The end of the Davos Consensus-James Saft

And even though banks have not yet been widely nationalised, there is no doubt that the state is actually directing which parts of the economy get cash. The United States is buying mortgage related debt, Britain is bailing out its auto industry, and there is every chance that further investments in banks by governments will mean more control of how, where and to whom they lend.

It is too a huge contrast from last year, when the debate was about how much globalisation, in the form of sovereign wealth fund ownership of the western banking system, was tolerable. The sovereign funds aren't buyers any more and the cash that is flowing into banking is mostly within individual states; governments ploughing funds into banks.

It's really not too far-fetched to speculate that globalisation might have reached its high-water mark.

It is also absolutely certain that regulation of finance will be tighter.

"The ideology of the last decade was self-regulation which means no regulation," NYU economist Nouriel Roubini told a panel discussion in Davos.

"If we don't want a backlash against trade we have to have prudential regulation of the financial system."

REGULATORY FREIGHT TRAIN

One tiny problem is that the stuff underlying the Davos consensus really was pretty good at doing lots of things, not least raising living standards in huge swathes of the developing world. States aren't traditionally all that great at allocating resources either, and it is by definition impossible for them to explain when and how they will step back and let individuals pick up the ball.

Maybe most concerning is the threat of protectionism. Most governments who rescue their banks and spend money trying to stimulate their economies have a natural incentive to try and capture as much of the benefit as they can for their voters. If you are on the line for the losses of a big international bank, do you really want it to continue taking chances lending abroad? Wouldn't it be more sensible to just go back to "basic" banking, lending to businesses you really know? That is a line we will hear more of and it is protectionism in another form.