Return of the State

The world in the age of globalization is interconnected. When economic crisis spreads, it travels faster and wider than ever. First the U.S., then Japan, E.U., then BRIC and other developing countries, no one can escape from the perfect storm of the global crisis. The shockwave sent by the U.S. is revibrated back by the crisis in Eastern European countries. And crises in different countries and regions are mutually reinforcing. 

In the 1990s and earlier this century, theorists always talk about the fading of the state power and the growing influence of super-state, non-state actors on the world stage. At that time, the state sounds more and more irrelevant in the future course of the global development and the transfer of power to a higher or lower rule is not only desirable, but unavoidable. But now, that trend is brutally interrupted by the economic crisis and the state return as powerful as ever. The key is simple: the state is the only power center that welds the fiscal, monetary, and regulatory policy. Neither super structure like EU or IMF nor under structure like regional or municipal government has such a comprehensive power and independence. That's why EU is one step closer to monetary disintegration as the crisis deepens each day. 

Looking at the exchange rate right now and you'd realize how market value today's state power. The more powerful the state is and swift on action, the more value will be assigned to its currency, regardless how much deficit is attached in the short run. Interestingly, in the time of once-in-a-lifetime crisis, the market observers are all looking at the state and measure the possibility of recovery on the stimulus plan or rescue plan. As long as the crisis persists, the expansion of state emergency power and the dominance of state power in the international relations will unquestionably materialize. 

However, the irony lies in the return of the strong state. The state follows "save myself first" principle and acts upon it. Lack of international cooperation and more powerful international regime to correct the hole created by unfettered flow of capital, single states can hardly save  themselves without the revival of the others. Politically difficult, maybe impossible, choices are exactly what we need now. The rising of the state power generates a situation in which protectionism, populism and other danger of repeating world conflict are more plausible.

A leadership is badly needed, not just from the U.S., but from China. Successful coordination between the two countries' recovery plans could contribute to a quicker cure for the economy. The world will follow if such engine could be re-jump started. 

Grave danger lies ahead. If no sweeping action taken by the leading states in the world, more and more economic problem will dive into political and social problem. Unstable political conditions compounded with worsening economic conditions will make solutions ever more elusive and difficult than today. symptoms are already emerging around the world and things will certainly get worse before the end of the first decade of 21st century.