As this year's financial woes spread beyond Wall Street to engulf much of the world's economy, the contours of debate over the crisis have also broadened. First narrowly defined around loans and bailouts, the debate has morphed into a wholesale reconsideration of the capitalist model and free-market economic orthodoxy. "Laissez-faire is finished," said French President Nicolas Sarkozy in a recent speech. "The all-powerful market that always knows best is finished."
Sarkozy's notion is grounded in the events of recent weeks. Developed economies that had espoused a hands-off economic approach have undertaken economic interventions of historic proportion. This interactive graphic from the Financial Times shows the global extent of this shift. The United States, most countries in western Europe, Japan, and South Korea have all funded private banks through recapitalizations. A handful of countries, including the United States, took the more radical step of buying assets directly from private firms. A much broader swath of countries have engaged in other forms of intervention that range from guaranteeing bank deposits to cracking down on short-selling to attempting to boost private lending markets.
The icons of flourishing U.S. capitalism--enormous investment banks that thrived off deregulated markets and significant leverage--found themselves unable to manage those privileges and forced to transform into bank holding companies (NYT). Meanwhile, both the United States and Britain nationalized mortgage lending firms, a move many economists and government officials had long resisted as overly interventionist, but which many came around to see as necessary. Faltering U.S. markets have also hampered American efforts to emphasize deregulation abroad. The Washington Post reports the current crisis has severely undermined Washington's credibility as a proponent of global capitalism.
The spectacle of a crisis of confidence in capitalism, largely...
