Nigel Lawson was the longest serving as well as the most controversial of Margaret Thatcher’s chancellors. His inaugural Adam Smith Lecture (reprinted in the January issue of Standpoint) shows him true to form. It is entitled “Five Myths and a Menace”. His menace is – or should be to Financial Times readers – the least controversial of his assertions. It is that of a “recrudescence of protectionist sentiment that threatens to repeat the disaster of the 1930s”. The “myth” on which I wish to concentrate is his fifth – that big current account imbalances are unnatural and dangerous. He is broadly right, but the argument needs to be taken further.

The essential point is that current account imbalances are the mirror image of international investment flows. These move, not always from rich to poor countries, but from high-saving economies such as China to those such as the US with a high propensity to consume. Lord Lawson instances the old Halifax building society, which in its heyday channelled savings from the north of the UK to the more free-spending south. The difficulty with this analogy is that the UK has been for centuries under one political jurisdiction employing a common currency. Internationally, everything depends on what the surplus countries do with their surpluses.

Many commentators have surmised that as countries such as China become richer and develop a consumer culture, their savings surpluses will diminish. But it will take time. The International Monetary Fund estimates total current account surpluses in 2010 at just over 2 per cent of world gross national product, less than often supposed. Nearly 1 percentage point is attributed to a group of east Asian countries in which China preponderates. Another ? percentage point is accounted for by Germany and Japan. The remainder is mostly the oil exporting countries.