Almost two years ago, I wrote a column hailing “the age of the small state”. I pointed out that the number of independent nations had grown sharply over the past 40 years and that small countries topped many of the international league tables, on everything from gross domestic product-per-capita to peacefulness and “human development”.

But that was then. In the aftermath of the Great Recession, the economic and political tide has turned against small nations. Look around Europe and it is the smalls that have fared worst – Iceland, Ireland, the three Baltic states. Iceland has not only suffered a catastrophic economic and banking collapse. It is also being bullied by Britain and the Netherlands into paying back billions lost by their citizens when Icelandic banks collapsed. Membership of the European Union has provided the Irish and the Balts with some protection from pressure by larger nations, but it cannot solve all problems. Latvia has had to go to the International Monetary Fund for a loan. Lithuania and Ireland may be forced to tread the same route.

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I have enjoyed the spat between Niall Ferguson and Paul Krugman: public intellectual v public intellectual; Harvard v Princeton - and, most significantly, historian v economist.

Essentially Krugman accused Ferguson of not knowing what he was talking about and having a shaky grasp of economics. I thought Ferguson’s response in the FT was remarkably good-tempered under the circumstances. As a former historian, I particularly enjoyed his line - “A cat may look at a king and sometimes a historian can challenge an economist.” I quoted this to one of the economists on the FT staff, who remarkred snootily that he regarded that as a reasonable summary of the intellectual hierarchy. Continue reading "Economists v Historians: cats v kings"

There was a moment, a few months ago, when sensible people in rich countries were considering pulling all their money out of the bank, buying gold ingots and hiding them under the bed. But now that the panic has passed, something less frightening and rather bleaker is beckoning. Welcome to the politics of austerity.

Across the developed world, unemployment, public debt and taxes are rising. When the global economic crisis first hit, it was natural to assume that the poorer and more recent democracies would be most vulnerable to a political backlash. Without the accumulated wealth or the welfare systems to cushion the blow, their populations looked vulnerable. Most countries in central Europe or Latin America only made the transition to democracy in the 1980s, so authoritarian nasties might still be lurking in the shadows.

But perhaps we are looking for trouble in the wrong places. It could be that it will be the richer democracies, such as Britain and the US, that find it most difficult to adapt to the politics of austerity.

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“Everything I say is a lie” has long been a favourite puzzle for philosophy students. But it took a Hungarian politician to turn a logical conundrum into a political strategy. Ferenc Gyurcsány’s admission in 2006 to a closed session of the Hungarian Socialist party that he had “lied morning, noon and night” to win the election, was swiftly leaked. It provoked riots in Hungary.

Amazingly Mr Gyurcsány managed to soldier on as prime minister and only stepped down a couple of months ago. But Hungary, a country of just 10m people, now faces an economic and social crisis so deep that its fate is being watched with interest and alarm from Washington to Brussels.

At the Group of 20 leading nations’ summit in London last month, the country’s name was whispered in the corridors, as world leaders scanned the horizon for the next stage of the global economic crisis. The International Monetary Fund had put together a rescue package for Hungary last October – but many feared it would not be enough. Barack Obama, the US president, even spoke out, warning Americans in March to ensure that “problems that exist in emerging markets like Hungary or Ukraine don’t have these enormous ripple effects that wash back on to our shores”. (This statement was greeted with a certain irritation in Hungary, where many are under the impression that their economy is underwater because of a tidal wave that started from American shores.)

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It is the Easter break in Britain, and I am about to go on holiday. My column will appear in the paper next Tuesday and will be re-published on the blog. Also, if war breaks out, I will make my way to the nearest internet cafe and post something.  Otherwise, I intend to fall silent for a week.

But I would like to leave you all, with a parting question. Lots of observers - including me - have been predicting that this economic crisis will have serious geo-political consequences. Niall Ferguson has written of an “axis of upheaval“. Harold James has predicted a reversal of globalisation. One of the prime ministers passing through London last week, told us that a political crisis would soon follow the financial crisis.

So this is the question which I would like answered - please - by the time I return from holiday on Monday 19th: Will there be global political trouble because of the economic crisis? If not, why not? If yes, where should we look and what form will it take?

All ideas will be gratefully recieved - and the best may be stolen and re-cycled in my newspaper column.

It is tempting to blame all the demos and violence in the streets of London on the economic crisis. But I think that would be a misreading. The fact is that the British - and many other Europeans - have long enjoyed a good riot. The thing that needs explaining is why we haven’t had much social disorder since the turn of the century, not why it has returned now.

When I was growing up in London we had the Notting Hill riots in the 1970s, the Brixton riots in the early 1980s, riots in Liverpool, all the disorder linked to the miners’ strike, the Poll Tax riots at the end of the Thatcher era. If you want to go a lot further back, you could mention the Gordon Riots in 1780; the Chartist riots in the mid-nineteenth century.

And that’s just Britain. Obviously, the French have an even livelier tradition of social disorder and street riots. And just before 9/11, it began to look as if no meeting of European leaders would be complete without being set against a background of anarchist demonstrations. In July 2001, I went to an EU summit in Gothenburg where most of the city seemed to have been trashed by the “black blocs” of assorted European anarchists. Continue reading "Rioting in the streets and the roots of anarchy"

The Financial Times building is a good vantage point for watching the goings-on at the G-20 summit. The Excel centre, where the summit will take place, is just a few tube stops away. As I write the “anti-capitalist” demonstrators are gathering near London Bridge - I can hear the sirens and the hovering helicopters through the windows. A procession of world leaders and summit participants have been trooping through the building, giving on-the-record interviews or off-the-record briefings.

Listening to three of the people who will be sitting around the table at the summit tomorrow, I was struck that maybe the leaders are arguing about the wrong issues. At the moment, the big controversies are about regulation and fiscal stimuli. But the three leaders I am referring to made the same point: this crisis is not going to end, until the banks have been cleaned up. As one of them argued, until the banks balance-sheets are cleaned up, more government money is just “pouring money into a bucket with a hole in it.” Continue reading "The G-20 - it’s the banks stupid"

These are troubled times at Bank of America - what with today’s announcement of an emergency government bail-out.

Still, if employees are feeling depressed may I suggest that they take a fond look-back at this inspirational video, made by Bank of America employees in happier times. It features an ecstatic middle-manager singing a song, set to a tune by U2, about a recent merger that the bank had negotiated. The song contains immortal lines like - “Two great companies come together/ MBNA and BOA/ One bank, one card, one name that’s known all over the world”. Bono himself couldn’t have put it any better.

[youtube]http://uk.youtube.com/watch?v=0qAuqq1LFnU[/youtube]

On the other hand, watching this performance, I slightly wonder whether it might not be more merciful to put people like this out of their agony.