What seems clear is that the severity of the downturn will end up reshaping the economic systems of many countries in profound ways: when the US bounces back, for example, it will do so with an economic system that looks and feels different from the existing one. A new economic paradigm is being brought to life by the scale of the crisis. Key will be the role of the state.

Three decades ago US president Ronald Reagan argued that government was part of the problem, not part of the solution. Today big government is back with a vengeance. Curiously, no one in the US or Britain seems to idolize government in the way they once did markets. But the failure of the international banking system, led by the death of self-standing investment banks, has meant that government was forced by necessity to ride in as a savior.

Many of the biggest London-based financial institutions are virtually state-owned as are huge American names like AIG. In the West, bankers are being savaged by parliamentarians. They ask: why should the poor’s taxes be used to bail out the rich who not only enjoyed fat bonuses but also helped bring the economic system to its knees? 

As this process continues expect more government scrutiny, more regulation, and more direct state intervention. And the rise of protectionism and financial nationalism have too already become evident. These will be tough times. As politicians grow fearful of offending voters pleading to have their jobs saved, countries will battle each other hard.  The irony is that, as they battle, their economic models may be showing signs of some convergence around the necessity of big government.