A few months ago, the words ‘regulation’ and ‘State involvement’ were swear words in financial circles. Today, the people in these circles clamour for State support and admit that they require regulation.

Financial rentiers used the façade of free market faith and the ideology of efficiency of financial markets to not only hide the real mess in finance, but also bully all of us into subservience. Policymakers were terrified of upsetting the ‘markets’. Governments are still cowered into making their policies credible to people working in the financial sector. Unfortunately, too many politicians and policymakers adopted the neoliberal ideology punted by people working in financial markets.

As much as government officials in South Africa deny it, this adherence to the neoliberal faith also occurred in the postapartheid government. The manner in which macroeconomic and financial liberalisation policies were adopted and implemented was a clear sign of the adherence to the neoliberal faith.

Now that neoliberalism is in tatters, both the South African government and big business are arguing that government made the correct macroeconomic policy choices. Of course, they would. Key government officials have invested their credibility in these policy choices. Their lifetime struggles and work rest on how history will judge their policy choices. People in big business, especially finance, made huge profits because the macroeconomic policies favoured their short-term speculative endeavours.

The saddest part of the entire episode is that the global and domestic media also accepted the neoliberal doctrine. They were the cheerleaders. They uncritically praised the financial market booms and failed to recognise that it was a speculative bubble. They virtually marketed the new financial instruments that promoted systemic risk throughout the domestic and global financial markets. They praised South Africa’s longest period of economic growth without realising that much of this growth was fuelled by wasteful, debt- driven consumption and the formation of real estate and financial asset bubbles. Today, business, government and the media act as if the global meltdown was a surprise. They do not take responsibility for it, even though they all had a part in creating it. Most of them benefited from it.

They all argued for a definition of ‘credibility’ where a few people working in financial markets decided whether policies were credible or not. They did not care that the notion of financial-market- decreed credibility was anti-intellectual and antidemocratic. It allowed a relatively few powerful people operating in financial markets to influence economic policies without having to test them against intellectual or academic debate. Further, it led to governments ignoring the wishes and needs of the majority of their citizens to keep the few in the financial sector happy.

There were many warnings about the profligate behaviour in financial markets. These were ignored. The excesses of people in the financial sector ultimately broke the financial system. They are fully to blame for the current intense level of government involvement in the market. They are to blame for nationalisation and State ownership. They are to blame for the new regulations that will be enforced. The true nature of the bullies is now exposed. Unfortunately, the rest of society – their victims – have to pick up the pieces, clean up their mess and put money into their pockets so that they can feel like big men again.

Many in government and business argue that South Africa’s macroeconomic and financial policies should not change. They are out of step with the world. They are clinging to failed ideas and policies. Our economy will face a lot of pain over the next few years even if some in government are in denial about this challenge. South Africa must have a new approach to macroeconomic policy and financial regulation to deal with the downturn and to prosper in the future.