The long line: Job seekers wait outside a social-welfare office in Dun Laoghaire. With some manufacturing jobs leaving for cheaper countries, unemployment in Ireland may hit 12% this year
More than six months have passed since Lehman Brothers went bankrupt and Wall Street teetered on the edge of oblivion, but the bad news from the world of business and finance keeps on rolling. If anything, it's gotten worse. The financial mess still hasn't been cleaned up; on March 23, Treasury Secretary Tim Geithner presented yet another gazillion-dollar plan to detoxify the balance sheets of U.S. banks. And around the world — from Raleigh, N.C., to Riga, Latvia — every day brings fresh reports of gloom. The International Monetary Fund has predicted that for the first time in 60 years, world economic activity will decline in 2009.
You can quibble with the pessimism and reject the now commonplace comparisons with that other financial crash of the past century, that of 1929. But pick up the authoritative book on the earlier crisis by John Kenneth Galbraith, and two chilling sentences leap out: "The singular feature of the great crash of 1929," he wrote, "was that the worst continued to worsen. What looked one day like the end proved on the next day to have been only the beginning." (See photos of the global financial crisis here.)
It's against this bleak background that government leaders from the world's 20 major economies will gather in London on April 2 in an attempt to come up with coordinated fixes for the two issues they all deem critical: how to prevent a recession from turning into a worldwide depression and how to restore confidence in financial markets. The auspices aren't favorable. Many countries have announced economic-stimulus packages, but national efforts have rarely been coordinated. (See pictures of the Top 10 scared traders.)
If little of substance comes out of the London meeting, watch for the rebounding confidence in stock markets to take a blow and for social unrest to increase. As always, it is the poorest who will be hardest hit by economic contraction. But among those most disappointed by a failure in London will be rich countries that thought they were doing everything right when it came to economic policy, only now to be among the most affected by the crisis — Ireland, for example, where unemployment has doubled in 12 months.
Galbraith said this of the crash of 1929: "Nothing could have been more ingeniously designed to maximize the suffering, and also to ensure that as few as possible escaped the common misfortune." This time around, the world is looking to its political leaders to ease the pain and limit the misfortune. We'll soon know if they are up to the job.