The Economy, Politics, Europe: Why We're Stuck

By midyear, hopes for a fast recovery in the U.S. were dashed. Then Greece and Ireland faltered. Even Toyota's accelerator pedals were stuck

Waterways, a development in Ireland's County Leitrim, remains a ghost estate. The developer's plan called for more than 60 homes. Kim Haughton/Polaris

By Devin Leonard

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December 20, 2010

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In early spring, it seemed as if things were getting better. The economy was growing, and those green shoots Federal Reserve Chairman Ben Bernanke had promised smelled lovely. On Mar. 23, President Barack Obama signed a contentious health-care reform bill—now being challenged in the courts—that would provide coverage for tens of millions of uninsured Americans and reduce the federal deficit over time by an estimated $143 billion. The end date to the combat mission in Iraq—Aug. 31—loomed auspiciously.

By May, however, hopes for a quick recovery were dashed. That month the stock market tumbled 10 percent, and the national unemployment rate dropped anchor just south of 10 percent. As setbacks mounted in Afghanistan, the reality set in: We're stuck. In May the European Union announced a $145 billion bailout of Greece, a nation in which saxophonists and TV news anchors retire with government pensions at age 55. Greece's financial self-immolation was facilitated by U.S. firms such as Goldman Sachs (GS), which advised the country on how to mask the true extent of its deficits.

Then there's Ireland. Despite a national economy the size of Connecticut's, the country's banking crisis and real estate bust spread panic throughout Europe. Meanwhile, the fast money continues to race to China, whose economy grew 9.6 percent in the third quarter of 2010. Real estate values have soared in the country, which appears keen on tightly managing its currency—and less interested in how that affects the global economy. In response to this seemingly hopeless and unchanged world, a frustrated American public stuck it to the President in November and flipped the House of Representatives to the Republican Party.

It wasn't merely a metaphor: 2010 was a big year for all things stuck. The eruption of an unpronounceable Icelandic volcano created an ash cloud on Apr. 14 that during its peak affected 1.2 million passengers each day and deprived airlines of at least $1.7 billion in revenue. (It also screwed up the itineraries of Obama, Tony Blair, John Cleese, and the FC Barcelona football team.) Three months earlier, Toyota (TM) had to recall 2.3 million vehicles amid complaints that some cars' accelerator pedals were sticking. (A month later it issued a separate recall for faulty antilock brakes.) In August a 60-mile traffic jam formed in China's Hebei province, leaving 10,000 vehicles stuck for at least 10 days. That month, 33 Chilean miners became trapped half a mile underground. Taken together, these events encapsulated the year's great question: How can you move ahead when you feel like you can't move at all?

Leonard is a reporter for Bloomberg Businessweek in New York.