Global village? It sure is

Global village? It sure is

According to discussions at the WEF in Dubai, democracies and fragile states are in danger of crumbling due to the credit crisis. Some are considering becoming isolationist states. Who can blame them?

November 11, 2008 3:43 by kippreport

Experts gathered at the World Economic Forum (WEF) in Dubai 2008 discussed the effect the global credit crisis will have on economies and governments around the world. One of the issues they focused on was how fragile countries and democracies will cope with the pressures of the financial meltdown, and whether they’ll survive the pull toward isolationism and corruption.

According to a report written by the WEF, fragile states, which are defined as countries with poor state legitimacy and weak economies, rely heavily on revenues generated by the export of primary materials and remittances from workers living abroad. Unfortunately, the financial crisis, which has reduced remittances and the demand for raw materials, may force such nations to resort to illicit trade: “The current financial crisis is likely to increase the different forms of illicit trade because of the increased pressure to lower prices and the greater desperation of individuals in affected economies,” the report said.

It isn’t uncommon for crime to flourish when economic strife is widespread. Besides, the harsh reality of a fragile state is that while its government may be struggling to maintain the rule of law, corruption at all levels (including within the government) are likely. But coupled with the global credit crisis, resorting to corruption may be a matter of survival for some.

Fragile states, however, aren’t the only ones at risk of deteriorating due to the credit crunch. Democracies may also face pressure to change their open policies. The WEF report states four reasons why democracies are at risk: first, because poor democracies may not survive the financial pressure they are currently facing; second, weak democracies that are facing monetary issues may be overtaken by criminals or the military; third, authoritarian regimes have not been as affected by the crisis as democracies, making them seem more attractive and reasonable; and finally, the crisis has proved that many governments and nations are ill-equipped to deal with trials of the global economy.

In short, the global credit crisis may result in more nations opting for isolationist and protectionist regimes in order to insulate their economies from future global crashes and recessions.

It doesn’t bode well for those who promote a ‘global village’, does it.