More than two years after the implosion of Lehman Brothers and the commencement of the financial crisis and more than a year since the official end of the recession, the economy continues to be a heavily covered topic in the news. But as we look back on a year that included the passage of major regulatory reform in the U.S., a eurozone in full-blown crisis and the looming specter of a global currency war, we thought it was important to highlight five important economy stories that got lost in this past year’s headlines.
1. Where is Basel, anyway?
While Rep. Barney Frank (D-Mass.) and Sen. Chris Dodd (D-Conn.) were burning the midnight oil and building consensus in Washington to pass financial reform, the real drama was overseas where “a shadowy international network of financial elites who gather in secret meetings at a small town in Switzerland to decide the fate of the world’s financial system,” as Alex Blumberg of NPR’s Planet Money memorably described the Basel Committee on Banking Supervision, which was busy writing new rules this summer.
In September of 2010, the so-called “Basel III” rules were announced, and for some commentary on the new rules, check out the tireless Felix Salmon. But for a great primer on the process, check out this Planet Money podcast from August.
2. Which U.S. state is the next Greece?
While the eurozone was possibly disintegrating into mass protests over budget crises and austerity measures, some commentators were looking at the same phenomenon a little closer to home. According to the National Conference of State Legislatures, states closed a cumulative budget gap of $83.9 billion in their FY 2011 budgets and estimate an $82.1 billion gap in FY 2012 for 35 states and Puerto Rico. And for some states the situation is particularly dire: California’s budget gap may reach $28 billion over the next 18 months.
These large gaps lead to the inevitable question: could a U.S. state default and require a bailout out by the federal government? The Financial Times has a great in depth package called “U.S. States of Emergency,” which includes a great interactive on budget gaps across the U.S. and how the bond market views individual states. But given the budget constraints that states operate under – they cannot run a deficit – default is not as unthinkable as once was. The Economist even war-gamed out the possibility at a conference earlier this year.
3. The rich own what?!
Year in Review
Most observers agree that income inequality is an extremely worrying trend in our society, but as Timothy Noah explains in his extremely thorough Slate series on Inequality, no one is quite sure on how to reverse it.
4. Buy, China!
“If only China would buy more” is a refrain that became part of the global economic community’s lexicon this year. As David Leonhardt explains in his profile of a nation in transition for The New York Times Magazine, “a Chinese consumer society would improve the lives of hundreds of millions of people.” And “for the rest of the world, the Chinese consumer is one of the best hopes for future economic growth.”
But can this transformation take place? Leonhardt explains how the continued rise of China and the transition to a consumer-driven society is not quite as inevitable as we may think.
5. Degrees for dollars
We see the ads for them on subways, the sides of highways and even football stadiums: The proliferation of for-profit colleges, including the University of Phoenix, has been hard to miss. As Frontline reported earlier this year in their report, “College, Inc.,” “nowhere is this more true than in one of the fastest-growing — and most controversial — sectors of the industry: for-profit colleges and universities that cater to non-traditional students, often confer degrees over the Internet, and, along the way, successfully capture billions of federal financial aid dollars.”
In addition to Frontline’s report, Sharona Coutts at ProPublica has written extensively about how private for-profit colleges have been a large recipient of federal dollars while becoming targets of criticism for delivering “poor results and for leaving many students with unmanageable debts.”