japan, in a world bound by lightning-fast communications and transportation. Countries that were recently poor (and still are, on a per-capita basis) find themselves with huge surpluses and sovereign wealth funds. The rich countries of the world, while still rich, struggle with monumental levels of debt, both private and public, and unsettling questions about whether they can compete globally.

Beginning in the late 1990s, a wave of capital, much of it the result of trade surpluses and big piles of savings in Asia, flooded the world’s capital markets. But consideration of global imbalances has taken a back seat in domestic policy circles. The causes of the crisis, it is often said in New York and Washington, lay mainly in too much risk-taking by the lords of finance, along with too big an appetite for debt among ordinary people.

But one can’t properly understand the financial crisis without appreciating how the rise of the emerging nations distorted the economies of rich countries. And you can’t chart a course to more growth and stability in the developed world without recognizing that many of these distorting forces are still at work. Cheaper credit through monetary easing, for example, doesn’t yield much in an era when cheap capital already exists in abundance.