IT WAS NOT SO LONG AGO THAT BEAR Sterns, Lehman Brothers and Merrill Lynch were thriving businesses and leading players in international finance. Today they have disappeared or lost their independence, while the likes of Northern Rock, Hypo Real Estate and Dexia have been saved from ruin only by state intervention.
Let us be very clear about it. What saved global finance was political engagement and a co-ordinated response from nation states in the form of massive fiscal stimuli. Many companies, countries and individuals were hit hard, some seriously. But members of the Group of 20 were able to offer a collective and effective response that mitigated the impact of the crisis and restored confidence at a faster rate than many analysts had predicted.
The world was pulled out of the financial crisis with a comprehensive package of measures from G20 members, including budgetary and monetary aid, support for the banking sector so it could continue to finance the global economy, protection of global trade and a determination to safeguard the financial flows to emerging countries, particularly by giving a significant capital injection to international financial institutions. The call of protectionism was also resisted, proof that we had learned the lesson of the Great Depression 80 years before.