Economics, Protectionism and Conflict

There is no doubting that the economic crisis is having a very negative impact on political stability in many countries across the Globe. This relationship between the economy and conflict is nothing new of course, but it needs to be recognized. The colossal disorder and economic instability that accompanied the end of the First World War – and the ascension of protectionism in the 1920s and 1930s (along with the enduring anger over the Versailles treaty), all combined to bring about World War II. In fact those same issues also set in motion many of the national and ethnic conflicts that continue to this very day around the world. I can see clear evidence that the current economic crisis, on top of the already destabilizing impact of rapid globalization, is creating more disruptions to the traditional social and geographic boundaries in many countries – and setting the scene for geopolitical rivalries of the type that have led to multiple wars in the past.

Last nights speech from President Obama, despite having been received very favorably by most members of the American public according to reports the morning after, contained elements which will be viewed as fanning the fires of the very geopolitical rivalries I warn about above. If the US denies tax breaks to American companies that outsource work to low-cost destinations they have be prepared to defend against accusations from countries such as India and China that the US is now leading the way in protectionism. Has the US thought through what the possible repercussions will be??