Capitalism has "fundamentally changed". The long-held faith in free markets appears to be at an end, and Adam Smith's "invisible hand" appears to be malfunctioning. Nearly 60% of senior business executives agree that "the current crisis has fundamentally changed capitalism". This view is supported by the experts we interviewed, many of whom suggest that the "spectre of depression", as Professor N. Craig Smith, INSEAD chair of ethics and social responsibility, puts it, will have long-lasting effects on the psychology of executives and consumers alike. "Previous recessions have been about a drop in aggregate demand," notes Naufel Vilcassim, professor of marketing at the London Business School. "They were seen as part of the general business cycle, and not seen as a major structural issue. There is now clearly a sense that something has gone wrong. The solution is not simply about boosting aggregate demand, but doing something structurally different." Business models have changed or will change for one-half of respondents. Mr Smith says this isn't surprising, and believes that some of the basic underpinnings of the system may be called into question. "For years, business schools have taught either implicitly, if not explicitly, shareholder value maximisation, and that's being called into question," he explains. "If they were following the model of shareholder value, how can this be happening?"

Executives want more regulation in the banking sector and beyond. Today, regulation is no longer seen as counter-productive meddling in otherwise perfect markets, but a prerequisite for a functioning global economy. Business people are not known for their affection for red tape, and usually balk at the idea of accepting more bureaucracy. Yet almost two-thirds (65%) of executives agree with the statement: "I am in favour of further bank regulation, even if the result is slower economic growth." It is a sign of just how much the global downturn has alarmed the business community. It could be argued that executives are reflecting widespread popular anger at the banking industry, but their support for regulation is not limited to banks. Executives accept that in the new landscape, businesses of all stripes will have government looking over their shoulder. Three-quarters (77%) of respondents agree that business will need to accept more oversight because of problems in the banking system. Almost one-half of respondents favour more financial regulation in non-banking industries and a similar percentage favour new regulations that limit risk-taking across the entire private sector. These numbers would have been unthinkable even three years ago.

Regulators and customers will have more sway over business decision-making as a result of the crisis. Power centres are set to shift as well, with some stakeholders exerting more pressure than others. At the top of the influence list are regulators (64% of respondents say they will have more influence), followed by customers (57%). Executives are split on the likely influence of creditors (49% say they will have more influence, while 43% say there will be no effect) and shareholders (46% say they will have more influence, while 46% say there will be no effect). In contrast, employees, non-governmental organisations and trade unions will be left out in the cold, with large majorities believing their influence will wane or stay the same. Overall, more than 60% of respondents think they will have to work harder to maintain their companies' reputation with stakeholders. This concern over brand and reputation could be influencing decisions about public relations spending. The majority of respondents in our survey expect advertising, marketing and communication budgets to go up or remain unchanged during 2009.

Caution will prevail in the aftermath. Risk appetites will diminish in the next two years, and remain flat in the following two to five years. Respondents say that the hangover from this downturn will be longer than in the past, with 59% believing that economic growth will be harder to achieve in the next recovery. "Higher regulation, coupled with a lower appetite for risk, will stall recovery efforts," notes one respondent. Gary Hopgood, business development director for Beckman Coulter International, a large healthcare manufacturing firm, comments: "Some investment decisions are being deferred until next year...Crucial things like infrastructure investment could get temporarily ignored. Government spending in some sectors, healthcare and research for example, could suffer as a consequence."

There is broad support for government measures taken so far to stem the crisis. Nearly 70% of respondents support government intervention in the banking sector such as buying shares and nationalisation. The majority of respondents also believe that governments' response to the downturn will have a long-term positive effect on their business. Only 17% think that the measures taken will have a negative effect on their long-term business prospects.