It is said of King Solomon that he had a servant whisper to him repeatedly – when things went well and when things went badly – “this, too, will pass”. Crises do pass, even the most intense ones. But after the current global economic crisis, there will be no return to the status quo ante. For the world has looked into an abyss. The experience of the 1930s led to the process of building a new world order: one that began at Bretton Woods in July 1944, even before the end of the Second World War. Today, the manifest failure of market fundamentalism and the need for a rebalancing of the world’s economy will inevitably be the starting point for a new new world order. There may be some hardcore faithful who continue to believe that business as usual will resume, but it is already clear that society the world over has demanded remorse from the practitioners of capitalism and action from its politicians.
Banks have been at the epicentre of the storm of public outrage. The sins of arrogance, greed, untrustworthiness and callousness are hard to forgive. But what is clear is that there are many lessons to be learned – not just by banks, but also by governments and regulators, rating agencies, investors and borrowers. All succumbed to the temptations of short-term profit at the expense of the creation of real long-term value.
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