The basic idea is that when countries go into surplus an increased foreign demand for their products should push up wage levels, domestic demand and, in turn, p

The basic idea is that when countries go into surplus an increased foreign demand for their products should push up wage levels, domestic demand and, in turn, price levels. With the rising prices there is less demand and the current account surplus equalizes. I think the general argument is that Germany and China both run huge current account surpluses. China accomplishes this partly through structural regulations and by holding the yuan at an undervalued rate. Germany, on the other hand, cut taxes and reformed its labor and welfare systems in the mid-2000's but in a way that prevents the system from equalizing. The main reason the author gives is that wages don't rise because workers are willing to accept reduced pay raises for job security.