Capitalism's Berlin Wall

As the economic crisis deepens and widens, the world is searching for historical analogies to help us understand what is happening. At the start of the crisis, many people likened it to 1982 or 1973 -- which was reassuring because both dates refer to classical cyclical downturns.

Today, however, the mood is much grimmer, with references to 1929 and 1931 beginning to abound, even if some governments continue to behave as if the crisis was more classical than exceptional. Europe is being cautious in the name of avoiding debt and defending the euro, whereas the United States has moved on many fronts in order not to waste an ideal opportunity to implement badly needed structural reforms.

For geopolitical strategists, however, the year that naturally comes to mind in both politics and economics is 1989. Of course, the fall of the house of Lehman Brothers has nothing to do with the fall of the Berlin Wall. Indeed, on the surface it seems to be its perfect antithesis: the collapse of a wall symbolizing oppression and artificial divisions versus the collapse of a seemingly indestructible and reassuring institution of financial capitalism.

Yet the past year, like 1989, may very well correspond to an epochal change, whose unfolding consequences will be felt for decades. The end of the East-West ideological divide and the end of absolute faith in markets are historical turning points. And what happens in 2009 may jeopardize some of the positive results of 1989, including the peaceful reunification of Europe and the triumph of democratic principles over nationalist, if not xenophobic, tendencies.

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In 1989, liberal democracy triumphed over the socialist ideology incarnated and promoted by the Soviet Bloc. For many of his supporters, it was former U.S. President Ronald Reagan who, with his deliberate escalation of the arms race, pushed the Soviet economy to the brink, thereby fully demonstrating the superiority of liberal societies and free markets.

Of course, there are obvious differences between 1989 and now. First, and perhaps above all, the revolutions of 1989 and the subsequent collapse of the Soviet Union put an end to global bipolarity. By contrast, 2009 is likely to pave the way to a new form of bipolarity -- this time with China substituting for the Soviet Union.

Second, whereas democracy and market capitalism appeared as clear winners in 1989, it is difficult in 2009, with the spread of the global crisis, to distinguish winners from losers. Everyone seems to be a loser, even if some are more affected than others.

Yet history is unfair, and the United States -- despite its greater responsibility for today's global crisis -- may emerge in better shape than most countries from the morass. In better shape, but not alone.

One senses something like the making of a universe dominated by the United States and Asia. From the incredible media lab at MIT to the mathematics and economics departments at Harvard, Asians -- Chinese and Indians, in particular -- are everywhere, like the Romans in Athens in the first century B.C.: full of admiration for those from whom they were learning so much and whom they would overcome in the coming decades.

But before this new order appears, the world may be faced with spreading disorder, if not outright chaos. What, for example, will happen to a country as central and vulnerable as Egypt when hundreds of thousands of Egyptians working in the Gulf are forced to return to their homeland as a result of the crisis in the oil-producing countries? When the rich get less rich, the poor get poorer. And what about the foreign workers who have reached for the "European dream" and are now faced with potential explosions of xenophobia in Europe's supposedly open countries?

The consequences of 1989 ended up being less enduring than many observers, including me, would have assumed. We can only hope that in the end the consequences of 2009 will similarly prove to be far less dramatic than we now -- intuitively and in our historical reflexes -- feel them to be.

Dominique Moisi is a visiting professor at Harvard University and the author of "The Geopolitics of Emotions." ?© Project Syndicate