The lessons of the world financial crisis have not been learnt, and it could happen again.
Global financial crisis sparked waves of political turbulence
September 2008, the month Lehman Brothers went bust, was the time when many began to appreciate the severity of the international financial crisis. With much of the banking system shaken to its core, it was clear that the consequences could be profound, and not just economically.
In February 2009, US Director of National Intelligence Admiral Dennis Blair asserted that “the financial crisis and global recession are likely to produce a wave of economic crises”, and, remarkably, that “the primary US security concern is now the destabilising global political fallout”. The then-secretary of state Hillary Clinton also argued that “this economic crisis, left unresolved ... will upend governments, [and] it will unfortunately breed instability.”
Five years on, there has indeed been significant political disruption across the world. However, this instability has had diverse origins, and the degree to which the financial crisis has been a driver has varied from country to country.
Many governments have unquestionably lost office, in part, because of economic downturn and/or austerity measures.
In Europe alone, millions have taken to the streets and administrations in more than half of the 27 EU states fell or were voted out of office from spring 2010 to 2012 alone. Within the core euro zone, 11of 14 governments collapsed or were turfed out during that same two years.
More eye-catching have been the political revolutions, popular uprisings and protests in emerging markets. This spans June’s demonstrations in Brazil (the largest in the country for two decades); through to the remarkable developments in North Africa and the Middle East, including the civil war in Syria which now occupies much international attention; revolutionary changes of power in Egypt, Tunisia, and Libya; transfer of power in Yemen; plus demonstrations in Turkey, Iran, Algeria, Bahrain, Jordan, Morocco and Oman.
This broad range of political instability, from Rio to Athens to Cairo, has reportedly been described as “a revolutionary wave, like 1848” by Sir Nigel Inkster, former director of operations for the UK Secret Intelligence Service. Others have compared the situation to 1914, 1968 and 1989.
Whatever the validity of these historical analogies, it is clear that there are some factors new to the post-2008 period, including the role of social media.
Moreover, this so-called “wave” of political instability has diverse origins, with economic issues not the only driver.
Thus, unrest in the Middle East has often stemmed from deep-seated political and socio- economic discontent that predates the financial crisis. Post-2008, however, factors including liquidity crunches, increased food prices and unemployment spikes have exacerbated these longer-standing grievances.
In the EU, the role of economic downturn and austerity has been central to unrest in numerous countries, especially those most effected by the euro-zone crisis like Greece and Spain. Even here though, unrest has tapped into pre-existing disquiet with established political parties and systems.
Five years from 2008, a key question is whether political instability will tail off, especially if economic recovery takes hold in much of the world in the coming years. While this is possible, there are at least two sets of factors that will continue to fuel protest and uprising in some countries.
Firstly, there are factors, unrelated to the financial crisis, that have been common to much of the political unrest, that will endure. This includes the disruptive role of social media.
There remains debate about how instrumental social media has been in fomenting political instability. However, whether one sees it as an essential component that translated discontent into concrete action, or accentuated what was already inevitable, it has indisputably played an enabling role that will probably only grow.
Secondly, even if the worst of the financial crisis has now passed, its consequences endure, especially for the young. People aged 15-24 constitute 17 per cent of the global population, but 40 per cent of the unemployed, a figure the International Labour Organisation forecasts will grow.
This puts many at risk of long-term damage to their earnings potential and job prospects, fuelling discontent.
In the EU, around 5.6 million people aged 15-24 are unable to find work (a record 24.4 per cent) as career opportunities have been swept away for many. This has given rise to concern, from German Chancellor Angela Merkel and others, about a “lost generation”, especially in Greece and Spain where youth unemployment now tops a staggering 50 per cent.
Youth unemployment in numerous Middle Eastern and North African countries is also above 50 per cent, and it is estimated that the region’s average rate could reach 30 per cent within five years. In the Middle East, the problem is acute because it has the world’s biggest youth bulge comprised of increasingly educated people.
Taken as a whole, it is premature to claim, as some have done, that we have entered a new era of global revolution that is here to stay. Indeed, overall political instability may decline if the world economy enters a sustained recovery phase.
However, there remains significant prospect of unrest. While circumstances will vary from country to country, instability will potentially be fuelled not just by the legacy of the financial crisis such as higher youth unemployment, but also by longer-standing political and socio-economic discontent which social media is giving fresh impetus.
Andrew Hammond was formerly a UK government special adviser, and a geopolitics consultant at Oxford Analytica