WORLD VIEW:MONETARISM, global- isation and empire. These were the principal ingredients of the neoliberal dish served up to the rest of the world by the United States over the last three decades. They contributed mightily to its hegemony, combining ideological attraction and politico-military power, writes Paul Gillespie
That free markets based on such principles are self-correcting and ought to be self-regulating was one of its mantras. Another was aptly caught during the Iraq invasion by a member of the Bush administration: "We're an empire now, and when we act we create our own reality".
The obverse also applies. The financial crisis has led many states in Europe, Asia and Latin America to question or reject the US's economic leadership and model. That is expected to undermine support for the dollar as a reserve currency, damage Washington's anti-regulatory zeal in opening up other markets, and boost efforts elsewhere to compete for global economic influence. It is equally likely to provoke political multipolarity, partly through a reconstruction of international institutions.
Speaking on Thursday, as Mr Bush struggled to get his $700 billion financial rescue plan accepted in Washington, German finance minister Peer Steinbrück said: "The US will lose its status as the superpower of the world financial system. This world will become multipolar".
On the same day Nicolas Sarkozy told a rally in Toulon: "The idea of the all-powerful market which must not be constrained by any rules, by any political intervention, was mad." But he went on to insist that "the financial crisis is not the crisis of capitalism" but betrayed its spirit.
At the UN in New York he called for a regulated capitalism to be rebuilt together through a summit meeting of the Group of Eight and associated states. German chancellor Angela Merkel joined Steinbrück in complaining bitterly that the US and the UK blocked her efforts to take such an initiative last year with dismissive contempt.
It is very instructive to see how rapidly the debate on capitalism's future has become entangled with the US financial crisis. The international response reminds us that despite its hegemonic attraction the US model, based on high credit-driven consumption, neglect of manufacturing and increasing inequality has been a special case. It has been replicated elsewhere, of course, notably in the UK, but has limited application in other parts of Europe. Ireland's economic openness to and sympathy for the US/ UK model makes us very vulnerable to its demise.
Sarkozy is surely right to argue that the financial crisis does not necessarily translate into a wider one for capitalism as a whole. He is concerned to head off any rejuvenation of the French left on the back of his own enthusiasm for other aspects of the US model.
Any "neo-comm"appeal will have to be based on the left's fresh analysis, insight and organisation, mindful of Milton Friedman's Leninist type advice quoted by Naomi Klein during the week: "Only a crisis, actual or perceived, produces real change. And when the crisis occurs, the change depends on the ideas that are lying around . . . our basic function" is "to keep the ideas ready until the politically impossible becomes politically inevitable".
France's state capitalism and Germany'smanaged one are distinct models, as is the Nordic one based on high taxation and social protection combined with labour flexibility. This variety has persisted through the deregulatory neoliberalism of recent years, inspired by the apparent Anglo-Saxon growth and dynamism and the EU's current centre-right majority.
All this also means there is no clear vision or consensus about what economic re-regulation would involve, whether at national, European or global levels. But the fact that the issue has surfaced so explicitly and immediately reveals a longer term trend and a real tipping point in world affairs. Urgent action to prevent recession becoming depression will propel political action - including an insistence that banks must not securitise more than a fixed proportion of their debts - and European ones are scarily over-leveraged.
Proposing such measures, Steinbrück rejected suggestions that an effort to rescue banks from toxic assets is needed in Germany or Europe. Nevertheless the sheer speed with which US financial issues course through the international system, creating liquidity problems and a credit crunch between banks, will force the pace. Expect more action at EU level, including more attention to Charlie McCreevy's package on financial regulation.
Political realignment at global level will surely follow. It is likely to involve the G8 and international monetary authorities as well as the UN, where the crisis suffused the General Assembly speeches.
The G8 is now quite unrepresentative of the global pattern of power. So are international financial institutions like the IMF. Ten years ago it imposed neoliberal terms on Asian nations after the economic crisis there, only to find the advice rejected in practice later. The UN Security Council is equally outmoded. In various ways China, Japan, Germany, Russia, Brazil, India and Indonesia will be pressing their cases for a larger role in these institutions as US power recedes.The EU will also demand a greater role in world affairs - Lisbon notwithstanding.
Much will depend on how the US recalibrates its international relations as these changes occur. An Obama victory would have greater international goodwill, but would not arrest them. Would McCain be tempted to do that in a resentful nationalist backlash using the US's still extraordinary military power?