*The System Worked*

That is the new and excellent book by Daniel W. Drezner and the subtitle is How the World Stopped Another Great Depression.  It is largely if not entirely correct, here is a summary excerpt:

A closer look at the global response to the financial crisis reveals a more optimistic assessment.  Despite initial shocks that were more severe than the 1929 financial crisis, global economic governance responded in a nimble and robust fashion.  Whether one looks at economic outcomes, policy outputs, or institutional operations, these governance structures either reinforced or improved upon the pre-crisis status quo.  The global economy bounced back from the 2008 financial crisis with relative alacrity.

I would myself stress two additional points, whether you call them addenda or qualifications is up to you.  First, we now know that the Fed could have done much more in 2008.  I consider this a mistake rather than a mistake in governance, and later the Fed did a great deal to try to make up for this error.  Second, the performance of the eurozone is hardly spectacular, to say the least, and the ECB should have moved to a much looser monetary policy in 2009 if not sooner.  Still, given what a screwy, seventeen-nation system had been set up, and given the severe distributional consequences of four percent inflation in the eurozone, I am surprised the system performed as well as it did.


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