How new will the next regulatory regime be?

The collapse of the American financial system following the sub-prime bubble and the ensuing global financial crisis have shown the fallacy of market fundamentalism. There is a now an urgent need to return to a more balanced view: modern capitalist economies are resilient precisely because they are mixed economies. This paper proposes a diagnosis of the various spillovers that generated the present crisis, and then discusses various options for new regulatory regimes. A light handed approach would use mainly monetary and fiscal policy, as well as limited macro regulation, in order to prevent financial instability from leading to major crises. A second and more ambitious strategy would redesign the whole financial system by changing accounting rules, building new risk assessment models and implementing less perverse remuneration systems. The social control of financial innovations, such as securization and its successors, could offer a third avenue to be explored. Correcting the global imbalances that led to the crisis concerning international relations and power relations between firms, workers and finance could define a still more radical reform. Eventually, under broad but not very demanding international principles, quite diverse regulatory regimes will probably emerge, given the various different economic specializations and styles of governance found in each national economy.