Afew months ago, under completely different circumstances, I had come to question the cheek of people who came to give us lessons about the need to do away with government?s attempts to outguess markets.

Unfettered freedom of markets, we were admonished, would take care of all our problems. What these pundits seemed to have conveniently forgotten to tell us was that this applied only when markets are looking up. As soon as it turns down it becomes essential for government to intervene.

Look at what happened on Wall Street. I had then specifically mentioned the case of American Banks teetering on the edge of bankruptcy and running to Sovereign Wealth Funds cap in hand. It would seem that they failed miserably in their desperate attempts.

The argument, then and now is not that Soviet-type planning would be the panacea but that any fundamentalism whether religious or economic, is a denial of judgement in favour of dogma. This can only lead to disasters.

To wit, the financial meltdown on Wall Street, which has led to the downfall of some of the symbols of financial capitalism. What went wrong during this last decade or so which has led to the demise of institutions which were more than a century old? As these words are being printed, Goldman Sachs and Morgan Stanley have announced that they are giving up on their erswhile Investment Bank models and joining the ranks of more regulated conventional banking institutions, marking the definitive demise of Wall Street as we have known it up to now.

The events signal the end to the era of financial globalization in which every formula which could be concocted on the assumption that assets values had somehow been freed from the rules of gravity and would fly forever, would earn money to their formulators. This may sound like an oversimplification, when the sums involved run into billions and the lives of thousands of people are at risk of being totally disrupted, but is it? Many clichés have popped up recently in the attempts to make something out of this horrible mess, the most popular being that ?losses are being socialized while profits were privatized? raising the serious issue of ?moral hazard?. When the US government moved in to ?nationalize? the assets of the falling behemoths on Wall Street it became clear that the famous, or should we say ?infamous? hand may be invisible but its shamelessness was there for all to see. Indeed as soon as Henry Paulson announced his intention to implement a ?comprehensive? solution to the crisis, stock markets the world over, immediately reacted to realize intra day gains which, in some cases, had not been witnessed for years. The officiating priests of free markets did not have any compunction in picking up a profit under the guard of the heavy handed protection of the state. All this led Floyd Norris in his column in the International Herald Tribune (19.09.08) to write ?Now we know what Richard Fuld did wrong at Lehman Brothers, thereby forcing it into bankruptcy. He did not take enough risks. Had he had the foresight to write a lot more credit default swaps ? so that the government feared chaos if Lehman defaulted ? then perhaps the US government would have nationalized Lehman just as??

<I> ?The events signal the end to the era of financial globalization in which every formula which could be concocted on the assumption that assets values had somehow been freed from the rules of gravity and would fly for ever, would earn money to their formulators. ? </I>

While describing the various degrees of uncertainties faced by humans throughout history, Douglas C. North distinguishes be-tween uncertainty that can be reduced by increasing the stock of knowledge within the existing institutional framework and uncertainty that can be reduced only by altering the institutional framework. Economic historians studying these momentous events on Wall Street would probably wish to pinpoint the exact moment when this mother of paradigm shifts took place during the past two weeks. It could arguably be traced to that moment in time when Paulson and Bernanke decided to abandon the one-rescue-at-a?time strategy of recent months for the more radical ?comprehensive? attack at the root cause of the crisis ? the rot on the balance sheet of America?s financial system.

And the answer, ladies and gentlemen, was NATIONALIZATION of the assets, a USD 700 billion worth of socialization of losses. The ?winning prize? for more than a decade of unfettered financial capitalism and the price to pay for government?s unwillingness to do anything about a market that was growing and growing, earning millions of dollars to their promoters ? all in the name of market fundamentalism.

The Paulson-Bernanke doctrine which some have described, not as ?too big to fail? but ?too reckless to fail? suddenly reverses the FAITH. The sacrosanct notion ped-dled by the market fundamentalists, that government?s role is to get out of the way, limiting itself to protecting the consumers and defining broad rules of engagement is suddenly thrown to the winds as the high priests among the US leadership are all too busy exerting themselves into some form of exorcism to now control the demonic forces which they have helped unleash.

As recently as the end of last year, Henry Paulson a diehard republican was arguing that onerous regulations were crippling American finance in intensifying global competition. Why does this sound so familiar a line to us in Mauritius?