From Adam Smith’s single reference to the “invisible hand” in The Wealth of Nations, one would be hard pressed—even delusional—to derive a theory of the selfsufficiency of the market economy. Quite the contrary. As the headline of a commentary by Harvard economist/philosopher Amartya Sen proclaimed in the Financial Times on 11 March 2009, “Adam Smith’s market never stood alone”. Indeed by understanding that the self-interested individual may sometimes be “led by an invisible hand to promote an end which was no part of his intention”1, the founder of modern economics laid open the possibility that the invisible hand could yield either positive or negative, unintended results.

There is by now a consensus that the current global financial crisis may well be the worst since the Great Depression. As solutions are proposed, there is strong pressure from Wall Street to make sure that their way of doing business is protected. They don’t want to see finance suffer from too much regulation.
In times of crisis, we all have to pull together; sacrifices are asked of us all. But in a democracy, that does not mean silent ascension to whatever is proposed. The voices of Social Democrats and those who reject the free market mantra of the US, should be listened to as the debate about how to proceed moves forward. We must be allowed to help formulate the government responses to the crisis. There are stark differences of opinion as to the best way to proceed.
The response of the US should have focused more on helping the millions of Americans who were losing their homes, ensuring that the economy not go into the predictable (and predicted) recession into which it has been sinking, and minimizing the inevitable resulting hardship. The US has one of the worst unemployment schemes in the advanced industrial countries. The US is one of the few countries that does not recognize access to medicine as a basic human right; and when Americans lose their jobs, they lose their health insurance. This says something about priorities and values.

The financial crisis has shown how dysfunctional the current global financial architecture is for managing today’s global economy. The need to govern globalization has never been clearer, but at the same time the present institutional arrangements have never been so impotent. Calls for deep reforms and even for a second Bretton Woods Conference are, therefore most welcome. Similar calls for reform were made after the Asian and Russian crises, which engulfed most of the developing world in deep recessions, but they led at best to marginal reforms. The fact that this time the industrial countries are at the center of the storm may lead them into action, but it also creates the risk that measures of direct interest to developing countries will be marginalized from the agenda.

There is widespread agreement that the current global financial crisis has highlighted a number of problems of accountability. Much attention has been focused on the accountability of various private actors, ranging from mortgage lenders and investment bankers to credit rating agencies and chief executive officers. In our view, more attention needs to be paid to that of the transnational networks of financial officials which oversee the coordination of financial regulation at the international level. The crisis, after all, was generated not just by market actors but also by a failure of international regulation which was developed in these networks. Moreover, these same networks are now taking the lead role in international initiatives to reform financial regulation.