Alongside all the economic horror of this ‘Great Recession’, the next big risk is that it becomes politicised in unexpected and unpleasant ways. We have already seen this on a small scale in Iceland and Latvia but there may come a tipping point when substantial sections of electorates and populations across the world turn to more extreme political forces in short order. As people grow more despairing of the economic crisis and less willing to accept mainstream leaders’ claim to have the situation under control, this is a very real possibility.
Those extreme forces will welcome this situation but I think those not blinded by ideology can see that this will be a very dangerous turn that could lead to heightened international tensions and worse.
The key thing that Governments must do now is act with sufficient boldness to limit some of the worst ravages of the recession and act together to show that there is a solution to this crisis based on global solidarity not unilateral national action. The G20 London Summit will be a crucial point at which those two principles must be exercised especially coming as it does before the first big European electoral test since the crisis took hold – the European Parliamentary elections in June.
So it is deeply depressing and worrying that the majority of EU leaders made clear yesterday that they will set themselves against US and UK calls for an agreement on a major fiscal stimulus to be agreed at the London Summit. A decision that has led the highly respected commentator, Martin Wolf, to declare bluntly today that the Summit will fail as an effective bulwark against further economic collapse.
This failure to act big and act together on 2nd April may be something that EU leaders will come to regret if they are turfed out of office for their timidity in the face of this all-embracing crisis. Unfortunately, I think it is something the rest of us may come to regret even more. I don’t want to sound too melodramatic but as this crisis deepens ever further, the primary aim of international policy must be not to avoid economic disaster per se but the growing potential for something even worse.