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Recovery before Reform

LONDON – The financial crisis that started in 2007 shrunk the world economy by 6% in two years, doubling unemployment. Its proximate cause was predatory bank lending, so people are naturally angry and want heads and bonuses to roll – a sentiment captured by the current worldwide protests against “Wall Street.”

The banks, however, are not just part of the problem, but an essential part of the solution. The same institutions that caused the crisis must help to solve it, by starting to lend again. With global demand flagging, the priority has to be recovery, without abandoning the goal of reform – a difficult line to tread politically.