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Business News/ Opinion / Online-views/  A turning point for the global economic system

Will the financial sector meltdown in the developed economies lead to a rethink about the path the global economy has traversed in the last few decades?

Will it lead to changing the distorted incentives that fuelled the crisis?

There’s little doubt that just as the US’ Sarbanes-Oxley Act came out of the Enron fraud, so tighter oversight of banks’ lending principles and more stringent norms for capital adequacy will emerge out of the credit crisis.

In recent months, however, a more radical critique has emerged, often from very respectable quarters. Much of it, a la George Soros, views the predominance of the financial system as the tail wagging the dog and harks back to a supposedly more rational time back in the 1950s and 1960s, when finance was the handmaiden of business rather than its master and which has often been labelled the “Golden Age of Capitalism". Paul Volcker, ex-Federal Reserve chairman and icon among central bankers, said recently: “This bright new system, this practice in the United States, this practice in the United Kingdom and elsewhere, has broken down."

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Updated: 31 Jan 2012, 09:03 PM IST
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