The problem did not just lie with the size of the banks' losses. It also lay with the massive internationalisation of the system compared with either the 1930s or even the 1970s. The Keynesian remedies which were supposed to deal with the crisis were remedies to be applied by national governments, none of which had the resources to pay for all the losses of the global system of which they were part. The biggest states might conceivably be able to salvage a good part of their national financial system. But the problems even here were vast, and many of the smaller states had very little chance of coping.
The system in a noose
The crisis had revealed one of the great fault lines running through capitalism in the 21st century. The complex interaction of states and capitals which had been simplistically referred to as globalisation makes it much more difficult for national states to fulfil their function of aiding the gigantic capitals based within them just as the need for that aid becomes greatest. As Paul Krugman puts it, there are "major policy externalities", since "my fiscal stimulus helps your economy, by increasing your exports-but you don't share in my addition to government debt" and so "the bang per buck on stimulus for any one country is less than it is for the world as a whole".8<sup>1</sup>
It was a contradiction that inevitably led to deep political fissures within national ruling classes and to bitter divisions between the states which were supposedly cooperating to deal with the crisis. Domestically, sections of capitals complained bitterly in 2007-9 at the potential cost of bailing out other sections of capital, and internationally governments quarrelled with each other as the concentration of each on efforts to prevent the collapse of its nationally based capitals led to accusations of "financial protectionism". As one observer told the Financial Times:
Financialisation and the Bubbles That Burst
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