Wednesday 18 Jul 2018 | 20:30 | SYDNEY
Wednesday 18 Jul 2018 | 20:30 | SYDNEY

'Comrade Bush, how are you?'


Mark Thirlwell

15 October 2008 11:28

That's a quote from Hugo Chavez, welcoming the Bush Administration’s decision to nationalise large chunks of the US financial system.

It looks like the world’s leading economies have finally settled on a solution to the financial crisis: massive injections of public money to recapitalise their banking systems. Or in other words, nationalisation. Even the US is having to bite the bullet.

So that’s pretty much a slam dunk for the return of government thesis, then. Want even more evidence? Take a closer look at some of the details of the UK package for which Gordon Brown has been receiving a lot of credit. Banks that benefit from the UK government’s financial support have to agree to limit executive pay, adopt controls on how 2008 bonuses will be paid out to executives, accept restrictions on dividend payments, welcome Treasury appointed directors, and promise to maintain lending to home buyers and small businesses. That’s a fair bit of government control.

The magnitude of these changes will have all sorts of implications for the working of the world economy in coming years. Here’s a small one: remember that big debate about Sovereign Wealth Funds and government-controlled foreign investment earlier this year? Perhaps it will now take on a slightly different complexion, since a large swathe of the rich world’s financial system looks like ending up in the hands of its own governments.