Publications
Partners
HAS the world insulated itself from another economic crisis like the one of 2008? There are those - such as the American Professor Nouriel Roubini, who this week wrote an article in The Guardian - who predict another crash, and fairly soon.
As I am not an economist, his reasoning eludes me to some extent. It has to do with too little money going around, which means that the markets may change dramatically in a very short time, like in 2010 when the main US stock exchanges tumbled 10% in just half an hour.
I am not able to tell how accurate his warning is. But I do know something about international politics. And as such I am able to point to several escalating flashpoints. Separately, they may be contained; together, they may cause a conflagration which could cause the world economy to come under severe strain.
Danger zones
Let us briefly look at these flashpoints.
First of all, there is the Greek problem. The possibility of Greece defaulting on its debts or even leaving the eurozone is still a real one.
It is compounded by the Ukraine, which is fast imploding into an economic black hole. It will take billions to rescue this country.
Far more serious is the Americans’ inability to rein in their ballooning public debt. In fact, there have been warnings that America is developing into a giant Greece.
They do not seem to understand that one cannot indefinitely continue to finance running costs with borrowed money. Sooner or later, this must spiral out of control – or so my common sense tells me.
These problems are bad enough. But they are being made much worse by several wars and looming conflicts.
The advance of the Islamic State in Syria and Iraq, as well as that of its allies in Africa – Boko Haram in Nigeria and Al-Shabaab in Somalia and Kenya – is bad enough but, compared to others, it is the least dangerous. After all, due to their extreme cruelty their appeal is relatively limited, and I would be surprised if they survived as strong players in the long run.
The real dangers lie in possible conflicts between the West and Russia on the one hand, and America and its Asian allies and China on the other.
Russian military meddling
Damning, irrefutable proof of Russia’s military meddling in the Ukraine has come to light during the past week or two.
Detailed reports have been published by the highly respected Royal United Services Institute, a British think tank mainly working for the British military; the Atlantic Council, an equally respected US think tank; and friends of the murdered Russian opposition leader Boris Nemstov, based on eyewitness accounts he assembled before being killed.
They all agree on the main points, namely that Russia sent in regular military units twice when it seemed that Ukrainian government forces might vanquish the rebels; that between 8 000 and 10 000 troops were employed in the fighting; that Russian artillery gave covering fire from Russian soil; and that about 200 Russian soldiers were killed.
A Reuters reporter very recently saw dozens of tanks and hundreds of soldiers, all with markings and insignia removed, crossing the border from Russia into the Ukraine. Photographs confirmed this. That may indicate Russia is about to launch a new offensive, possibly to take the strategically important port city of Mariupol to create a land corridor between Russia proper and the Crimea.
It is also rather suspicious that President Vladimir Putin has suddenly outlawed all talk of Russian casualties in the Ukraine.
Harsh words between the US and China
In the Far East tension is building between China and the USA, together with its Asian allies – South Korea, Japan, the Philippines, Indonesia, Malaysia, Singapore and to some extent also India.
At the so-called Shangri-La security summit in Singapore this week, harsh words were exchanged between the Americans and the Chinese.
A Chinese English-language newspaper, presumably acting under the direction of the Beijing government, even spoke of possible war. Exaggerated, no doubt, as there is virtually no chance of war in the short term.
But with the pace of escalation, anything is possible in the middle term – and then I am talking about a year or two, three down the line.
The Chinese are laying claim to virtually the entire South China Sea, even ridiculously far from their own shores and dangerously close to the Philippines, Indonesia, Brunei and Vietnam. In these waters, they are building up the isolated rocks comprising the Paracel and Spratly Islands into full-blown islands with settlements and landing strips.
They are denying everyone else the right to fly or sail in the vicinity without their permission. The Americans are defiantly refusing to bow down to this, and have vowed to continue using what they see as international waters and airspace.
What will happen if the Chinese decide to launch a missile or two at an American warship or aircraft?
What I am trying to illustrate is that economics is not simply a matter for economists. International politics may indeed have a tight grip on the global economy.
* Leopold Scholtz is an independent political analyst who lives in Europe. Views expressed are his own.
