The World Today: November 2008: November 2008

A butterfly flapping its wings in New York may eventually cause a storm in Beijing. Well, how about a devastating tsunami in New York? In the last month, the world has watched the American financial crisis unfolding day-by-day. Ripples from Wall Street spread to each corner of the global economy. When this financial tsunami finally hits China, should we expect the earth to shake and a collapse of the Chinese economy?

Japan is an abject lesson in how not to handle a major banking crisis. During the 1990s, its banks were technically insolvent following the bursting of the late 1980s bubble and the implosion of land and stock prices. Since land was the collateral for many loans, banks were saddled with massive bad debts. This festered as banks and the government dithered and temporised for nearly a decade when the country was in collective denial about the severity of the bad loan debacle. Myopia was facilitated by fuzzy accounting practices and the government’s failure to exercise proper oversight. Sound familiar?

Russia is caught in the global crisis and cannot escape its impact. The crucial question is how the Dmitri Medvedev-Vladimir Putin leadership will respond. Putin has presided over a steadily strengthening economy; he now appears ill-equipped to handle crisis and contraction. The signs are not encouraging. Trust and confidence, two essential ingredients vital to resolving any financial crisis, are in short supply. The public could pay a heavy price for the hubris and schadenfreude of their leaders, still ‘dizzy with success’ from years of economic revival and what they perceive as a successful reaffirmation of the country’s great power status.

The global economic crisis is accelerating processes of change, whereby economic – and ultimately political – power is shifting away from European and North American states which have dominated the world for most of the past two centuries.These dramatic changes will have significant impacts in many sectors, including on development and humanitarian activity. Any decline in the west’s economic and strategic power means that in future there will be less financial and political capital to back international interventions based on human rights.

Ghana’s President John Kufuor has successfully promoted his country as a haven of political and economic stability, but as he comes to the end of his two terms in office, the cracks are beginning to appear. Can Ghana escape the election traumas that have been so destructive in Kenya and Zimbabwe?

In September, Zimbabwean opposition leader Morgan Tsvangirai signed a power-sharing deal with President Robert Mugabe, aimed at ending years of political conflict and economic decline. There have already been problems forming a cabinet, so can such a deal work? An unsettling answer comes from another deeply divided, but once prosperous, African state which should itself be taking a further democratic step this month.