How we got into this mess: a political primer.

• Author: Smick, David M.
• Position: FROM THE FOUNDER

The April 2 G20 meeting in London of the major world economic leaders could have been the most important global economic gathering since 1944, when the Bretton Woods conference reshaped the old order near the end of World War II.

But it wasn't.

Another Bretton Woods is not in the cards because U.S. and European officials, like ships passing in the night, couldn't agree on their response to the financial crisis. This is a tragedy because the world's policymakers are failing to deal with many fundamental issues, including the question of how we got into this mess. Lack of a widespread policy consensus adds confusion to global political constituencies dangerously unaware of the global nature of the financial crisis.

Someday, historical archeologists will sift through the rubble of this ugly financial period. They will conclude not only that our regulators were asleep at the switch, the big global banks deployed reckless amounts of leverage while losing any understanding of their own balance sheets, and gluttonous American consumers spent a lot more than they earned.

Historians will also discover the flip side to this morass. The entire world was out of balance. While Americans became dependent on massive leverage and over-consumption, large parts of the world, primarily the emerging markets, became dangerously dependent on exports--either goods and services or high-priced oil.

Today, with the industrialized economies in trouble, the emerging market economies based on this export model are crash landing. Why is that important for the rest of the world? The collapse of emerging markets from Hungary to South Korea, of course, could have consequences far beyond their borders. The World Trade Organization, moreover, forecasts overall global trade to decline by 9 percent this year. From 1929 to 1932, the beginning years of the Great Depression, foreign trade among developed economies plummeted in volume terms by about the same yearly amount.

The political community has an oversimplified view of the cause of the financial crisis. Somehow the bursting of a mere $300 billion U.S. subprime bubble in August 2007 brought a global financial system worth hundreds of trillions of dollars to its knees. Actually, the seeds of financial turmoil were planted much earlier--as odd as it sounds, with the 1989 fall of the Berlin Wall. Today's financial crisis all began as an unintended consequence of the collapse of the state-run economic model.

Within several years...