Why we’re (still) screwed

BOSTON — I wrote a rather nerdy column in February about the Davies J-Curve, the political science theory put forth by James C. Davies in the 1950s.

Davies’ idea was simple but powerful: Political unrest occurs when a people’s rising expectations — about how much money they can make, what they can buy, whether they have enough food or medicine — are suddenly dashed by, let’s say, a global economic crisis that follows the longest expansion in decades.

Here’s how professor Davies put it, in that special language of academia:

"Revolutions are most likely to occur when a prolonged period of objective economic and social development is followed by a short period of sharp reversal. People then subjectively fear that ground gained with great effort will be quite lost; their mood becomes revolutionary."

Since those dark days of winter, the global meltdown — while moving out of the panic stages — has shown very few signs of recovery. Meanwhile political violence and turmoil has blossomed in nearly every corner of the world. In many places, the mood has become quite revolutionary.

First, the economics:

The U.S. unemployment rate — the key figure underlying confidence in the world’s largest economy — is at a 26-year high of 9.5 percent, and President Barack Obama this week warned it’s still rising. Larry Summers, the director of the president’s National Economic Council, was even gloomier, telling the Financial Times: “I don’t think the worst is over. It would not be surprising if GDP has not yet reached its low."

As for the global economy, World Bank President Robert Zoellick has warned 2009 remains a "dangerous year." Recent gains could be reversed easily, Zoellick said, and the pace of recovery in 2010 is "far from certain."

So much for economic cheer. As for the unrest part, it’s been even worse. Here’s a quick rundown of some of the trouble we’ve been following at GlobalPost the past few days, weeks and months. And this list of woes is by no means complete:

• Chinathis month suffered its worst political violence since the Tiananmen Square crackdown, as tensions between Muslim Uighurs and ethnic Han Chinese exploded in the northwestern province of Xinjiang, killing nearly 200 people. A reported 1,400 people have been arrested in China, and Al Qaeda is now threatening to target Chinese working in North Africa and the Middle East in retaliation for the deaths of 46 Uighurs. At the heart of these escalating ethnic and religious tensions? A battle over money and resources.

• The bloody uprising in Iran has been about a lot of things — the limits of political expression, underlying tension between conservative and more liberal values, the role of Shia Islam in Iran’s political process, charges of official corruption, the legitimacy of a ruling political elite in the face of changing demographics, and plenty more. But economic insecurity has played perhaps the biggest role. A faltering economy was the key issue in the June 12 election, with Iran’s unemployment rate estimated to be above 20 percent and inflation hovering near 25 percent. Declining oil prices, too, are hurting the government’s budget. The International Monetary Fund says Tehran needs oil prices of $90 to stay in the black; light sweet crude this week fell below $60 a barrel. This economic unease became clear during the uprising when street protesters openly mocked President Mahmoud Amadinejad’s (mis)handling of Iran’s economy.

• On June 28, Honduran soldiers stormed the bedroom of President Manuel Zelaya and — at gunpoint, with Zalaya still in his pajamas — forced him to flee to Costa Rica. While the coup was largely a power play over constitutional reform, Honduras is one of the poorest countries in Latin America. Many of its 8 million citizens, particularly the Zelaya supporters who subsist on shrinking banana, coffee, apparel and other low-value exports, are growing increasingly restless.

• On June 4, in the remote Amazon region of Peru, violence erupted in the worst civil unrest the country has witnessed since the days of the Shining Path guerilla movement in the early 1990s. The source of the trouble, in which 23 people were killed? The development of oil and gas resources where the indigenous population claims an ancestral right to land, and to the riches buried beneath it.

• On March 4 the president of Guinea-Bissau was assassinated, the culmination of four months of political violence and upheaval in the tiny west African nation. According to the CIA Factbook, Guinea-Bissau is one of the five poorest countries in the world, an economic plight that has helped fuel almost constant unrest since the nation won independence from Portugal in 1974.

• No discussion of recent unrest would be complete without noting the ongoing piracy debacle in the Gulf of Aden, a stretch of troubled waters hemmed in by the two failed states of Somalia and Yemen.

But political and economic turmoil is also seeping into the world’s most developed, and presumably more stable, economies.

•  British Prime Minister Gordon Brown is fighting for his poltical life, due mainly to the U.K.’s worsening economic woes. London has also been rocked by a "moat-cleaning" expenses scandal that further pressured Brown’s Labour government, and sparked the resignation of the speaker of the House of Commons.

• This week, beleagured Japanese Prime Minister Taro Aso was forced to call a general election, after Japanese voters signaled their extreme displeasure of his handling of the world’s second-largest economy.

So what’s the takeaway from all of this strife around the world? Economics matters. A lot.

Of course every country is different, and no single factor can be attributed to the violence and unrest in the examples cited here. All politics is local, as that tired-but-true cliche goes. But economic insecurity runs through these stories like an electrical current. It is a key element, a trigger, and in many cases, the root cause of all the trouble.

So are we headed for even more turmoil, violence, political unrest and revolution? No one knows for sure. Not the economists. Not the political risk consultants. And certainly not the journalists writing about it all.

But the answer will surely depend on how quickly the global economy recovers, and whether people’s resulting expectations about their future economic prospects are met. In other words, we need to get back on the right side of the J-Curve.

And that’s not likely to happen any time soon. And it’s certainly not going to happen as long as business owners and executives, consumers, and investors worldwide continue to fret about the state of the fragile global economy.

So as much as I hate to say it, I’m afraid we’re — still — screwed.

Other coverage of the global economic crisis:

A World of Trouble, the sequel

A World of Trouble

More recent columns by Thomas Mucha:

Fake news gets real

In China, this photo may be porn