Adrian Hamilton: This crisis can only be solved at a global level

It was a coincidence no doubt – although a convenient one – that the Prime Minister was abroad when the world markets started their precipitate decline, telling the Indians that the world's global institutions such as the International Monetary Fund needed radical reform with a role to "prevent crises and not simply to manage or resolve them as in the past".

He was on the same theme when he returned to London on Tuesday, spreading the word that he was now calling for an emergency meeting of European finance ministers in London to urge, as one report put it, "for measures to improve transparency in the banking system, co-ordinate national regulators, review the role of credit rating agencies, and to strengthen the management of liquidity risks".

Gordon Brown is no doubt right to call for early international action to deal with the present crisis, although whether his fellow European finance ministers will be willing to hear the call from a man who has spent the past decade bad-mouthing their efforts with the euro might be considered debatable.

Nor is he wrong to see the need for regulatory reform. There is a strong case for improving the rules on bank regulation and capital market supervision in the light of the credit crunch of the past six months. If you want to get really excited, as some commentators do, you can demand a wholesale re-ordering of the role of the state in the markets on the grounds that laissez-faire economics has been tested and found wanting.

But none of that helps deal with the present crisis. Nor is it clear that structural reform would materially affect the markets and their effective management. Institutional change makes a convenient rallying call for politicians under pressure. But it is not structures that are so much at fault at the moment as a basic failure of leadership.

If banks went in for excessively loose lending, asset prices were overvalued and the normal rules of fiscal rectitude were abandoned, it was because it suited everyone, including finance ministers and central bankers, to let it happen. It was a convenient way for countries to keep growth at a time of restricted public expenditure and for the world to cope with the huge transfer of funds from the West to the oil producers and to Asia.

If regulators and finance ministers had wanted to question the growth of securitisation, they could have. The power of central banks, even informally, is considerable, while there are plenty of institutions, such as the Bank for International Settlements and the G8, to co-ordinate international action if it is globalisation that is spreading the problem.

The crisis we face at the moment is a very real one. It is the product of a credit crunch brought about by serious strains in the banking system, excessive borrowing by Western and Asian consumers, the onset of a business cycle that would have slowed growth in any case and serious underlying problems caused by imbalances in trade in the world.

It matters to London particularly, not just because, as the Bank of England Governor would have it, it poses problems of the risks of inflation versus recession domestically, but because the British economy and employment are now so dependent on our role as a global financial centre. When the banks in America sneeze, we can catch double pneumonia.

The credit squeeze and economic slowdown is not going to go away at the drop of a Federal reserve interest rate and a package of tax cuts, not least because the problems of overheating and credit constraint are affecting Asia as much as America and Europe. China and India may not be in a position to bail us out of this one.

The worry at the moment is that, as far as international co-ordination is concerned, it's every man for himself. The US moves are not the product of careful consideration but the urgent actions of a country at the beginning of an election year. If it wasn't for the politics, they wouldn't have been introduced in this way. The Bank of England and the European Central Bank in the meantime are going their merry and quite separate ways, while currencies and capital movements – both of which will be altered by the crisis and the responses – are being left free to bounce between individual national actions, and China, India and the Middle East will be making their own decisions as to where to put their surpluses now that America is turning sour.

The need for international co-ordination and leadership has never been greater, yet the lack of it has never been more obvious. Forget institutional reform, let's just get down to the old-fashioned business of getting the players round the table "to manage and resolve" the crisis at hand.

a.hamilton@independent.co.uk