By Henry Hilton

Commentary Mar. 14, 2009 - 05:32AM JST ( 15 )

TOKYO —

We face a “difficult transition period.” That was all former U.S. Treasury Secretary Andrew Mellon could report as the Great Depression of the 1930s gathered pace. Holding out almost zero hopes for improvement, Mellon told his British audience in April 1932 that it was essential to wait patiently until things got better and markets eventually cleared. 
 
Anodyne stuff indeed, but before you scoff, take a look at where we are today. Mellon hated giving interviews, whereas our rulers today love their soundbites. Instead of silence and inaction, there are endless press conferences and summits. Finance minsters promise in the cliche of the moment to do whatever it takes for as long as it takes to conquer the greatest economic crisis since the 1930s. 
 
Nobody, though, has much idea on how the present global crisis can be resolved. Politicians and their minders are certainly scurrying around in preparation for the forthcoming world economic G-20 jamboree in London scheduled for early April in the hope of discovering a united front. Yet the evidence from damage limitation talks underway this weekend among finance ministers suggests that any substantial outcome is improbable given the diversity of opinions on how to act.

The parallel between British Prime Minister Gordon Brown’s hopes of a successful international agreement on how best to tackle the crisis and Prime Minister Yasuo Fukuda’s dreams in 2008 at the no-expense-spared G-8 gathering in fortress Hokkaido look pretty close. In both instances, the build-ups have been intense and the two leaders hoped against hope that a major international gathering would boost their sagging domestic ratings. Yet Fukuda achieved little and Brown will be hard-pressed to cobble up a communique that tells us very much more than Mellon’s statements once did. 
 
The news on all fronts is far grimmer than almost anyone would have predicted last autumn when finance ministers met in Washington. Then we were reassured that a global rescue plan was on the cards and some may have taken heart from President George W Bush’s statement that the United States was “a prosperous nation with immense resources and a wide range of tools at our disposal.” 
 
Six months on, his successor is discovering the pitfalls of the separation of powers and the problems of even getting a full set of officials approved in order to conduct the nation’s business. Coordination with allies is suffering and the top mandarin of the British civil service has been ruffling a few feathers by letting it be known that no one appears to be answering the phone in Washington DC.

All eyes may be on President Barack Obama but commentators are questioning whether his administration’s calls for further fiscal measures from others will get much of a hearing in Euroland. Voters fear that they and their children will have to pay and pay again through the nose. 
 
Those aware of Japan’s dismal performance during its “lost decade” are also asking whether all the fiscal stimulus, all the quantitative easing and all the desperate moves to support so-called key industries are ever going to do the trick. The answer, of course, won’t be known for several years but the fact that the head of the International Monetary Fund has admitted that we are now in a “great recession” and that 2009 is set to be the worse year for negative growth since 1931 for some states only adds to the gloom. 
 
Recent statistics reinforce the pessimists’ position with Japan’s own economy dipping by 3.2% in the last quarter of 2008. The result is the nastiest set of GDP figures since the nation’s near panic of 1974. It was in those half-forgotten days of the first oil shock that the nation discovered quite literally that the lights were going out, gas stations closed and housewives did indeed stampede through supermarkets in the search for scarce toilet paper.
Today, the industrialized world prides itself on possessing far better domestic safety nets than in both prewar and early postwar decades. Yet it is still almost as difficult as in the past to achieve effective coordinated international policies that might avoid a second global depression. In the early 1930s, Japan—thanks to some astute Keynesian-like programs by finance minister Korekiyo Takahashi—managed to escape much of the pain that severely hurt the United States and left Europe wide open to fascism.

Yet the increasingly global nature of finance, trade and the service sector in the early 21st century ought to make self-contained national solutions less likely. Individual governments know they should not attempt protectionist, beggar-my-neighbor trade ploys or massively devalue their currencies since this would bring retaliation. If—fingers crossed—substantial agreement could be reached on an interventionist, liberal global agenda, the worst could probably be avoided.

For the moment, though, the world is floundering. Critics of capitalism are having a field day saying I-told-you-so, while its once staunch defenders remain mute.