America Will Rule Post-Crisis World (UK)

I am just back from Washington where the green shoots of recovery have sprouted into a jungle on Wall Street, if not yet on main street or in other countries. I was addressing a meeting of US and European diplomats to survey the geopolitical horizons.

As the world economy gradually returns to something approaching normality after the catastrophe triggered by the Lehmans bankruptcy on September 15 last year, thoughts naturally turn to the longer-term effects of the crisis.

Economic models are never good at predicting turning points in cycles, but in these conditions they are completely useless. To assess the long-term political and ideological impact, it makes more sense to consider two scenarios.

In the first, which has dominated thinking throughout the crisis, the deflationary forces of the credit crunch prevail and the world sinks into a recession lasting many years, with unemployment soaring to levels last seen in the 1930s. In that case, this crisis really will mark the end of US dominance, not only as a global power, but also as an economic model and source of political inspiration. But rather than neatly shifting the mantle of global leadership to China or maybe Europe - if we take seriously the triumphalist rhetoric of President Sarkozy after the London G20 summit about the death of the Anglo-Saxon model - a prolonged recession would usher in chaos.

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