The political class can't face up to the scale of this crisis
Financial meltdown spells the end of the free market model. It is a gift for any leader prepared to advance a new agenda
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- Seumas Milne
- The Guardian,
- Thursday September 18 2008
The scale of the crisis engulfing the global financial system can no longer be in doubt. The events of the past few days have confirmed that we are living through the greatest meltdown since the Wall Street crash of 1929. For the second time in barely a week, an avowedly free market government in the citadel of laissez-faire capitalism has been forced to nationalise a linchpin of American finance - this time the world's biggest insurance company, AIG - in an effort to prevent the toxin of collapse spreading further through the US economy.
That followed hard on the heels of the nationalisation of the mortgage giants Freddie Mac and Fannie Mae; the bankruptcy of the country's fourth largest investment bank, Lehman Brothers - corroded by bad debt and bonus-fuelled speculation - and the forced takeover of Merrill Lynch. And a year after the credit crunch triggered the fatal run on Northern Rock, British high street retail banks are being sucked into the crisis: at one point yesterday the country's largest mortgage lender, HBOS, had lost almost 70% of its share value since the start of the week.
Meanwhile, the impact on the real economy is becoming stronger: output in Britain is falling and official unemployment is likely to rise above 2 million next year - the real figure will be significantly higher. More than 100,000 jobs are expected to go in finance alone. The only question is how deep and prolonged the recession will now be.
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