British Prime Minister Gordon Brown has been enjoying a much-needed boost to his status and popularity as he watches country after country adopt the same pattern as Britain in propping up their struggling banking sectors.
But preventing widespread bank collapse is of course only one piece of the jigsaw of disaster that now threatens the global economy. Money and credit flows are the lifeblood on the whole economic system, and when they become infected the repercussions are felt everywhere. Many of them are unpredictable.
The most immediate and painful reaction as the huge edifice of paper credit crumples can already be seen in the shriveling of trade and markets worldwide, and therefore the corresponding shrinkage and cutbacks in production by suppliers to those markets wherever they may be.
No country will be immune from this process, and it explains why stock markets round the globe have all continued to sag even though the big banks may have been saved for the moment from going under. Every sign points toward lower profits, lower yields and lower earnings.
Even Japan, which experienced a severe credit contraction throughout the 1990s, is seeing its equity share values plunge along with everyone else.
Curtailed production in turn spells closures, layoffs and rising unemployment — an outcome that every democratic government dreads. In the British context this means that the triumph of stabilizing the financial system by the radical method of acquiring huge state holdings in the major banks may be short-lived as the fallout from unemployment grows.
A parallel consequence is that with lower demand come surpluses of unwanted commodities and lower prices for metals, for foodstuffs and most notably for oil. For many, this will be a welcome relief after the ferocious rises in food and fuel prices of recent years.
But for those who live by exporting commodities, or are left without a job, or have seen their savings decimated, it will be poor compensation.
As trade diminishes, the political pressures inside each nation for protection from the cold winds outside will increase. This has already begun, as prospects for further liberalization through the so-called Doha round of negotiations within the World Trade Organization look dimmer than ever.
Despite these grim possibilities, the gloom at what has happened should not be total. We have been living in a series of unhealthy bubbles, and once they have burst, life will have its advantages.
Oil and commodity prices, which were far too high, will sink back to manageable levels (even though this may weaken incentives to invest in green alternatives and renewables). Inflationary pressures generally will ease. Countries that were growing too rich with easy oil money and maybe a bit too arrogant (one thinks of Russia with its recent aggressiveness in Georgia) may well feel they have to curb their actions and behave more consensually.
The puncturing of the property bubble was also overdue. At last younger families will be able, at least in Britain and America, to buy a home without mortgaging their entire life’s income in the process.
More generally, we may see the past inclination of U.S. leaders to assert American “leadership” here, there and everywhere, whether it is welcomed or not, give way to a more tempered, less unilateralist and even more humble approach, now that they are no longer master of the financial universe.
Above all, without wishing to see a return to centralized state socialism that paralyzed and impoverished the 20th century for so many, this may be a time, as the state shores up the banks, when the balance between the state and the private individual becomes more settled and balanced and less of an ideological frontier war. The old polarity between the fears of harsh state dominance and the fears of private greed could give way to a more comfortable partnership between interactive and responsive governance working with an empowered and involved private citizenry.
But for these blessings we may have to wait. In the meanwhile fright and panic rock the world scene. The mass participation in financial markets which the Internet age permits has led inevitably to mass shifts of mood and breathtaking volatility. Yet fear is always a dreadful counselor — and crowd fear the worst of all. To prevent such global moods from producing knee-jerk responses and impetuous political reactions (as occurred after the Great Depression of the 1930s) will require statesmanship and powers of understanding and explanation of the very highest order.
Perhaps that kind of leadership is just over the horizon and on its way toward us. But it is not visible yet.