Blickpunkt Großbritannien Büro London October 2008 “Without real leadership, we face disaster” A lethal new threat is emerging at the dark heart of the financial system. We must have a unified global response or an already perilous position will be­come a calamity. Will Hutton* In the week of the crash in 1929, Wall Street fell by 23 per cent. Last week, it fell by 18 per cent, London and Frankfurt by 21 per cent and Ja­pan's Nikkei by 24 per cent. Every major finan­cial centre's interbank market is frozen. Trust and confidence have collapsed; the global sys­tem is paralysed on a scale that now surpasses 1929. There is a combination of a worldwide bank run, seizure of credit markets and collapse of asset values that could plunge the globe into a depression. This is history's joke: the crisis of capitalism long predicted by communists and socialists who are no longer able to take advan­tage of it. The scale of what is happening is scarcely credible. On Wednesday morning, the UK gov­ernment committed itself to an unparalleled £500bn of extra support for Britain's paralysed *Will Hutton is Chief Executive of The Work Founda­tion and a well-know writer and columnist. This article was first published in The Observer , Octo­ber 12 th , 2008. financial system- up to£50bn of capital, guar­antees for£250bn of lending between banks and additional injections of cash. This is the biggest, most comprehensive and best-thought­through operation of its kind mounted by any Western government since 1945. It was re­warded for its pains by a further 10 per cent fall in stock market prices, a further freezing of the already crisis-stricken interbank markets and, most ominously of all, the beginnings of a run on sterling. One government can do so much; the British plan was simply swept to one side by what is now a financial pandemic which only a global response can address. G7 finance ministers, at last jointly aware of the gravity of the crisis, at­tempted to produce such a response in their five-point plan announced at the meeting of the IMF and World Bank in Washington on Friday night. Friedrich Ebert Stiftung London Office The Chandlery(609) 50 Westminster Bridge Road London SE1 7QY, UK Phone+44(0)20 7721 8745 Fax+44(0)20 7721 8746 e-mail website feslondon@feslondon.org.uk www.feslondon.org.uk