Millions of protesters took to the streets across France yesterday to protest what is loosely being described as the "economic policies" of French president Nicolas Sarkozy. I know, saying the French are taking to the streets is like saying the sun always rises. Obvious.
However, the protests are but the most immediate example of widespread and growing popular discontent with the financial crisis and the response of governments. Governments in Iceland, Belgium and Latvia have already fallen, and political instability is rising across Eastern Europe, Africa and Asia in response to food shortages, budget cuts and rising unemployment. Even in Russia, the United Russia party lost two local mayoral elections in restive eastern provinces, leading President Medvedev to introduce legislation that would allow provincial governors (appointed by the Kremlin) to replace democratically-elected officials at the local level. This follows brutal crackdowns on protestors; Moscow has become so sensitive to the risk of popular unrest that it recently flew special forces thousands of miles to snuff out local protests against rising tarriffs.
These examples seem to foreshadow a global summer of discontent as unemployment rises and government budgets come under greater pressure. This poses obvious risks to political stability and commerce. It also constrains the options available to policymakers, making beggar-thy-neighbor actions such as the imposition of trade barriers, subsidization or nationalization of industries and currency devaluation more likely. History tells us that these domestic political considerations, particularly in the developing world, risk reinforcing the downward economic spiral, as policymakers appease factions and fail to reach coordinated regional/global programs. They also risk, particularly in the case of currency devaluations, setting off a change reaction of competitive responses that, in the absence of regional cooperation, ultimately destabilizes the system as a whole.
The potential impact of growing popular unrest cannot be overstated. While violent inter-state conflict seems only likely over energy resources, the damage from economic warfare is still profound. Intelligence services have come to recognize this threat. In testimony before the US Congress, Director of National Intelligence Dennis Blair identified the financial crisis as the single greatest national security threat to the United States, before Al-Qaeda or nuclear proliferation. President Obama now receives a daily economic intelligence briefing from the CIA in addition to his traditional daily intelligence briefing. Economic and national security considerations have converged in the eyes of intelligence analysts and policymakers. One has to wonder whether this will lead to more mercantilist policy agendas as liberal economics loses credibility, multilateral cooperation stalls and popular discontent grows.
As we try to come to terms with the crisis and its implications, IPE, as an academic discipline, is well-positioned to explain and guide us through this complex global environment. The discipline arguably isolated itself for many decades as it sought to distinguish its theories from the traditional IR, realist paradigm that dominated both academic and official thinking during the 20th century. It discounted security considerations too much, pushing an almost Marxist-like bottom-line: the economic drives the political. But since the end of the Cold War the discipline has developed a greater appreciation for the security implications, and influences, within the global political economy. Freed from its self-imposed intellectual box, IPE now offers the most multidimensional, comprehensive analytical framework for conceptualizing and forecasting the economic and political consequences of the current crisis. I would guess that more than a few IPE grads will be drafted into their respective national intelligence services in the coming years.
It has become cliche to say we are witnessing a global paradigm shift. But as the crisis plays out over the coming months, and political instability spreads, it will become ever more apparent that one cannot divorce economic conditions from national security. The risk is that this realization leads policymakers to adopt mercantilist policies and abandon multilateral cooperation. Amidst growing protests, the difficulty policymakers face in fashioning a global consensus on regulatory reform and economic stimulus only hardens. Upon this backdrop, the G20 meeting in London develops an even greater sense of urgency. Our leaders must sieze the moment. Their window may be closing.
