NEWS ANALYSIS: Financial crisis also changing the political playing-field

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By Kari Huhta
     
      Put slightly crudely, one of the golden rules of international politics is that whoever has the gold makes the rules.
      As the financial and banking maelström of recent days redistributes the world’s wealth in new ways, it is clear that political clout is also being shuffled and dealt out again.
      A detailed study published last week on longer-term voting patterns at the United Nations General Assembly indicated how economic changes had spilt over into politics well before the Wall Street tailspin and failing banks were in the headlines.
     
According to the findings of the European Council on Foreign Relations study, as recently as in the 1990s, more than 70% of the UN member-states supported EU initiatives and views on human rights issues within the General Assembly.
      In recent years, however, Chinese and Russian positions on such matters have enjoyed a similar level of support, while the EU’s backing has collapsed to below 50% - the zone where China and Russia once languished.
     
Economic growth strengthened the status accorded to China and Russia among the members of the United Nations.
      Before the financial crisis struck home, it was assumed that the future would belong to the large emerging economies, a category that also includes India and Brazil.
      Now the picture is rather more blurred, because the crisis is not affecting all high-growth economies or all industrialised countries to an equal extent.
     
Expert analyses of the political ramifications of the current crisis are still cautious in tone.
      The final dimensions of the destruction done to the world’s economic systems are as yet unclear, and hence it is premature to declare who are the biggest losers and the relative winners in all this.
      In Finland, at least at the Ministry for Foreign Affairs, there were preparations for a strategic meeting to assess the political questions and fallout from the crisis.
      It was also possible for the President and government to discuss the matter at last Friday’s meeting of the Cabinet Committee on Foreign and Security Policy, although apparently it was not on the formal prepared agenda.
     
In background discussions, the experts are in any event predicting that the current turn of events will be a hindrance to the political aspirations of the United States and Russia.
      China is seen as the player reaping the biggest benefit.
      The whole mess kicked off in the United States, and the Presidential elections only worsened matters.
      Above all, this was a crisis of confidence, and one that will still require a pronouncement from the incoming President of the U.S. on the policies to be pursued, was one expert’s view.
      The fact that the dollar is standing fairly firm amidst all the mayhem going on around it may stem from a sense that the euro, for instance, does not offer any better port in a storm.
     
Russia has problems in its economy and its political system.
      With the credibility of both looking fragile, the nation’s dependence on oil revenues switched from a blessing into a curse.
      There are no automatic grounds for countries in Asia or in other growth areas to rub their hands in glee at others’ misfortunes.
      Brazil may dodge the worst of the fallout, but that was just the assessment made on one day, and matters are moving at a headlong pace.
      According to some analysts, India at least is facing considerable problems, both in its own market and globally.
     
In China, stock prices at their worst point were some 70% down on last November’s highs, but the weight of the Chinese exchanges is only limited.
      In contrast with Russia, China has diversified its economic base, and its markets are more reliable.
      As the week drew to an end, Chinese banks and sovereign wealth funds were already on the move as possible seekers of a stake in the ailing financial institutions.
      This was a reminder, if one was ever needed, that not everybody loses in a financial meltdown.
     
The experts believe that those in the best position, also on the national level, will be those who have wealth to call upon and not too much by way of debt.
      At this point we cannot tell which will be more useful in a crisis - a working democracy or disciplined central control.
      This will be the first time the two are tested in the fire since the rise of the emerging economies.
     
Helsingin Sanomat / First published in print 20.9.2008


Links:
  European Council on Foreign Relations: "A global force for human rights? An audit of European power at the UN"

KARI HUHTA / Helsingin Sanomat
kari.huhta@hs.fi