Richard Florida
by Richard Florida
Wed Jan 31st 2007 at 10:34am UTC

Dangerous Politics of a Spiky World

Martin Wolf puts his finger on what is perhaps the biggest issue of our time – the growing divergence between “economic progress” and “political turmoil” in the Financial Times (subscription only, hat tip: Mark Thoma).

The world’s economy is in excellent shape, but
its politics is disturbing. ..-. The question is whether and how this
divergence might end. …

One possible outcome
might be the exact opposite of conventional wisdom: economic disappointment and
political stability. … Today, the underpricing of risk and the combination of low interest
rates with fast growth almost invite economic blunders. Meanwhile, the world’s
political leaders, aware of the risks of conflict and reliant on their people’s
prosperity for retaining power, may well continue to muddle through. This
surprising outcome is quite possible.

A second alternative is that the economic and political tracks would continue
in their separate directions. The reason for this would be that, far from being
distinct, the contrasting economics and politics are two faces of just one
globalising world. …

The fact that economics is making our world more interdependent and
connected, while politics remains national or local, makes the contrast between
economics and politics inevitable. …

It is plausible, therefore, that political disarray and economic success will
continue in tandem, the challenge being to avoid the emergence of too wide a gap
between the two. For, as we learned in the first half of the 20th century, a big
enough backlash is capable of causing devastation. In a nuclear age, that
devastation would be greater still. …

A third possibility is that the politics overwhelms the economics, as it did
between 1914 and 1945 and in the communist “second world” and much of the
so-called “third world” for much longer. An attack on Iran – a much-discussed
possibility in Davos – would bring far closer the clash of civilisations… feared by so many… In that case, the

economic optimism of today would prove unfounded – possibly destroyed by a world
of $150-a-barrel oil in the aftermath of the closing of the straits of Hormuz
through which so much of the world’s oil flows.

Yet there is also a far more comforting possibility: the economics overwhelms
the politics. One of the stories of our era is the way in which vast countries
such as China and India are orienting their politics around the goal of
prosperity. This forces them to seek domestic and global stability and accept
international openness and mutual dependence. They see no benefit in
international conflict. It is surely possible that this view of national
priorities will take hold in more of the world, including the Middle East. …

In such a world, the issues discussed in Davos – climate change, the Doha

round and African development – might be handled successfully. The difficulties
of collective action are profound. But …, the less credible are unilateral approaches to a resolution, the more
likely are co-operative ones.

This year’s “Davos dilemma” – the contrast between the world’s favourable

economics and troublesome politics – is clear enough. But its resolution is not.
A range of possible outcomes, from the perverse and catastrophic to the
uncomfortable and even benign, is conceivable. The outcome is not inevitable. We
can choose.

Jerry Mayer and I take up this theme in our essay on “The Unsettled Politics of the Creative Age.” Click here to download.

What are your thoughts?

2 Responses to “Dangerous Politics of a Spiky World”

  1. mc Says:

    Hmmmm, interesting

  2. Brian Knudsen Says:

    Some interesting points here, though it does seem like the author is suggesting that we regard “economics” and “politics” as wholly separate domains. I wonder about that a bit. I think that John Dewey wrote that under capitalism, government is the shadow cast on society by business. Today that shadow is the Bush Administration, and that shadow is leading us to war with Iran.