This is the most opaque financial crisis: Naim

There are those who say that it is a historical world-changing crisis, an end of an era, that the world has changed forever. And then there are those who say it is an economic cycle, and prefer to focus on the question, how long will the down cycle last?

Naim has written extensively—and often presciently—on the rise and fall of nations in each other’s consciousness and is a student, through books and articles, of the unexpected ways in which globalisation reveals itself. But for now, he says: “I cannot tell you my own synthesis, though I am more on the side of the cyclical line.”

Perhaps the bemusement comes, he suggests, because the financial crisis comes at a time of already great turmoil: the American elections, turbulence in Pakistan, the Iraq war, oil at a hundred dollars, China’s need to create millions of jobs each year to be stable, expectations in India on the returns from globalisation, climate change.

But, Naim explains, there are also three paradoxes of the crisis. One: “We have been told for five years that the international economy is out of balance, that the US is not saving enough, that China’s exchange rate is a problem. Now here is the adjustment, but people do not want it.”

Perhaps because no one knows the nature of the monster. So, the second paradox: “This is the most opaque financial crisis we have witnessed. We don’t know its nature, size, spread, contagion. This lack of transparency comes in a country that is the most transparent country in the world, and in a sector that is the most transparent in that country.”

And the third: it is said that this is a crisis of liquidity, but we are also told that there are huge deposits of capital—for instance, with the sovereign wealth funds and hedge funds. Could there be political implications of the financial crisis? “If there is over-reaction and mismanagement,” says Naim. But be prepared, he adds, for a more central role for the International Monetary Fund.

Another striking feature of the 2008 WEF meeting is the way the US has been debated. (Lee Howell, head of global agenda at WEF, confirmed it some days earlier when asked whether the interrogation of the US in the programme was intentional. Not intentional, he said, as that implies motive. But it was necessary.)

So, asked about his views on US Secretary of State Condoleezza Rice’s talk on American ideals some days ago, which still continues to divide opinion in the corridors of the WEF Congress Centre and in the cafes on Davos’s Promenade, Naim says, “I am more interested in the reaction to the speech.” As he may be.

It appears to confirm a hypothesis he laid out in the current January/February issue of Foreign Policy in an article titled “Hungry for America: after seven long years, the world is ready — and waiting — for the return of the United States”.

So, it is with a beam that he allows himself to be directly quoted from that article: “The world wants America back. For the next several years, world politics will be reshaped by a strong yearning for American leadership. This trend will be as unexpected as it is inevitable: unexpected given the powerful anti-America sentiments sweeping the world, and inevitable given the vacuums that only the United States can fill and that others will increasingly demand that it fills.”

So: “Not that anti-Americanism will suddenly disappear; it never will. Nor will America’s enemies go away. But strong anti-American currents will increasingly co-exist with equally strong international demands for the US to play a larger role in world affairs.” And thus changed the international political landscape with not bipolarity, but duality.