Sunday, March 29, 2009

Economic crisis and political instability beckons?

A report by the Economist Intelligence Unit (EIU) claims that the global economic crisis may be inducing social unrest and political instability in many countries. For the coming year 95 countries or so are judged to be at high risk of instability, compared with 35 in 2007. Bad governments and governance had left many unstable and economic downturn has only made the situation worse.

Apart from the immediate dangers of social unrest and political instability, it also points to three other dangers

1. Threats to democracy over and above outbreaks of political unrest - especially vulnerable areas are Latin America (which has a history of democracy reversals), eastern Europe (where democracy is only weakly consolidated) and Africa
2. A negative impact on economic policies and longer-term potential growth rates — in particular, there is a risk of a descent into protectionism, de-globalization, partial reversal of globalisation (globalisation in retreat) or its unwinding (globalisation sunk).
3. A host of geopolitical risks, including ultimately the outbreak of large-scale international conflicts.

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