Monday February 28, 2011
ANALYSIS - After the crisis, a worldwide rise in unrest?
By Peter Apps, Political Risk Correspondent
LONDON (Reuters) - With the Middle East in turmoil, authoritarian states jumpy and post-crisis economic pain prompting protest in western Europe and elsewhere, some suspect a systemic rise in worldwide unrest might just be beginning.
Instability in the already volatile oil-producing Middle East could produce a feedback loop where unrest pushes up energy prices, fuelling inflation and deepening discontent both in the region and around the world.
In most countries, the so-called "misery index" -- an aggregation of unemployment and inflation long seen as a warning of protest and instability -- is pushing higher.
"After an extended period of economic growth and political apathy across the developed and emerging worlds, we may have reached a new political cycle -- one where populations take out their grievances on their leaders and their associates," wrote Citi political analyst Tina Fordham. "This won't be limited to the emerging world."
In democracies, elections provide a release valve -- Ireland has seen some of the worst post-crisis economic pain but minimal unrest in part because voters knew they could oust the government they blame for the crisis in elections this weekend.
But Greece, Britain and others have seen anger expressed in the streets as their governments push through austerity, arguing they have little choice but to rein in unsustainable deficits even if it means cutting services, pay and benefits.
Most analysts agree North Africa's demographic "youth bulge", relatively high unemployment, long-serving leaders and recent Internet penetration made it particularly volatile. But strains are clearly visible elsewhere.
Almost without exception, authoritarian states around the world appear to have seen at least a modest uptick in protest following the ousting of presidents in Egypt and Tunisia.
Even China, whose breakneck growth has long been seen limiting discontent, has blocked terms such as "Egypt" on social networking sites and stepped-up arrests at small demonstrations.
"Two crises are happening at the same time - which is unprecedented I think," said Joel Hirst, International affairs fellow at the US-based Council for Foreign Relations.
"An economic disaster and 'readjustment' of the developed world while the developing world fights for their freedoms. Add in there the oil/energy price, which could be seen as the link between the two, and it makes for a perfect storm."
Crude oil prices have risen by up to a fifth on recent unrest in the Middle East and North Africa, enough to act as a potentially brake on already fragile economic growth.
Libyan oil production has slumped as companies withdraw foreign staff and oil markets have begun to look much more nervously at largest producer Saudi Arabia.
Most still expect the Saudi royal family to ride out the storm with the help of colossal oil wealth, but the cost of insuring the kingdom's debt against default in the credit default swaps market has doubled since January as worries mount.
The rising power and influence of social media sites such as Facebook and Twitter is also seem a common factor between emerging and developed world protests, acting as a powerful accelerant that can bring masses swiftly onto the streets.
Twitter was central to student protests in London late last year that ended in the city's worst street violence in decades.
Some also see a wider anti-establishment backlash to the global financial crisis, with anger directed not just at politicians of ruling parties but also whole systems of government and wider economic and market structures.
In the United States, analysts say that sense of disillusion is also clear and manifesting itself in different ways. Some turn to the right-wing populist "Tea Party", arguing too much government intervention is the problem.
As individual U.S. states move to cut spending to stave off bankruptcy, some see occasional signs of the kind of backlash seen in Europe -- including recent protests against union reform in Wisconsin as it tries to push through its austerity package.
"The crisis is the connective tissue that binds these events together, particularly in the West," said Jonathan Wood, global issues analyst for Control Risks. "In North Africa, what we're seeing I think has more to do with the recent spike in food and commodity prices -- although you can also link that to the loose monetary and fiscal policies we have seen since the crisis."
The speed with which Tunisia's revolution sparked unrest across the region suggests its leaders were already on much thinner ice than they or others had appreciated.
CRISIS OF LEGITIMACY?
"Revolutions... happen when regimes suffer a collapse of legitimacy," said John Steinbruner, director of the Center for International and Security Studies at the University of Maryland. "The problem is, there's no way of measuring legitimacy. You can only tell with hindsight that it has gone."
In Western states in particular, legitimacy might as we seem to in part come from providing certain key services. In more authoritarian nations, it may in part come from fear -- and the sight of autocrats being ousted may be undermining that.
In China, most appear to believe that rapid growth and job creation has been key to securing the state's legitimacy in the two decades since the Tiananmen Square crackdown.
Certainly, the ability to guarantee food has long been core to regime survival and many analysts see governments ramping up purchases since Tunisia's revolt, again pushing prices higher.
"Food hoarding may continue as the general public and governments try to build inventories to protect against future shortages due to political upheaval or even a war," said Ana Armstrong, chair of fund manager Distinction Asset Management, warning that this could also cut growth and leave policymakers with difficult choices over what to do with interest rates.
In Western democracies, few see unrest ousting whole systems
-- but it could bring down governments, make structural economic reforms impossible and drive populist policies.
In others, as in Egypt can Tunisia, if attempts to placate with handouts and increased openness fail, it may come down to how harshly security forces are willing to crackdown.
In either case, predicting outcomes is far from easy.
"This is indeed a Year of Living Dangerously," said Citi's Fordham.
(Editing by Jon Boyle)
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