He was in Dublin yesterday to speak at an economic conference in Trinity College. The economic implosion over the past five years is different from previous downturns because it was caused by a collapse in the financial system.
The financial crisis also exposed huge flaws in economic thinking in the run-up to the crash, he said.
The financial system is different to other parts of the economy and should not be subject to unfettered free market forces.
The view held by the IMF and many leading economists before 2007 was that the proliferation of credit default swaps and other debt instruments was a positive development that would reduce market risk.
This was based on the erroneous assumption that markets are efficient and that debt instruments will always end up in the hands of the right investors at the right price. Mr Turner said in Apr 2007 the credit default swaps market was trading at historically low spreads, yet two months later the worst financial crisis since 1929 erupted.
One of the main lessons from the past few years is that any downturn triggered by the banking system and the debt markets will have disproportionate and devastating consequences for the economy because they result in widespread insolvencies and bankruptcies.
Moreover, the aftermath of a financial crisis is just as problematic as the crisis.
As in the case of Japan following the banking and property crises in the late 1980s, the private sector embarks on a deleveraging process to repair its balance sheet.
To compensate, the government has to increase public spending, which puts sovereign debt on an unsustainable path.
Mr Turner said there were now policies in place to regulate financial markets in the future.
But the policy response to the economic management of a country following a financial crisis is still incomplete and that is why the “Great Recession” will be around for another few years, he argued.