In 2008 there was a global financial crisis comparable to the storied Wall Street Crash of 1929: some of the biggest investment banks in the world, followed by the American automobile industry, tottered on the brink of collapse. If these had gone, the entire global financial system and the heart of American industry would have gone with them.
The consequences of the two crashes were, however, quite different. The 1929 crash was followed by a global depression, with catastrophic consequences in mass unemployment, poverty and social dislocation. In the United States, the New Deal brought a progressive coalition to Washington with innovative social and economic programs. Europe witnessed the collapse of the Weimar Republic and the rise of fascism. Japanese militarism swept over Asia; The world slid into war on a scale never witnessed before or since. Only that war and its aftermath resulted in the end of economic stagnation and anew golden era of postwar prosperity.
The crash of 2008 had ugly consequences, especially in unemployment which was ratcheted up to historically high post-1930s levels in North America, with only moderate relief three years later. But unlike the earlier crisis, panic on Wall Street did not automatically translate into worldwide economic collapse. Emergent economies, notably China and Brazil, felt scarcely a ripple. Australia sailed through unscathed. Canada experienced far less negative impact than did the United States. By 2011 even badly affected economies, with a few exceptions, seemed to be limping back toward a semblance of recovery.
For Western capitalist states, the narrow escape from a rerun of the "Dirty Thirties" rests largely on lessons learned the first time around. In addition to the huge state bailout of the banks and the North American auto industry (all "too big to fail"), a Keynesian response to the market crash was promptly instituted across the board with massive economic stimulus measures--precisely the appropriate medicine that was not followed after 1929 when governments were still prisoners to classical economic nostrums. Social safety net provisions, largely set in place after the ravages of the Great Depression, prevented the worst human costs of unemployment and economic dislocation. In other words, the Keynesian countercyclical prescriptions for saving unregulated capitalism from its own excesses--objects of bitter political contestation in the 1930s and 1940s--were...