A New Age Of Global Capitalism Starts Now

It's also worth asking whether political proclamations can actually stop people from trying to make 25 percent returns. Can capitalism itself ever really be hobbled? Or will its more buccaneering side always re-emerge after periods of repression? Hedge funds, wounded by recent losses, may be heading for the hills (they've parked some $100 billion in money market funds in recent weeks). But there are currently no major proposals to regulate them, and at some point, their thrusting managers will be back, ready to take on the risk that investment bankers will no longer hold. Likewise, sovereign wealth funds and new emerging markets powers are flush with cash—Asian central banks alone have reserves of more than $4 trillion dollars, enough to fund several Paulson plans. This growing wealth was a major driver of financial innovation over the past several years. Now, all that money will inspire a new kind of creativity focused on circumventing any new regulations. Investors and the people who service them will seek ever more creative ways to dodge the rules.

A good chunk of the new money will undoubtedly end up in Western markets. And while that will certainly increase the power and political clout of emerging powers, and further catalyze the shift to a more multipolar world, it won't mean the wholesale demise of the free-market system. While China has used the crisis on Wall Street as an opportunity to tout its own authoritarian capitalism, the "Chinese model" resulted in market losses of 66 percent this year, and massive wealth destruction among ordinary people—hardly a comparative success. Europeans, despite their schadenfreude, don't really have anything better to offer than Anglo-style capitalism, either. Their own regimes simply tend to follow the Anglo-American lead, albeit with resentment, a few years later, and with a lot of brakes put on by the state.

That said, the world as it enters this new economic era may in fact end up looking more like Europe. "We will muddle through and complain a lot, with no major growth surges, but no disasters, either," says Bob McKee, chief economist at London-based Independent Strategy. We will once again be savers rather than investors. A culture of thrift will reign, as credit continues to be tight in the short term. And then, at some point, the money will flow again. New bubbles will be formed. Where they will be—in energy, or green technology, or space—is anyone's guess. But regardless of bailouts and new laws, they will come again. And when they do, everyone will have forgotten that the world almost came to an end in 2008.

With Stefan Theil in Berlin, William Underhill and Sophie Grove in London, Mac Margolis in Rio and Tracy Mcnicoll in Paris

© 2008