VIENNA – The greatest challenge of the current global financial crisis is the seeming impossibility of comprehending and managing its diversity. Indeed, the way problems are proliferating appears almost uncontrollable. Plans to meet the crisis, in country after country, have been revamped and restructured time and again. The old models about how to understand the economy have had their day. Across the globe, governments are facing fundamental decisions about the future nature of their economies and societies.
The sub-prime crisis in the early summer of 2007 developed first into a financial crisis and ultimately into a recession. New economic problems soon rushed in to add to the existing ones: energy and food prices rose and then fell like a yo-yo; the dangers of climate change became ever more clear; and the mal-distribution of global political power demanded action.
The recent social unrest in Greece, Latvia, and Lithuania has shown that political stability is now vulnerable even in the European Union. Indeed, around the world, from Mexico to Indonesia and even China, the social fabric is being stretched to the point of fraying. This anxiety is reinforced by the general lack of funds among large groups of people who had nothing to do with creating today’s crisis but are bearing the pain of it.
These social anxieties are not being addressed because financial-sector bailouts, stimulus packages, and help for distressed industries with strong lobbies are testing many governments’ financial limits. That the advocates of unconditional privatization are now crying out for state support would be cause for cynical laughter if the danger were not as big as it is. For the brutal question governments must now face is this: is there an alternative to the Icelandic crash course?