Paul Krugman, New York Times columnist and recent Nobel laureate, rightly pointed to the reemergence of Keynesianism in an article praising British Prime Minister Gordon Brown for his response to the current financial crisis (the partial renationalization of banks), contrasting it to the hesitant decision making process in the United States:
It's hard to avoid the sense that Mr. Paulson's initial response was distorted by ideology. Remember, he works for an administration whose philosophy of government can be summed up as "private good, public bad," which must have made it hard to face up to the need for partial government ownership of the financial sector.
Commentators have already stated that the current financial crisis is far more serious than previous crisis because it threatens the global banking system as a whole. The collapse of the government backed mortgage system in the United States, followed by the failing of major investment banks, will entail a growth in risk aversion. This, in turn, will slow down investment and growth.
Because neoliberalism IS the problem the solution has to be found elsewhere. The era of extreme deregulation and the supremacy of the free market has ended. States have to intervene decisively in order to alleviate the negative repercussions of the crisis, particularly on the the poor.
Latin America has undoubtedly some serious challenges ahead. The conservative Calderon government initially declared that a crisis in the United States would have no serious impact as far as Mexico was concerned. Calderon was quickly proved wrong. The peso suffered a devaluation, and his government was forced to craft a crisis package which entails a significant increase in government infrastructure spending. A large amount will go towards the construction of Mexico's first oil refinery in 30 years.
In a clear example of poetic justice for Mexican opposition, the Calderon announcement comes on the tails of a government-sponsored campaign that attempted to convince Mexicans that the only way to ever construct such a refinery and to modernize PEMEX–Mexico's national petroleum company–would be with the partial privatization of Mexico's most profitable industry and the letting in of foreign and national private investment.
It seems that the financial crisis has momentarily overriden the Calderon government's natural inclination to bow out to private interests and the crony capitalism which has thrived in the country ever since the first neoliberal reforms were launched in the 1980s.
