After the economic 9/11, we will face a new world order

http://www.yorkshirepost.co.uk/opinion/Nick-Clegg-After-the-economic.4588451.jp

Published Date: 14 October 2008
By Nick Clegg
THE financial collapse we are seeing all around us may prove to be an economic 9/11. That was a security crisis, with security implications. This is an economic crisis, but its social and security implications are potentially just as severe.
In our world, economic strength is power, and until the dust settles from this crisis, we don't know where the power will lie. The international landscape may change radically, and that will mean new risks and new threats.

Any student of history kADVERTISEMENTnows that economic turmoil creates instability. Just think back to the Great Depression of the 1930s, which created the conditions for the resurgence of fascism that culminated in the Second World War. In the public imagination, economic failure is twinned with political failure. Dictators and fundamentalists use deprivation to their advantage, tapping into frustration to spark violence and secure loyalty. We see the consequences of economic insecurity all over the world, from Afghanistan, to Pakistan, to the poorer parts of our own country. Here in the UK, fundamentalists prey on men and women alienated by widening inequality.

We need to take steps now to restore economic stability and with it political legitimacy. Without firm action, the outlook for international relations will be bleak. Developed nations facing recession will have less money to spare. For countries where developed nations have been loathe to intervene, like Zimbabwe, Burma and Darfur, the domestic economy will be another excuse not to act.


Recession could also threaten existing military action. In Afghanistan, our troops lack vital equipment, the helicopters and armoured vehicles to carry out their mission effectively. The mission in Afghanistan may need to last many years. But recession could make that impossible.

In this new order, we will doubtless see a different America. America's role in the world has undergone great change, but its relative decline will be fast tracked by the economic crisis. The country that lost its moral credibility with the war in Iraq now risks losing its economic credibility as well.

Of course, no one should under-estimate America's ability to adapt, long a hallmark of American power. But the US will have to cope with the failure of a brand of capitalism it put its name to. This may mean a retreat to isolationism.

Volatile regimes that stand in opposition to the US will be emboldened by a diminished America. Already, Iran crows over a lame President. North Korea, Russia, Venezuela and others will look to benefit as the US turns inward with economic woes.

So, what can we do? How can the world cope with the unpredictable dispersal of power that we now face? It is time for Europe to step up to the plate. Much of Europe, Britain included, is on the verge of a recession. Whole countries, such as Iceland, are being driven to bankruptcy. When economic collapse risks a surge in conflict and cross-border crime, that's everyone's problem.

I welcome the EU's package of co-ordinated measures to tackle the financial crisis. But co-ordinated action has been too slow in coming.

I worked in the EU for 10 years. I understand as well as anyone the difficulties in co-ordinating a policy response across 27 sovereign states. But I also I know the EU represents a form of international co-ordination unmatched anywhere on the planet. It is up to European leaders to emulate the courage and co-operation that fixed the global economy the last time it lay in tatters.

European governments have a responsibility to reduce inequality at home and across Europe. We need greater fairness to create greater security too. That's one of the arguments for my party's pledge to cut taxes for society's worst-off, paid for by those who can afford it and a reduction in Government waste.

Europe must agree on a new regulatory system for its financial markets, and lead the way in redesigning the Bretton Woods institutions, which were created for a different era. We must now make it right for the 21st century.

The emerging powers of China, India and Brazil need a place at the top table.

Europe needs to make clear that multilateral trade will not be replaced with economic protectionism. The protectionism of the 1930s drove Europe into a fatal spiral in the 1930s. We repeat those mistakes at our peril.

Finally, European leaders must work together to undertake a massive expansion of renewable energy. Volatile oil producing nations cannot hold all the cards and hold financial stability to ransom.

The challenges for Europe, and the world, are clear. The events of the 20th century remind us that we must restore economic security today to avoid global upheaval tomorrow. The only way to do that is through a multilateral – a liberal – approach.

Global security depends on it.

Nick Clegg is the leader of the Liberal Democrats and MP for Sheffield Hallam.