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"The best that can be said for 2009 is that it could have been worse" - Joseph Stiglitz, in China Daily

That pretty much sums it up right there. I have been looking through some of our posts from late '08 and early '09 and things looked pretty grim on a number of fronts. But the year did not turn out quite as badly as it could have. Let's have a look back at some notable items from the world of economics in 2009, shall we?

Some Statistics from 2009
# of US banks shuttered by the FDIC: 136; the current yield on a 1-year US Treasury bond: 0.00%; China's government stimulus package: 4 trillion yuan ($586 billion); inflation of the gold bubble this year: 27%; IIF's projected decline in foreign direct investment to emerging market economies in 2009: 82%; Actual decline as of October 2009: about 30%; IIF's prediction for 2010: probably worth ignoring entirely; The Economist's global public debt clock as of today: $32,052,820,000 (or thereabouts).

Protectionism
When we started our year, the threat of protectionism loomed large in many different countries. We've seen some bad examples throughout 2009 - government-sponsored stimulus packages being probably the worst offenders - but I suspect the above quote from Stiglitz applies here. We can find a number of protectionist anecdotes that make us shake our heads, but it doesn't appear to be systemic. Encouragingly, the G20 at least got the right language in their public statements, even if they haven't followed it to the letter.

The G20's extraordinary economic intervention
Surpassing my wildest expectations, the G20 has proven itself to be something other than a complete waste of time. The members of the G20 have shown themselves to be genuinely interested in making a crack at international cooperation on economic affairs - albeit with the usual cases of counter-productive grandstanding by leaders for their domestic political purposes. Granted, the "trillion dollars" of stimulus money pledged by the G20 in April may have been fudged a little, but the perception that governments were willing to step up and do something probably helped counter the deep-seated uncertainty felt by markets and citizens across the globe.

In all likelihood, the G20's accomplishments will be less about the big numbers and rhetorical posturing of the summits, and more about the incremental changes made by sub-bodies. Take the Financial Stability Board which, despite sharing an acronym with Russia's domestic security services, may prove to be quite useful. The FSB, like the IMF, has been tasked with some of the heavy lifting for the G20: strengthening regulatory standards, developing principles for compensation practices, and monitoring "exit strategies." They will also likely play a role, alongside the IMF, in the G20's efforts to conduct peer-review evaluations of each other's financial policies starting in 2010. Something to watch for.

Return of growth or govt life support?
Many of the economies of the world officially exited recessions my mid- to late-2009. These stats are always subject to later revision, but the overall point - that things did not get profoundly worse for economic growth - is the take home message. Of course, what's unclear is whether this growth will sustain itself when governments begin to ease off the stimulus measures. Moreover, the focus on overall GDP growth ignores the fact that unemployment rates have skyrocketed in many countries.

Macroimbalances
A running theme throughout the year was the dynamic between the US's efforts to re-balance their chronic deficits with China's efforts to continue export-led growth with an under-valued currency. Pressure on China has been growing throughout the year and will continue into the next.

Public Debt
Really piled up.

Some Losers
American auto-makers (esp. GMAC and Chrysler); traditional newspapers; global trade & Mother Nature (casualties of shifting priorities); Gordon Brown (policies as finance minister came home to roost); the US dollar (losing relative clout to China, maybe); frozen waffles & the Icelandic BigMac.

Some Winners
Gold, Goldman Sachs (God's work is apparently quite lucrative); Gordon Brown (crisis has temporarily breathed new life into premiership); IMF (relevant & better resourced); Ben Bernanke; and crackpot populist economic measures

As usual, The Economist's year-end issue is sweeping and engaging. Its lead article, 'Onwards and Upwards: Why is the modern view of progress so impoverished?' is the paper at its absolute best.

Happy new year.

This was the year that everything was supposed to change. We were told that the greatest financial and economic crisis since the Great Depression would usher in a new paradigm on global markets and authority (look up)...did it? Judging by the top political stories of 2009, not quite:

And then it was two...the G2
For years we have been waiting for the inevitable moment when China would elevate to great-power status and challenge the US for global authority and influence. While the conventional wisdom says that this happened in 2009, the reality is more nuanced. China's role as America's banker and its economic performance are the envy of the world and empowered it with great and growing influence over affairs both local (see: African investment) and global (see: climate change). But it is still years, maybe decades, away from truly rivaling the US on military, economic and political power. It's precarious social order and frothy economic recovery may yet fundamentally undermine the communist party and China's methodical rise on the international stage.

That said, the US-China balance was clearly tilting eastward following the crisis and 2009 was the year that the so-called 'G2' paradigm finally crystallized. The US and China are now the two primary players and their cooperation is essential to progress on almost every major global issue, from trade to climate change.

Exit the old, enter the new economic order...sort of
The crisis would change the relationship between government and markets, reorganize the major economies, elevate the emerging giants and re-regulate financial markets. The G20 talked a big game and editorial boards called for sweeping regulatory reform. Everything would be different the next time around.

Remember those heady days? Crises often bring about transformative change, but the window of opportunity to affect this change is often small. Unfortunately, this window closed quickly in 2009 with little substantive reform enacted either transnationally or within the major economies. In the US, massive government bailouts translated into surprisingly little leverage in the re-regulation of the financial sector. Executives at AIG are using the threat of resignation to extort further pay exemptions from Obama's pay czar. Perverse incentives and too big to fail firms still pervade the system. Record profits have afflicted the financial sector with collective amnesia.

The problem is one of political will and policymakers in the US in particular lacked the courage and purpose to enact real regulatory reform. We need more Paul Volkers and less Timothy Geithners.

Obama- The Tragedy of Great Expectations
What started with such promise and purpose ends the year struggling under the weight of expectations. To be fair, the Obama administration's first year has been marked by notable successes domestically, from the stimulus package to health care to executive orders reversing Bush-era policies on everything from stem cells to government secrecy. His international rhetoric and posture have remarkably transformed the image of the US following eight years of tarnish. His Cairo and Nobel speeches were transcendent.

But many of us are still waiting for 'change we can believe in.' Perhaps the expectations were always too high, setting Obama up for an inevitable fall. Perhaps the challenges facing the US are too great for one government to correct. But I can't help but feel that on issues where he could affect great change, from Afghanistan to financial reform, he has come up short. Domestically, he has been naively committed to the fantasy of bipartisanship in Washington. His trip through Asia was a bust on any measure. The challenges are no less daunting in 2010.

Kicking the Can
Climate change, trade, Iran, financial reform. Big issues, little progress.

Lisbon Treaty
Europe finally got its act together and ratified the Lisbon Treaty, only to appoint two of the most underwhelming candidates on the international scene. The primacy of the nation-state persists in spite of Lisbon.

The Trouble with Elections
Elections in Israel, Iran and Afghanistan all complicated progress on major international issues in 2009. In Iran, the regime faces its most committed and prolonged challenge since the revolution.

Berlusconi
Just kidding!

As we kick off our look back at 2009, here's a list by Joshua Keating, associate editor at Foreign Policy, of the 10 Worst Predictions for 2009. The predictions are paraphrased below, the comments are my own:

1. Obama to sign energy bill by end of the year- Rahm Emanuel on 19 April (White House chief of staff)
Not even close. Health care, health care, health care.

2. Bernnake to step down after first term, Summers replaces him at Fed- Business Week on 2 January (magazine)
Tough confirmation hearings, but Bernanke enjoys the confidence of the president and is soon to be entering his second term. Far from basking in the glory of a depression averted, Bernanke has been charged with unwinding his extraordinary response to the crisis.

3. Swine Flu to kill hundreds of thousands in the US- Report to the President on US Preparations for the 2009-H1N1 Influenza on 7 August (President's Council of Advisors on Science and Technology)
Um, no. But this was enough to scare me into getting vaccinated.

4. No end in sight to US economic freefall- George Soros on 20 February (billionaire investor and activist)
To be fair, Soros hedged his comments, but the pace of recovery in both the financial markets and real economy has undoubtedly been surprising. The US stimulus package may not have done enough, but it seems to have done just enough to avert catastrophe. That tricky unemployment rate remains...

5. No Afghan surge for Obama, Gen. McChrystal to resign- Charles Krauthammer on 27 September (right-wing columnist/commentator)
Obama succumbed to the COIN camp against, I suspect, his instincts. McChrystal saw the back of Obama's hand following his public intervention into the Afghan surge debate, but in the end got 3/4 of the troops he was looking for.

6. Gordon Brown will 'certainly' step down within three days- Martin Kettle on 5 June (associate editor at The Guardian)
The train wreck that was the Brown premiership reached its inglorious nader over this week in June when the Labour backbench revolt burst into the open with public calls to resign. Somewhat remarkably, Brown fights on (thanks in no small part to Lord Mandy) and has even narrowed the Tory lead in the run-up to likely elections in March.

7. Breakthrough agreement, Zelaya returning to office, democracy lives in Honduras!- Hillary Clinton on 30 October (US secretary of state)
Zelaya has spent quite a bit of time the Brazilian embassy, presiding over nothing but his cowboy hat, and Honduran democracy is shaky at best.

8. Israel will likely strike Iran between US election and Obama's inauguration...Israel will likely strike Iran before end of 2009- John Bolton on 22 June 2008 and 28 July 2009 (former US ambassador to UN and epic moron)
John Bolton calls on Israel to bomb Iran as often as the sun rises. It still hasn't happened. You get the impression that Bolton believes if you wish for something hard enough it will just happen. I really loathe this guy on so many levels.

9. G7 finance ministers have unleashed inflationary hell, world markets to collapse under chaos- Jim Rogers on 10 October 2008 (billionaire investor)
I would argue that entering 2010 deflation remains a bigger risk than inflation in the major economies.

10. China will take over Panama and choke the US via the canal- Rep. Dana Rohrabacher on 7 December 1999 (US representative)
Ten years later and the cargo flows.

In my eyes, 2008 has provided a harsh reminder of a fundamental lesson of political economy: the economy drives politics.

It may seem like an obvious point, but it is often a neglected one. Throughout the year, we've seen fascinating discussions about the rise of authoritarian states as an alternative to Western liberal democracy, the success of political party X or candidate Y, the further integration of global trade, the possibility of more comprehensive environmental treaties, and much more. But the outcome of each of these debates has been changed in important ways by the roller coaster ride that has been the economy in 2008.

Just ask some of the losers: Putin/Medvedev in Russia, government officials in China, Mr. McCain, Mr. Cameron, Mr. Chavez, the governments of Iceland, Belgium, Iran, Greece, and anyone hoping for more stringent carbon emission rules.

Or some of the winners: Messrs. Brown, Obama, Sarkozy and Keynes.

And if the economy driving politics was the big lesson of 2008, the interesting question for 2009 will be: how hard will politics push back?

In keeping with our year-end extravaganza:
Maclean's, a Canadian newsweekly, has compiled an excellent gallery of photographs from the past year. Some of the most powerful:

• Beijing Olympics opening ceremony
• Close call in Afghanistan
• Volcano erupts in Chile
• The true cost in Georgia

FP Passport counts down the 10 Worst Predictions for 2008.

Are there any poor predictions FP Passport has overlooked? Let us know what you think deserves to make the list.