Ben Bernanke, Jean-Claude Trichet and Masaaki Shirakawa

Article excerpt

Three gray eminences may decide the fate of the global economy next year.

By Robert J. Samuelson

They're technocrats, schooled in subjects that bore most people. They are appointed--not elected--to top government jobs, and what they do is not well understood. But they are enormously powerful, and in 2009 they may determine whether the global economy avoids calamity. "They" are central bankers: Ben Bernanke of the U.S. Federal Reserve; Jean-Claude Trichet of the European Central Bank (ECB); Masaaki Shirakawa of the Bank of Japan; and, to a lesser extent, counterparts in China, India, Brazil, Mexico and elsewhere.

Not since the early 1980s, when high inflation plagued many advanced economies, or perhaps the 1930s, has their role been so crucial. Global economic growth is slowing to a standstill. Economists at Deutsche Bank forecast that the world economy will expand a meager 0.2 percent in 2009--the worst year since at least 1950. In 2007, growth was almost 5 percent. Without stronger growth, the slump might feed on itself and fuel economic nationalism.

Superficially, central bankers seemed poised to deliver that revival. As if on cue, major central banks cut interest rates in November and December to spur growth and prop up their financial systems. The ECB reduced its key rate to 2.5 percent; the Bank of England went down to 2 percent, equaling the lowest rate since its founding in 1694; and many other central banks have also cut rates--China, India, Canada. As for the Fed, its key short-term rate has dropped from 5.25 percent to as low as zero; the Fed will now try to lower long-term rates.

Until recently, there was little unanimity of purpose. In July, the ECB raised its key rate to 4.25 percent to prevent soaring oil prices from increasing overall inflation. "Europe was in denial [about the crisis] until Lehman's bankruptcy" on Sept. 15, says Fred Bergsten of the Peterson Institute for International Economics.

In a crisis, history counsels cooperation. Its absence in the 1930s was disastrous. …