From global imbalances to global reorganisations

The world feels itself to be in transition, but to what is unclear. Will the liberal\udmarket model retain its normative primacy once some semblance of normality is\udrestored, or will other varieties of capitalism, with a bigger role of the state, acquire\udmore legitimacy? The answer depends partly on one’s explanation for the current\udcrisis. This essay argues, first, that global imbalances had too important a role to\udignore, in contrast to a mainstream view that focuses on mistakes in monetary policy\udand financial regulation. It argues, second, that in light of global dynamics, the crisis\udis likely to become worse by early 2010—which, on the face of it, makes significant\udreorganisations of capitalism more likely. The third section lays out what should be\uddone to reconfigure capitalism at national and international levels. The final section\uddiscusses the political economy of policy reforms in terms of the difficult translation\udfrom what should be done to what can be done. The broad conclusion is that in five\udyears from now the liberal market model will have been restored to normative\udprimacy and ‘we must have more globalization’ will again be the elite rallying cry;\udbut the crisis will have left behind sufficient doubts about factual propositions and\udvalue priorities that political parties and economists advocating alternatives will have\udmore scope than they have had for the past three decades