Over the last 10 years many commentators have tried to pin the blame for what went wrong on certain individuals or groups, especially banks and bankers. There is no doubt that the crisis arose from a malfunctioning of the banking system, with some individuals guilty of incompetence and excessive risk-taking.
In a few cases their culpability may even extend to criminality.
But this is not the overall picture. Banks and bankers acted according to the incentives ruling at the time, and in line with the prevailing legal and institutional structures.
It is to those incentives and structures that we should look for the ultimate explanation.
Underlying all this was an intellectual failure. The dominant belief in the banks, within the authorities and among the commentariat was that the markets participants, acting in their own self-interest, would bring about the best of all possible worlds. They believed that the system was inherently stable – unless the authorities messed things up.
One of the most remarkable individuals during the period running up to the crisis was Alan Greenspan, the chairman of the US Federal Reserve.
When he left office in 2006, he was regarded as little less than a saint. Greenspan himself was an avid believer in free markets and saw little need to worry about the degree of risk in the system. He has subsequently admitted that he was taken aback by what happened. Reputationally, he has gone from hero to zero.
What a shame that the key players didn't know much history. I remember, as a callow youth, studying the history of the Great Depression of the Thirties. It resulted in a loss of output and income in the United States of about 30 per cent. (Here in the UK we got off much more lightly.)
The received wisdom about what happened was that essentially there were some key mistakes that would now be avoided.
Supposedly, nothing like the Great Depression could ever happen again because we, the new generations, would never make the same stupid mistakes again.
It didn't feel like that 10 years ago. I well remember how frightening it all was. It seemed as though we were again living through the sort of events that the textbooks had told us couldn't happen.
In particular, what the textbooks failed to bring out, with their arrogant simplicities, is the raw reality of the combination of pure uncertainty and the ticking clock. Policymakers had to decide what to do about Lehman's there and then before the market opened.
The British authorities had to decide what to do about RBS before it ran out of money later that day.
One important lesson is the overwhelming importance of leadership. The record of the British authorities is mixed. At first they were slow to see the enormity of what was happening and to realise how radical their measures needed to be to shore up the system.
But once the penny dropped, they acted decisively and quickly. In the end, we benefited from strong leadership at the Bank of England, the Treasury and, most importantly, at No. 10. Internationally too, we benefited from close partnership and co-operation.
Without such leadership and co-operation we could well have found ourselves falling into a catastrophe, reminiscent of the Great Depression. Are we as well placed today?
Over the last week there have been many attempts to draw comparisons with the situation pre-Lehman's. Some commentators have even suggested that the American sub-prime property market is again a source of trouble. "Sub-prime" was a revealing term to use. It was a bit like, in estate agentspeak, referring to a "cosy garden flat", while deftly avoiding mention of the word "basement", let alone the word "dingy".
Now in the US, such property is referred to as "non-prime", and prices have been rising.
But the situation now is radically different. Just before the Lehman's crisis, in relation to historical norms, American property prices were 30-40 per cent above fair value. Now their valuations are pretty much bang on the historical average.
In the banking system, many of the practices that led to the crisis continue. And there hasn't been the radical restructuring which is needed to make the system much more stable. But banks hold more capital and liquidity and they are better regulated.
Lightning never strikes twice in the same place. It is unlikely that what caused the last crisis will cause the next one. Today, the fragility of the eurozone and high debt in China are more likely sources of trouble.
The best insurance against a future serious crisis is for students of economics to learn economic and financial history and, this time, to appreciate how, in all human systems, things can go wrong. People in the past weren't especially stupid and we, their successors, aren't especially clever.
We might then have a generation of market operators, commentators, analysts, regulators and policymakers who could not be duped into thinking that whatever goes on in the financial markets is bound to be just fine and dandy.
- Roger Bootle is chairman of Capital Economics.
