•Dheeraj Nayyar: You are saying the entry of hedge funds basically brought in instability? So you prefer the older model where companies are controlled by promoters and big banks?

I am not saying that the entry of investment banks and hedge funds per se brought about this instability. It is a lack of transparency and regulation which is the cause of my concern. When you ask a small savings bank to correspond to certain capital base regulation, why should the same not apply to huge investment banks which are coming into the market with a million times the leverage and could have a more pronounced destructive effect? I am saying that you need to extend the regulatory system, which we have accepted for the classical banks, to the other financial instruments.

•Suman Jha: Does this financial crisis mark a break in the consensus that globalisation was the model for the entire world? Now countries have to devise localised methods that would combine global economic models as well?

To a certain extent you already have that. The state takeover of insurance companies and banks in the US is more pronounced than what President Chavez has been doing in Venezuela until now. We all have mixed economies and the mix we choose has to depend on the specific history and the requirements. However, this does not raise questions about whether market economies are still the right way to go. On the contrary: German history, for example, shows the success and strengths of a market economy. As soon as we opened up our markets, we were able to get the dynamic forces inherent in our economy to play out and that created enormous prosperity. The same is true for the situation we faced in Germany during reunification. There, the economic challenge was to takeover a socialist planned economy (of the German Democratic Republic or East Germany) which was not able to deliver the goods. The state was, basically, bankrupt and we introduced the parameters of a market economy, but one that was socially cushioned. We also introduced our health insurance system, our pension insurance system, and so on.

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