Anthony Barnett (London, OK): There are 'must reads' in the sense of 'catch this latest hot gossip' and there are 'must reads' which are about 'if you have not read this you are not a grown up'. This is about the latter, an article you have to read if you want to know about where we are now. Martin Wolf of the FT has hit the nail on the head. This is its opening sentence: "Remember Friday March 14 2008: it was the day the dream of global free- market capitalism died."
Way back in September when we still lived in a time where it seemed that Gordon Brown could do little wrong, I wrote a post on listening to the then chief executive of Northern Rock. He stopped me eating my breakfast when, in a Today programme interview, he referred to 9 August 2007 as "the day the world changed". This was the moment his reckless model of borrowing short and lending long in a market of ever rising property values came to a shuddering halt, as the banks said 'hold on a moment'; the wax melted from his feathers and he started his pitiless, Icarus descent.
That was the start of the "credit crunch". Now it seems we are only half way through and have seen another turning point. Martin Wolf says he "greatly regrets" what has happened and that it brings to an end thirty years of deregulation and the capitalist growth that went with it. He is the first person I've read to make this argument:
Until recently, it was possible to tell the Chinese, the Indians or those who suffered significant financial crises in the past two decades that there existed a financial system both free and robust. That is the case no longer. It will be hard, indeed, to persuade such countries that the market failures revealed in the US and other high-income countries are not a dire warning. If the US, with its vast experience and resources, was unable to avoid these traps, why, they will ask, should we expect to do better?
He accepts that there will be more regulation - but of what kind ? - and that the financial market will now have to pay for the risk the rest of us are taking to ensure its functioning, as Tony Curzon Price has been arguing in OK.
There are parochial political consequences here in the UK which feed into the political crisis of Brown's lack of coherent direction (hat tip Speccy's James Forsyth). Brown and Blair embraced 'globalisation' as the growth-delivering force one had to be part of to succeed. Now a new kind of politics is demanded. What was the future once, is no longer. But who said that? Cameron and the Conservatives should beware of positioning themselves as the best form of continuity of a world that has passed away.
It's going to get worse too. Tucked away on page 26 of the same issue of the FT is an article by Peter Marsh and Adrian Michaels on the machine tool industry, a key indicator of the future of the real world economy. They report on an interview with one of the world's leading manufacturers, Andrea Riello. "If you speak to industrial companies and they say they are not going to be affected [by the credit problems], don't believe them", he told them, "The most likely scenario is disaster".
