It is abundantly clear to everyone of course that the global financial crisis has now gone from ’slow burning’ mode to a more acute situation. Governments are already being forced into un-imagined “radical” responses. Could they now be open to more radical proposals from the left that tackle the systemic causes of the financial crisis? The crisis has already played an important role in finally discrediting the ideas that brought us all here to this pass, such as monetarism , deregulation, the ‘wrong’ kind of (neoliberal) globalisation; greed, risk taking speculation and excess, as well as the regulatory ‘failure’ and political failure that allowed this crisis. It also holds the possibility of a significant shift in political environment and public attitudes that could favour a fundamental re-working of the institutions that govern finance. UK Prime Minister Brown has reiterated his call for a new global regulatory system over finance that is global. A debate on the longer term re-organisation of the global financial system is already beginning in earnest in the press and media, and in central banking and government circles. However despite rhetoric of radical changes, the elites are unlikely to propose anything that fundamentally changes the system. The Left needs to engage so that the focus of reforms is not just aimed at creating basic stability but also re-disciplining capital into socially responsible, socially useful and constructive ends - ensured by much stronger mechanisms of regulation, public ownership and control. At the moment the mainstream focus is on the ‘fire brigade’ approach- ie to put out each fire as it arises before they spread (contagion!) to other all too inter-linked institutions and more dominoes fall. This is based on the very real fear of allowing the financial and liquidity crisis to spill over into the real economy and precipitate a deep and prolonged global recession (or in other words another Great Depression). It is also a response to what Susan Strange has argued is the nature of the ‘regulatory cycle’: that regulators are always ‘behind’, ie reactive and acting ad hoc to any acute immediate crisis. In the short term they merely facilitate the system to limp along, though do not create coherent comprehensive or decisive solutions. This is politically understandable, but does not appear to be working, even in the short-term. As Keynes pointed out, in regard to the liquidity crisis post crash of 29, you may provide the banks with more liquidity (as the central bankers are presently doing on a large scale) but you cannot force the banks to lend. Banks are in fact (predictably) hoarding cash and ‘parking cash’ with central banks. There is also a rush into treasury securities- while demand for gold bullion and coin is also skyrocketing- and there is a predicted stampede coming soon out of hedge funds and into ’safe’ (ie cash) havens. This tells us that the Paulson plan is a finger in the dyke and in no way a real long term ’solution.’ At least public outrage in the US has moved Congress to insist on a new plan (rather than be railroaded into a Republican plan that had no public oversight or guarantees to speak of and simply did ‘bail out’ bankers in the name of systemic stability). Obama is right to play to public anger that this is an outrage for the poor and working people to be called upon to rescue the rich and arrogant and reckless- nevertheless- a ‘plan’ must be approved -if only to fulfill the expectation of one. But as Keynes argued - the real problem is not liquidity per se now- but how to restart the lending cycle and ensure credit to businesses, local governments and individuals. There is no easy solution to that problem. It hinges in part on that elusive ‘confidence’ and the idea that there is a ‘reasonable expectation of profit’ in the future rather than an expectation (and fear) of losses. Unless the cycle of lending, borrowing, and credit creation can be effectively restarted however, the contractionary cycle will deepen and the credit squeeze threatens to become a credit freeze, with dire consequences for the real economy. The impending crisis means that governments have had to resort to ‘radical’ measures of direct intervention, including nationalisations and more. Russia for example has shut its stock market, while pumping billions of dollars via a state vehicle into support for paying the loans of Russian businesses to prevent defaults. In the US this may have caused shock - with a Republican congressman remarked during the debate that the bailout signaled ‘a slippery slope to socialism’ – but it is becoming a reality. Such measures are ’round one’ towards acceptance of the need for radical responses- but there is also ’round two’ in the making- which constitutes the much better thought, more radical, and more long term responses to the systemic causes of the current crisis.

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Barry Gills, a former TNI Fellow is the editor of the academic journal Globalizations and the Rethinking Globalizations book series (Routledge).