In the modern world, economic interests is a vital check and balance against extreme views of politics. Due to the economic depression, the West is forced to go backwards in capitalism and in effect nationalise a number of companies. For the moment, this is limited to financial institutions, but the list could well expand into other key industries, should the economic situation worsen. Obama, who is likely to be elected President of the United States, will most likely pursue more welfare policies to help the masses. With the Western economy shifting to the left, the Government is going to own larger and larger chunk of businesses.
On the other hand, emerging countries, such as China, is in better shape in terms of fundamentals versus the West. Even though they are unlikely to avoid an economic slowdown, they are likely to gain in the balance of power between nations. This may take the form of a greater say in world affairs, buying businesses in the West in distressed companies, and so forth. These new owners may decide to gradually change the culture of the companies they newly acquired, or restructure the organisations leading to job redundancies, and so forth.
We are going to have an interesting situation, where the West will have a socialist economy and a democractic government --- exactly the opposite from what China is having at this moment! Such a situation, if left unchecked, can be abused by extreme right-wing politicians. They may manuipulate the masses, who are frustrated by the poor economy, increasing rise of foreign powers, and so forth. It will be difficult to have check and balances against these politicians if they get into power, because the economy is already controlled by the government.
Even if such politicians were kept under check, geopolitical risks will most likely increase. US will diminish in power as the world sheriff, or else it will be spending more money that it can ill-afford. Situations that were kept in lid by the US will be induced to resolve themselves:
- US will need to pull out of Afghanistan and Iraq. Israel will be exposed to greater risk than before, which can lead to heightened tension, if not war, in the region
- Russia will continue to reassert its might in the former USSR. It will continue to test the bottom line of NATO, as it did in Georgia in the summer this year
- Taiwan and China will most likely reunify peacefully
- South Korea will have to reconcile with the North
- Japan will continue to better relationships with China and Korea
Of note, Russia is a most interesting case. The government has increasingly become heavy-handed in their policies. With the plummeting of the stock market, the government can support the companies by buying into them and in effect nationalising them. If that were the case, then the government can already be left unchecked in its actions within the country.
Of the five bullet points aforementioned, if left unchecked, the first two can have potentials of leading to a greater scale war. A third possibility is a further deterioration in the economy situation in the US. China and Japan are the largest owners of US debt. We already saw the diplomatic dispute between the UK and Iceland over British savings in Icelandic banks. If there were any signs of the US unable to fulfill its debt obligations, it can lead to unimaginable consequences in the world, both economically and politically.
A shift recovery of the economy is the best way to prevent such events to develop. The nationalisation of financial institutions is an excellent first step to inject confidence into the system. The governments should also encourage more mergers and acquisations, so the companies can save themselves without using up more government money. Potential programs should be created such that people losing their jobs would be retrained and can find employment in other areas. The US needs to tighten its budget eventually, slow down the borrowing and should aim to start paying back its debt.
While extreme right-winged opportunists should be monitored, the best prevention against the rise of extreme nationalism is for the masses to have a more open-mind, to accept an ever-changing world as part of living in a global village, and to practise tolerance and patience. Then, only then, can we turn the current econmic depression as a necessary step to the creation of a better world.
