The pall of Lehman Brothers' collapse in 2008 is still settling over many Western economies and its citizens. Yet things aren't all dreary. We've tried to take the contradictions of 2010 and show how stories link up, sometimes in unexpected ways
"Dull year for the industry."
There you have it, the most interesting sentence in the American Federation of Labor's roundup of 1910. Even those who fetishize stability would concede that it's a death march of a volume, a 420-page trade-by-trade chronicle of a year in which little seems to have happened. At least the authors of the five-word summary above—members of the AFL's knife-sharpening union—could say they spent 1910 crafting a decent pun.
A century later the idea of a dull work-year is quaint verging on incomprehensible. Global trade connects the fate of every industry and laborer, no matter how small or seemingly self-sufficient, to the decisions of bureaucrats in China, shipbuilders in Korea, and bankers everywhere. It's hard to have a quiet year in the shop when the shop has no borders. Even the structure of a year seems enlarged and more complex. The depth of our interconnectedness, the constancy of media, means that themes and moods tend to hang around past their season. By the admittedly squishy metrics of pessimism and disruption, 2010 feels as if it started a long time ago.
Maybe that's because we're still breathing the fumes of 2008. Lehman Brothers' collapse 27 months ago brought on more than just a teetering economy: It created a cloud that has settled over most Western economies and, in 2010, wrought a kind of seasonal affective disorder on their citizens. In a Bloomberg poll conducted in October, two out of three likely voters in the Nov. 2 midterms said that taxes had gone up, the economy had shrunk, and the billions lent to banks as part of the Troubled Asset Relief Program would never be recovered. A September poll showed that 77 percent of global investors expected the European monetary union would crumble and at least one struggling government would default, all despite a $1 trillion euro zone backstop.
What's revealing about these responses is the chasm between feelings and facts. Congress and the Obama Administration have cut taxes by $240 billion since 2009. Growth continued without interruption in 2010 in the U.S. and most major economies. The Treasury expects to turn a $16 billion profit on the TARP rescue. Greece and Ireland may have stared into the white light of fiscal death, but they were yanked back to earth by their neighbors and are now trying to rehabilitate (with wounded fury, but—so far at least—without default). By the end of the third quarter, U.S. nonfinancial corporations were sitting on a record $436 billion in cash. Through Dec. 14, the Standard & Poor's 500-stock index was up 11 percent for the year. And Wall Street was racking up its fourth-largest profit ever, a projected $19 billion for the year, according to the New York State Comptroller's office.
So if things aren't nearly as bad as they seem, why do they seem so bad? Jobs and houses have a lot to do with it. In the U.S., 17 percent of the workforce either couldn't find employment or was surviving on part-time jobs. Their collective frustration and scrimping are contagious. Despite interest rates so low they would shock previous generations, the housing market has all the bustle of a Pompeii bazaar; there were 202,000 new homes on the market at the end of October, the fewest since June 1968. Mix in an unrelenting foreclosure crisis, in which the centuries-old concept of title was thrown into doubt by faulty record-keeping, and it's easy to understand why so many people feel like they've lost a degree of control over their lives: because they have.
The notion that trusted institutions can restore our sense of security is as worn as that 1910 yearbook. Governments can't stop leaks— of oil or information—let alone regulate behavior. Passage of the Dodd-Frank Act in July may have constrained investment banks by putting limits on proprietary trading, but as Michael Lewis wrote in this magazine, "What's really striking is how little ability the outside world retains to find out what is going on inside these places—even after we have learned that what we don't know about them can kill us." The Tea Party, which resists meaning as ferociously as it resists Ben Bernanke, makes sense when seen as an exercise in fist-shaking. Two years after hope and change, it fumed at economic abstractions such as quantitative easing and bending the curve and asked a simple question: Why can't we have our country back?
Here's the thing: That America has been gone for years. Cheap labor and plentiful resources combined with ease of travel and communication have given emerging markets more than just a place at the table. In 2010, the U.S. added 937,000 jobs; Foxconn, the Taiwan-based maker of nearly every consumer electronic product you wanted this year, added 300,000. Fueled by gold, copper and coal, the most robust currency of the year against the dollar was the Mongolian tugrik. In India, competition for deals has become so intense that billionaire Ravi Ruia is branching out to Africa—buying coal mines in Mozambique and a Kenyan oil refinery. Competition is one of the pleasures of business and one of the foundations of America. That right hasn't been rescinded—it's been extended to people around the world. In a way, we've won. Now the game starts again.
Capitalism lives off of change. The new challenge is to shake off the trauma of a decade that started with the ultimate loss of control and get to work on winning the new century. There's a lesson to be found in the two most-talked-about companies of the year. On May 26, Apple (AAPL) blew past Microsoft (MSFT) to become the second-most-valuable company in the world (it's currently No. 3) largely by selling beautiful devices that let you control a universe with a swipe. Google (GOOG), which began the decade offering a pathway to infinity, now fights to keep its employees from defecting to Facebook, which chops infinity into an endless series of cul-de-sacs. Apple and Facebook figured out something about the consumer psyche—then they innovated to fill the need with astonishing results.
Our yearend issue takes some inspiration from that approach. We've tried to take all the contradictions and complexity of 2010 and make sense of them. Grouping the year into chapters—Normal, Jobs, Spills, Stuck, Currency, and Gaga—our writers, editors, photographers, art directors, and graphic whizzes collaborated to show all the ways in which diverse stories link up, sometimes in linear fashion, sometimes with unexpected leaps such as the price of gasoline, measured in bacon. We think it's unlike any previous issue of Bloomberg Businessweek. One thing's certain: It ain't dull.