PRINCETON – The world is confronted by a dramatic financial crisis that many policymakers believe is more severe than the interwar Great Depression. Before 2008, experts said that a new Great Depression was impossible because of the strength and the depth of the cooperative mechanisms set up at the end of World War II.
The G-20 summit has thus created enormous expectations that internationalism may once again overcome a plethora of economic problems. Unfortunately, the magnitude of the expectations alone suggests that disappointment is almost certain.
The symbolism of the location is unfortunate, as it carries a reminiscence of the main abortive attempt to manage the world economy during the Great Depression. The 1933 World Economic Conference also met in London, at the Geological Museum, with an even broader range of participants from 66 countries. The participants at the 2009 summit may not visit the Geological Museum, but they will have to deal with the specter of conferences past, for the failure in 1933 offers important lessons for our current leaders.
First, as with the G-20 summit, everyone expected the London Conference to fail. The plenary meeting was paralyzed by the way in which the preparatory commissions had worked. Monetary experts argued that an agreement on currency stabilization would be highly desirable, but that it required a prior agreement on the dismantling of trade barriers – all the high tariffs and quotas that had been introduced in the course of the depression.