Change of gear

US President Bush has prepared a “rescue plan” of 700 billion dollars, but this has been turned down by the House of Representatives. The central banks are injecting liquidity into the system, while various national governments, including Germany, the UK, Holland and Belgium, have passed directly to the nationalization of failing banks. Other capitals are toying with similar ideas. The Western financial system risks collapse: people tremble just hearing the word “subprime”; Wall Street and the City are pleading for a lifeline. And French President Nicolas Sarkozy, at the helm of the European Union, is calling for a EU summit to “redefine the global financial system”.The liberalist inebriation of the Eighties and Nineties, with the myths of Reagan and Thatcher, seems like a distant dream. Especially after the fall of the Berlin Wall, America and Europe thought they had in their hand the key to unstoppable development: Communism, and hence centralized economic management by the state, had been defeated by history; nothing remained but the free market. The spread of globalization furnished further ammunition to the politicians in office who, virtually till yesterday, continued to repeat the same liberalist mantras, gaining a hold over the electorate even in these early years of the new millennium.But we were – and still are – faced by a strange kind of laissez-faire, combined with growing nationalist theories and populist throwbacks: in other words, a free hand in the economy, while at the same time erecting barriers and protectionist measures to provide safeguards against the free competition (of others). And this is being aggravated by a continuous reduction of the measures of social solidarity and by the placing in doubt of the value of welfare and its related costs. The many warnings of the economists went unheard, or were even dismissed: “The usual prophets of doom”. Now that we are faced by the implosion of credit markets, with the speculative bubble that threatens savers, manufacturing firms and public accounts alike, the change of gear seems abrupt. Even the best of liberalist premises are being ditched. The return to ‘Colbertian’ models, Keynesian solutions, even judicious “third ways” able to bring home the point that the market has a need for rules, are now being prospected. It is pointed out that there does not exist a single economic theory able to work in so large and diversified a world, that there are new and seasoned protagonists on the world scene (heavyweights of the calibre of China, India and Brazil), and that there remains a huge part of the planet, colonized and exploited, that is excluded from development and from any form of solidarity and justice, and that patiently awaits its own slice of prosperity. In this phase we need to have a far-sighted vision. Ban Ki-moon, Secretary General of the United Nations, warns: “The danger exists of nations becoming locked into themselves instead of imagining a shared future and constructing a new world leadership”. He then adds: “There’s a need for a renewed vision of governance and business ethics, characterized by more compassion and less blind faith in the magic of the market”. In his inaugural speech at the last UN General Assembly Sarkozy himself urged: “Let us reconstruct together a regulated capitalism, where whole sections of financial activity are not abandoned to the sole evaluation of market operators and where the banks do their job, which is that of financing development and not speculation”.So the subprime crisis is forcing the West to re-think its strategy, in the hope that the necessary steps will be taken towards good solutions not only for the pockets and interests of the richest hemisphere of the planet. Not by chance does Brazilian President Lula warn: “The global character of this crisis demands multilateral, legitimate and recognized solutions”. The real challenge could start from out from here.