The first is how deep the plunge in world financial markets, trade and production really were. As PM Rudd said at the book launch, ‘On both the financial and economic metrics, the early stages of the current global crisis rivalled the severity of the Great Depression.’ The second is how much worse the mess in the global economy would have been without decisive and global policy action to cushion the slump. There were unprecedented interventions in financial markets and in the real economy, amounting to over 16 trillion US dollars in fiscal, monetary and financial policy support from G20 economies, the equivalent to 24 per cent of global GDP. The third, as Garnaut reminds, is that it is not all over yet – for the major developed economies in North America and Europe the recovery continues slow and painful. Sustaining growth and addressing the national and international imbalances that have been problems in the past require new policy strategies and models of growth in all economies. These are events that, as Lee Kuan Yew said last week, have changed the global order. The growing interconnectedness of the global economy underlines the importance of global responses to economic events and the shift in the balance of world economic and political power cried out for a new system of global governance. That is why the emergence of the G20 leaders represents such a fundamental change in how the world henceforward will manage not only its economic affairs but also international political affairs. And Rudd was an important player in bringing that about. In the generous repartee around the Garnaut book launch, Rudd gave Garnaut a distinction for his work and hoped that he deserved a credit for his own. Garnaut was quick to award a high distinction for the Government’s first term performance but warned that the second semester’s assignment would be tougher. At the ANU Forum senior Treasury official David Gruen discussed Australian ‘exceptionalism’ and ex- Reserve Bank Deputy Governor Stephen Grenville looked at what is needed to make financial markets more robust. There will be more on this discussion later on the East Asia Forum.
In Brief
We are now more than a year into the global financial crisis, or the Great Crash of 2008 as Ross Garnaut describes it in the timely and important book he has written with David Llewellyn-Smith, launched by the Australian Prime Minister in Canberra last week and dissected in a forum at the ANU a little while before. The book provides everyman’s guide to how the global financial crisis happened and what lessons we might take away from what was a very scary experience. This week’s lead describes the nature of the beast, as Garnaut sees it. Three things stand out about the Crash of 2008.