The extraordinary series of bank collapses and bailouts that have swirled round the world's financial markets in September-October 2008 continues to unfold. It is palpable that in relation to the global economy (as to global security), no one - bankers, traders, politicians, national governments or international agencies - is in control. But even at this stage of the crisis (whatever that stage proves to be), it is clear that the world's major economies are moving into recession.

Paul Rogers is professor of peace studies at Bradford University, northern England. He has been writing a weekly column on global security on openDemocracy since 26 September 2001

This in turn poses two questions: how deep and persistent will the recession be; and what are the chances of a real reform of international financial institutions so that they begin to meet the needs of citizens in all parts of the world?

The parallel view

There are no direct historical parallels to provide an adequate route-map here. The 1929 crash and subsequent depression was in a world where the globalisation of financial markets was far less developed; while later crises (the late-1980s downturns, Russia's mid-1990s economic collapse, and the east Asian problems of 1997-98) were only national or regional in scope. The most appropriate comparison is with the ten-month period immediately following the Yom Kippur/Ramadan war of October 1973. This saw 450% oil-price increase, and was accompanied by a surge in the prices of other commodities and by a widespread food crisis (see "The world's food insecurity", 24 April 2008). The commodity bull-market of the time benefited speculators on the futures markets more than the producer countries of the majority world, but still affected the economies of the industrialised world. 

What followed that crisis was not an egalitarian restructuring of world-trade relations but the rise of a neo-liberal ideology in the late 1970s that was embodied in Reaganomics and Thatcherism in the global north and the Washington consensus and structural adjustment in the global south (see Walden Bello, "Afterthoughts: A Primer on the Wall Street Meltdown", Focus on the Global South, October 2008). There was a shortlived opportunity in 1974-75 to move to the United Nations ideal of a "new international economic order", but the industrialised states of the north Atlantic and west Pacific would have none of it and the opportunity was lost (see "The Financial Crisis and Sustainable Security", Oxford Research Group, September 2008).

In addition to his weekly openDemocracy column, Paul Rogers writes an international security monthly briefing for the Oxford Research Group; for details, click herePaul Rogers's most recent book is Why We're Losing the War on Terror (Polity, 2007) - an analysis of the strategic misjudgments of the post-9/11 era and why a new security paradigm is needed

The considerable financial and political shocks of September-October 2008 make it just possible to envisage a new start. Britain's prime minister Gordon Brown has called for a Bretton Woods-type summit that might launch the process of creating a better model of financial governance. This would certainly be welcome, but past experience suggests that there is little desire for any kind of fundamental reassessment of the structure of the globalised liberal market.

This is because the common understanding of the crisis relates very largely to faults in the working of the world's banking system, with the consequent belief that what is required is cooperative transnational regulation. There is little or no appreciation of the deep structural problems that go far beyond the buccaneering behaviour that took so many banks into the sub-prime risks.

The wider angle

The globalised liberal market of the 1970s-2000s may have produced worldwide economic growth, but the great majority of its benefits have been concentrated in the hands of barely 20% of the world's people. This trans-global elite which claims over 80% of total annual income includes most (but by no means all) people in north America, western Europe and Japan, as well as sizeable minorities in many countries including the wealthier developing ones such as India, China and Brazil. The wealth differential is even more extreme, with just 10% of the world's people possessing 85% of household wealth against half the people owning barely 1% (see James Davies, Susanna Sandstrom, Anthony Shorrocks & Edward N Wolff, "The World Distribution of Household Wealth", WIDER Angle, 2/2006 [World Institute for Development Economics Research, Helsinki]).

This extraordinary socio-economic divide is a far greater failing of the current international economic order than the recent follies of the financial system, yet it is the latter that dominates current concerns and is at the centre of establishment thinking about better regulation. Even within these narrow terms, however, a more strongly regulated financial order may be achieved through international cooperation. This could start with the G8-sponsored summit planned to be held in November 2008. The British prime minister Gordon Brown, for example, is calling for:

* an effective early-warning system

* a framework for transnational responses

* international "colleges of supervisors" to monitor the world's leading companies and financial institutions (see "Overhaul of global markets is 'close'", European Voice, 15 October 2008).

The problem is that even if that does happen, it will do no more than make a fundamentally flawed economic order more efficient in maintaining the current deep inequalities. There may be less risk of banking failures and less chance of wild speculation ending in bursting bubbles but nothing will be done to address the much more deep-seated structural problems.

If these are not addressed, there is every chance that  one of the main effects of the developing recession will be to exacerbate the tensions that are already so widespread, not least the deep-seated social unrest in China and India (see "China and India: heartlands of global protest", 7 August 2008). There is, after all, abundant evidence that the recession will disproportionately have an impact on poorer communities across the world (see Abid Aslam, "Poor Sidelined in Rush to Contain Financial Crisis", Terra Viva/IPS, 14 October 2008). In particular, people already affected by food shortages will become even more vulnerable (see Wolfgang Kerler, "A Billion Hungry People Need Rescue Plan Too", Terra Viva/IPS, 15 October 2008).

What appears most likely at the emergency G8 summit is an emphasis on "cross-border supervision of multinational financial companies", including reform of the International Monetary Fund (see "EU leaders seek broad bank reform", BBC News, 15 October 2008). There is some talk of resurrecting the Doha trade talks that reached a point of failure in July 2008, but little indication that they could be linked to the economic well-being of the majority world.

The time to act

While international efforts to regulate "casino capitalism" will be no bad thing, the summit has to go far beyond that. The trade talks have to be reconstituted and structured to focus on trade/development links to the majority world; this would be involve moving to a much fairer and managed world- trade system embracing commodity agreements, compensatory finance, tariff preferences and all the other reforms that have been cast into outer darkness for the best part of thirty years. It also has to address the continuing issue of indebtedness while bringing under control the excesses of currency speculation by means of some version of the Tobin-tax proposals.

Any talk of planned world markets will no doubt be anathema to a political order that has rooted itself in support of the liberal-market economy; but it is, after all, no more radical than the nationalisation of banks and insurance companies in the last two weeks.

As Gordon Brown's policy response to the crisis is emulated by other states, he is being hailed in some quarters as some kind of financial superhero (see Paul Krugman, "Gordon does good", International Herald Tribune, 13 October 2008). Brown may indeed deserve some credit, and it is true that his past record in raising the debt issue at G7 meetings in the late 1990s shows him to be aware of wider global issues.

Now, he and his colleagues have an opportunity to be genuinely radical in reforming key aspects of the global economy. There are many signs that unusual circumstances have created a rare opportunity (see "Capitalism at bay", Economist, 16 October 2008). In light of the shocks of September-October 2008, proposals which would have been shouted down by powerful financial interests only a short time before might now have a chance of being heard. If Gordon Brown and other European and G8 leaders - with the pressure of citizens at the sharp end of the global convulsions at their backs - rise to the occasion, then some good might come out of the mess the world is now in.