A New Age Of Global Capitalism Starts Now

It was a week for dramatic words and even more dramatic gestures. as the U.S. congress debated, then vetoed, and then revised and ultimately passed a $700 billion plan to bail out the country's failing banks, world stock markets rose and fell in what can really only be described as rollercoaster fashion. The Dow recorded its biggest loss in two decades before making up much of the ground, falling and rising again in triple digits each day of the week as Treasury Secretary Henry Paulson's plan wound its way through Congress. Among lenders, paranoia reigned—record-high interbank lending rates underscored the fact that after weeks of financial fall-out, nobody knew who was holding the next basket of exploding assets. Individual investors were gripped by siege mentality. The usual queues of limousines formed in front of London's posh Savoy Place were outnumbered by queues of customers inside, piling into a gold exchange looking to turn stacks of cash into bullion, many paying premiums of up to $100 an ounce above spot prices to walk away with coin and bars in hand. Demand for Krugerrands threatened to outstrip supply. "At least it's a safe bet," said one buyer. "I mean, what are these banks doing with our money?"

It's the question on everyone's lips. And increasingly, it's not just bank solvency that's being questioned, but the entire Anglo-Saxon capitalist system. Three decades of conventional economic wisdom said the markets were supposed to know best, but as U.S. politicians bowed to public outrage at the idea of average Joes spending nearly a trillion dollars of their hard-earned cash to bail out profligate masters of the universe who seemed to have in the end created nothing of real value (in fact, quite the opposite), it was clear that the idea that "what's good for Wall Street is also good for Main Street" is over.

Now, as the clout of Reagan–Thatcher ideology diminishes before our eyes, there's a palatable sense that a line has been drawn—we are leaving the golden era of free markets, easy credit, high-risk deals, and big paydays, and entering a new paradigm of tight money, tough regulation, less speculation and more government meddling in markets. Politicians everywhere, eager to reassert themselves, are calling for new regulation and "reform" of the financial system. Meanwhile, authoritarian capitalist states like China, along with social democratic nations like Germany and France, greeted the crisis with an attitude somewhere in between relief and "I told you so." Both have been fearful of the Anglo model, albeit for different reasons. The demise of Wall Street now meant that their own models might not only survive, but flourish.

In France, President Sarkozy is planning a world forum to "rethink capitalism," declaring "the legitimacy of public powers to intervene in the functioning of the financial system is no longer in question." Germany's Angela Merkel remarked last week, "A few years ago, it was fashionable to say that governments would be ever weaker in a globalized world. I never shared that view." She added that it was the Americans and British who rejected her calls for more financial regulation at the G8 meeting. Her finance minister, Peer Steinbrück, went a step further, saying the crisis would lead to "the end of America as a financial superpower."

It's a sentiment that will no doubt draw cheers in Russia, where Putin is busy blaming the "American contagion" for his market troubles, and in Latin America, where leaders from Hugo Chávez to Cristina Fernández de Kirchner to Evo Morales are declaring neoliberalism DOA. "The U.S. economic model is terminally ill," crowed Ecuador's Rafael Correa last week.

Certainly, there is no lack of schadenfreude surrounding the fall of Wall Street. But beyond that is a sense, even from many eminent players within the financial community, that things had indeed gone too far. "At a fundamental level, the model of globalization and deregulation has blown up, and that's what's caused the current crisis," says investor and philanthropist George Soros, one of the first to sound a warning about the dangers of complex securitization of nearly everything, from mortgages to credit-card bills. "We're now at the end of that ideology." The future, says Soros, will be "less freewheeling, less aggressively speculative, less leveraged, and tighter on credit. We're in the midst of a massive de-leveraging."