In This Review

The System Worked: How the World Stopped Another Great Depression
The System Worked: How the World Stopped Another Great Depression
By Daniel W. Drezner
280 pp, Oxford University Press, 2014

Many believe that the financial crisis of 2008—from which the world has yet to fully recover—represented a failure of the international economic system. Drezner argues the contrary: although the system did not prevent the crisis or the subsequent recession, it did avoid a catastrophe on the order of the Great Depression of the 1930s, successfully mitigating an economic shock of even greater force than the one that hit the global economy in 1929. The summit meetings held by the G-20 during the crisis were loosely coordinated but provided a way for policymakers to share perspectives and ideas. And international financial institutions, especially the International Monetary Fund and the World Bank, rose to the occasion by offering enlarged and more flexible lending programs. Central banks, led and often aided by the U.S. Federal Reserve, also performed well. At the very least, they avoided the mistakes their predecessors made in the 1930s; as a result, significant fiscal stimulus occurred in most major countries. Drezner hesitates to forecast the future of the system, not least because serious misunderstandings among politicians and the public continue to distort views about the crisis and what lessons ought to be taken from it. But he convincingly argues that the system responded to a very real stress test surprisingly well.