Balancing Act

In the wake of the financial and economic crisis, the worst since the Great Depression of the 1930s, a major debate is now underway on the future role of the state and the version of capitalism that is best suited to a modern economy. At issue is the free market philosophy that had dominated thinking—and policy—in the G7 world since the Thatcher-Reagan revolutions.

This crisis does not mark the end of capitalism. But as we know, there are many different varieties of capitalism, from the more laissez-faire versions of the United States and Great Britain, through the middle-of-the-road versions found in Germany, France, Canada and Australia, to the social democratic versions of Scandinavia and on to the state-led capitalism that accounted for the rise of Japan, Korea and Taiwan and that, in various forms, is now being followed by China, Russia and Brazil, as well as the resource-rich economies of the Gulf Cooperation Council.

This debate, of course, is not...