EMERGING countries are growing fast, which increases the demand for raw materials. Therefore, the price of raw materials goes up. This is a real phenomenon, in the sense that it is going up relative to other goods. This relative price adjustment is necessary for the world market for materials to clear. From an accounting perspective, it also shows up as more rapid growth in the consumer price index, in particular in the West. Does that mean that "inflation" is more of a problem? Yes, from an accounting perspective. No, from an economic perspective.

It is not that we expect the value of money to eventually go down more quickly as a result of the rise in import prices. If imports must be relatively more expensive, either the aggregate price index must go up, or the price index of domestic producers must fall. An important task of the central bank is to distinguish movements in the aggregate price level that result from relative price adjustments, from movements that signal a general drift in all prices. It is the latter, not the former, that central banks are supposed to combat. To do so, formulating an inflation target based on "core inflation" (i.e. domestic prices excluding imports) is enough. If my monetary policy prevents core inflation from exceeding 2%, I am preserving the value of money in the long run. If headline inflation is 2% higher than core inflation, it means we are getting poorer because of the increase in the cost of imports. There is nothing we can do about it and it does not imply that inflation is getting out of control.

MY ANSWER is: not a politician. The last two directors were politicians who were holding the job while in the opposition party of their own country, and who were supposed to resume their political careers after their mandate at the IMF.

I TEND to agree with Eichengreen and co-authors. There is an easy source of catch-up which consists of accumulating capital and importing technologies. But this will not buy you total convergence to Western levels. At some point other factors will kick in, such as the cost of doing business, barriers to entry, transparency of the legal system, shareholder protection, and financial markets regulation and development, and none of these aspects are particularly supportive in China. As Chinese workers become more productive, but also more expensive, through the mechanism of capital accumulation and technical catch-up, production of low-cost commodity goods will gradually move toward cheaper countries, while China will produce more technologically advanced goods. Eventually it will settle at a level of GDP per capita which will be lower than in the West, but not by an order of magnitude.

I AM sure most responses will say that inequality is bad, so let me discuss one potential good aspect, having to do with the super-rich.

The super-rich cannot consume all their income, so they are forced to reinvest it in the economy. They can start new businesses and create jobs, which tends to raise the productivity and income of other people, more so than if the money had been consumed by a not-so-rich person. Or they can use their money to influence public affairs, through the media or through foundations as Bill Gates, George Soros and others do.