Crisis in the Midst of Recovery

Published June 18, 2011
By Nate Haken
Failed States Index 2011
After having contracted by 0.5% in 2009, global GDP is now very much in recovery mode, with growth of around 5% in 2010. However, this does not mean smooth sailing either for developing or developed countries. In the last year there have been massive protests against governments’ economic stewardship in countries as disparate as Greece and Burkina Faso, illustrating the sobering truth that under certain conditions recovery can be even more destabilizing than recession.

In 2009, economies in the developed world took a nosedive, as debt crises spread like wildfire, hopping through the Eurozone from Iceland, to Ireland, to Greece, and Portugal. Looking ahead, people are now turning their concern toward Spain. All of these countries, whether or not they have been, or will be, bailed out to stabilize their economies, are facing the necessity of austerity measures to prevent such crises from repeating themselves in the future. These austerity measures are being imposed as economies are now deemed strong enough to withstand them. Nevertheless, they have sparked protests, which have sometimes turned violent. Meanwhile, the recovering global economy is contributing to rising food and fuel prices, which have sparked massive protests and military crackdowns in Mozambique, Uganda, and Burkina Faso.

As viewed through the Failed States Index, Ireland had the sharpest downward trend among the developed countries which were slammed by the economic crisis over the last few years. One of the Index’s 12 indicators provides useful insight for just how bad things became: Ireland’s score on Poverty and Economic Decline (PED) worsened by almost two full points on a 10-point scale over the past five years, jumping from 2.1 in the 2007 Failed States Index (which looks at the year 2006) to 3.9 in the 2011 Index. Like Ireland, Greece’s scores show a similar downward trajectory beginning in 2006. That year, the country scored 3.5 for PED, with an unemployment rate of around 8.7%; today Greece has an unemployment rate of around 14% and a PED score of 5.1. Portugal’s PED score also worsened by a full point. In each of these cases, the decline reflected rising unemployment and declining economic growth.

The Failed States Index, however, is not so much a deep economic analysis as it is a broader overview of the linkages between economic, social, and political drivers of instability.  Viewed through this lens it becomes clear that the crisis in the Eurozone is not just economic; it has had severe political ramifications as well. Countries across Europe have been compelled to implement austerity measures to cut government spending and relieve the burden on stretched state finances.

Not surprisingly, such measures are  unpopular and often create frustration and political problems for governments. Greece was by far the poorest performer with respect to deterioration in the political indicators. This reflects a general lack of confidence in the government’s ability to handle the crisis.  In a recent poll, 77% of Greek respondents said they did not trust the Prime Minister to solve the problem. Eighty percent said they did not trust the Finance Minister. There have been massive protests which have at times turned violent. In one incident, several people were killed in clashes with police, during which protesters set fire to a bank in Athens. In Portugal, Prime Minister Jose Socrates resigned in the midst of crisis there.

Meanwhile, in the developing world, the global economic recovery has proven to be no less challenging. In 2008, food prices soared.  This negatively impacts stability, especially in countries with high poverty and population growth.  There were food riots and other forms of civil unrest in North Africa, Central Africa, Southern Africa, South Asia, Asia Pacific, Latin America, and the Middle East.  In Cameroon, dozens were killed in protests. In Haiti, five were killed, including a UN peacekeeper.  The prime minister was forced to resign. In Egypt, six were killed in breadlines. The situation became so dire that President Hosni Mubarak ordered the army to get to work baking bread. In Senegal, there were also clashes with police. 

Then the global economy took a nosedive and prices came back down.  The food riots stopped. Now, the global economy is recovering. Consequently, protests over high food prices have resumed, and in September 2010, 13 people were killed in food riots in Mozambique. 

In Uganda, food protests occurred around the time of a disputed election in February of this year. Opposition leader Kizza Besigye lost and tried to mobilize the population to protest was he claimed was a stolen election. The Ugandan people were not interested in taking up that cause. But when he suggested that people protest high food and fuel prices, they came out by the thousands in multiple cities. By the time the protests subsided, at least five people had been shot dead. There were reported lynchings. Hundreds were arrested. Meanwhile, in Burkina Faso protests over rising prices turned chaotic when soldiers staged a mutiny and ran wild in the streets, before finally being suppressed.  Some analysts have suggested that rising food prices contributed to the revolution in Egypt.

In each of these cases, people debate whether the root cause of civil unrest was really food prices or whether the price of food was used as a justification by politically motivated actors to incite the population. In Uganda, food protests coincided with the electoral period. In Burkina Faso, protests were one piece of a wider combination of factors. In Egypt there was a “contagion” of uprisings moving across the broader region.

As viewed through the lens of the Failed States Index, however, the social, economic, and political dimensions of instability are all interdependent. Economic and demographic pressures have political implications and vice versa. It is certainly a relief that the Great Recession is over. But recovery has not been smooth, in either the developed or developing worlds. The lesson for policy makers is that maintaining stability in the context of economic recovery can be just as challenging as doing so during a decline.