Unexpected twists make 2008 an epochal year

In retrospect, the causes of today's woes seem obvious. House prices rose too high, driven by irresponsible lending and borrowing. The bubble burst, pulling down consumer spending and economies around the world.

Proponents of the magic of free markets are in retreat. Former Federal Reserve Chairman Alan Greenspan admitted to Congress in October that he had found a "flaw" in his ideology, and that he was "in a state of shocked disbelief" about the failure of lending institutions to protect themselves against the possibility of failure.

In the US, the defining moment of the financial crisis seems to be Lehman Brothers' September bankruptcy, which froze bank lending as institutions retreated in fear of who might fail next. But outside the US, others might point to Iceland, an entire nation brought low by an overextended banking sector.

World economic growth as a whole now seems certain to fall below 3 percent, a level at which the World Bank rates the globe to technically be in recession. Some emerging nations, however, see opportunity in the troubles of the developed world.

China enters superpower ranks

Growth in China, for instance, will undoubtedly slow, as its major western customers retrench. But given the current bad image of US-style free markets, plus China's huge store of dollar reserves, Beijing's rise to superpower influence may be speeded by the financial crisis of '08.

Meanwhile, the Chinese Olympics showcased three decades of national development – and China's ruthless smothering of dissent.

Elsewhere in the world, the New York Philharmonic played in North Korea (February). Iran test fired long-range ballistic missiles (July). Pervez Musharraf resigned the presidency of Pakistan (August). Russia and Georgia engaged in a brief but fierce war over South Ossetia (August).

And in sports, the world saw the rise of a new champion with an eager, friendly touch. No, not Michael Phelps – though those gold medals were impressive, not to mention the size of his breakfasts.

In 2008, Uno the beagle became the first of his breed to win the Westminster Dog Show, the canine equivalent of the Olympics. By all accounts, he is the most popular top dog ever, with public appearances booked deep into 2009.

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