The stunning scale of the interventions under way in financial markets – barely imaginable just weeks ago – make it seem that nothing will ever be the same. A crisis so grave, so weighted with ideological implications, must point to a grand political realignment, with much of what we thought we knew about the role of governments and markets overthrown. So it is argued, and so many people hope.
It is possible. It happened after the Great Depression. But I doubt that this crisis will change the world anything like as profoundly. In the end, I doubt it will even overthrow much of the conventional wisdom about states and markets.
In thinking through the parallel with the 1930s, the important question is how far the financial emergency will infect the rest of the economy. The Depression changed the US and the world because it wrecked the lives of countless millions of people.
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