Brace Yourselves

(TWP)

China needs to move upmarket, clean itself up, deal with declining industries and try to keep creating enough jobs to prevent social unrest. That's more than enough to make it prefer to avoid taking on international responsibilities, aspiring to leadership or any such grand, epoch-making gestures. They might be something to think about for the 2020s, '30s or '40s, perhaps, but not for this economic cycle.

China is, though, Exhibit No. 1 for the fourth theme: the revival of authoritarianism. But in that role, it's an impediment to change, not a source of it. The real examples of new braggart authoritarians are Vladimir Putin's Russia and Hugo Chávez's Venezuela, countries that flirted with democracy in the 1990s but then thought better of it.

They are also prime beneficiaries of another recent phenomenon: the boom in oil and commodity prices that began in 2002. So they are best thought of not as winners in the current economic crisis, but as potential big losers. The price of crude oil has already fallen dramatically from its peak of $147 a barrel in June to less than $75 now. The Western recession looks as though it will combine with slower growth in Chinese demand for oil to push prices even lower, unless producers can agree to cut supplies. The prices of metals and other natural resources are also tumbling fast.

This is good news for countries that consume natural resources, including both the United States and China. But it should also remind us of another recurrent truth about economic crises: It's political instability that turns a crisis into a disaster, bringing about real change. During the 1997-98 financial crisis in East Asia, the most dramatic and painful effects were felt in Indonesia, not because of its economic weaknesses but because the crisis led to the overthrow of its longtime dictator, Suharto, and then to several years of chaos.

If we look for the Suharto of this crisis, for a place where economic stress could produce a political explosion, we're unlikely to find it in the United States or Western Europe. It's more likely to be found in poorer countries such as Pakistan or, likelier still, in countries whose economies and regimes have become dependent on high commodity prices: Russia, Venezuela, some African nations, perhaps even Iran. In those places, if prices collapse, all political bets are off. All told, the consequences of economic and financial turmoil are far less predictable, and far less pat, than the current consensus seems to hold.

bill@billemmott.com

Bill Emmott is former editor of the Economist and the author, most recently, of "Rivals: How the Power Struggle Between China, India and Japan Will Shape Our Next Decade."