The world is suffering from the most severe economic breakdown in decades and the international political community, under the umbrella of the G20 and the UN, is working feverishly to mitigate the hardest consequences of the downturn. But the political management of the crisis must not only focus on the tackling of economic issues and the reform of the regulatory framework for financial markets. Political leaders must also address some of the fundamental political and democratic problems that helped the crisis to materialise in the first place. If a new post-crisis economic system is to become more sustainable and responsive political control of the economy needs to be permanently restored.

The British MP and former Cabinet Minister Clare Short once said: ‘People have accused me of being in favour of Globalisation. This is equivalent to accusing me of being in favour of the sun rising in the morning.’ Short, who enjoys a reputation as a principled politician, expressed what was the widespread believe of the mainstream Western political class in the 1990s and early 2000s: economic Globalisation – driven by financial markets – was regarded as an inexorable law of nature. Attempting to shape the process was hence a hopeless undertaking.

This view has always been tricky. In fact it led to a democratic problem: if politicians – as a matter of faith – surrender the political scope of action over a process that has such a major effect on the societies whose interests they were elected to represent, what democratic mechanisms are left for people to influence the way Globalisation impacts on their lives? And if it is not elected politicians who set the rules of the game is it democratically legitimate that markets by and large determine their own boundaries?

In the wake of the financial crisis it became apparent that surrendering the scope of action to shape Globalisation did not only produce a democratic problem but was also a serious political mistake. As a result of the market being unable to heal itself and prevent a systemic crisis, governments were forced back into the driving seat. And there was no choice but to assume responsibility since no other institution is equipped with the necessary means to stabilise the economy.

But far from realising their political mistake politicians were ill prepared for this seemingly impossible scenario and reacted more than they guided. Caught on the wrong foot about the extent of the predicament of the financial sector and the beginning global recession, national governments had to prepare emergency landings for financial institutions and enacted stimulus packages to strengthen economic demand using dizzying amounts of taxpayers’ money. The irony therefore is that it was the ordinary citizen, who used to have little say over how the global economic system was governed, that in effect had to provide the means to prevent a disaster and was left with serious risks and liabilities.

Against this backdrop, it is crucial for political leaders to realise that what is needed now is not just basic repairs of a broken system. Above all politicians must comprehend that giving up the scope of action to shape economic Globalisation was a big mistake and part of the reason why the crisis could happen in the first place. Politics must not surrender democratic control over the global economy again but insist on setting the rules of the game in the future. This would also help to make Globalisation more democratic, accountable and responsive to citizen concerns taking into account their new role as risk-bearers of last resort. If political leaders, however, simply move back to pre-crisis business as usual there is a good chance that the next crisis is just around the corner.

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