The world as we know it has changed forever”. This is the refrain we heard post 9/11. This is the refrain we hear today. The contours of the change, post-9/11, soon become physically manifest. Bush declared war on terrorism; his neocon advisors asserted the US’s preemptive right to intrude on other nations’ sovereignty. The contours of the change after the financial tsunami have still to be fully delineated but a culling of commentary and a review of the decisions under consideration suggest five emergent trends.

· “We are all Keynesians now”: John Maynard Keynes was the most influential voice in economic circles for perhaps the first three decades after World War II. Most governments accepted his prescription of tax cutbacks and expansive public expenditure to secure growth and low unemployment. But then Mrs. Thatcher came to power. She blamed Keynesianism for the inflation of the 70s and put her economic eggs into the basket of minimal government and the “invisible hand” of the market. Her success and that of the other countries that followed her lead in generating non inflationary growth put paid to Keynesian economics. But today the Keynesian prescription has been resurrected. Most governments are looking to pump state funds into public projects and lower taxes not so much to resolve the banking crisis but to break out of the trough of a deep and enduring recession. It is the “fierce urgency of the now” (Martin Luther King) that has turned economic ministers into latter-day Keynesians.

“We are all socialists now, comrade”: A typical exaggerated caption from the Daily Telegraph. It does however highlight the shifting boundaries of the relationship between the state and the market. Francis Fukuyama shot into the limelight a few years back with his book The End of History claiming that the collapse of the Berlin Wall symbolised not simply the end of communism but also the conclusive superiority of the liberal democratic and laissez faire capitalist model of political economy. To the extent that postwar ‘history’ could be defined as the clash between Marx and Adam Smith, the fall represented (metaphorically at least) its end. Today however with the de facto nationalisation of some of the largest financial institutions in the US and Europe; Sarkozy’s call to set up a sovereign wealth fund to protect French companies from cash-rich predators, and Greenspan’s public mea culpa that he overestimated the market’s capability to regulate itself, the Fukuyama prognosis is not compelling. The pendulum has not of course swung to the extent suggested by the caption. And it would be a mistake to throw the baby of free market entrepreneuralism and efficiency out with the muddied waters of greedy capitalism. But that said, the proponents of unfettered market power have certainly had their wings more than just clipped.

... contd.