Be Very Afraid

What frightens you most about the world? Some people naturally incline to catastrophe theories. During the Cold War, they thought that the arms race would lead to nuclear annihilation. Today, they think that global warming will destroy the planet.


Personally, I find such dangers too big to focus on. I don't lose sleep over nuclear or environmental Armageddon. It takes something much smaller to frighten me. This week, it was a photograph of the G8 leaders at their summit in Hokkaido.

advertisementIt was not a physical thing. True, the attempt to make Silvio Berlusconi look younger has had the strange side-effect of making him look dead. True, Nicolas Sarkozy, perhaps distracted by his love for Carla Bruni, seemed quite alarming.

True, the G8 had just made their way through an 18-course banquet of things like hairy crab bisque, and Gordon Brown looked as if he were muttering Heathcliffian small talk ("The more the worms writhe, the more I yearn to crush out their entrails!"). But no, it was not their appearance that struck fear.

It was simply the thought that these people are in charge of our civilisation. Twenty years ago, the line-up included Reagan, Kohl, Mitterrand and Mrs Thatcher. Today, we have in George W. Bush a president who has literally and metaphorically used up his country's credit in the world. Angela Merkel runs Germany with decency but impotence. Mr Sarkozy is a walking dictionary definition of the word "mountebank". And then there is Mr Brown.

What do these leaders want? What do they believe? Where are they taking us? Do they understand what is happening?

One of the essential gifts of leadership is to explain the state of the world truthfully, and then to say something about how it might be improved. In the 1980s, such leadership was provided.

The explanation was that Soviet Communism threatened our way of life, but would not prevail if we remedied our own military weakness and sorted out the economic errors of the 1970s.

Reagan, Thatcher, Kohl and Mitterrand often disagreed strongly among themselves about particular methods, but they all worked for the recovery, even the victory, of the West. They achieved it.

Today, our leaders do not even tell us what is wrong, let alone how to put it right. In the past nine months, the Western world has experienced a crisis in the banking system that threatens our prosperity.

In America, the Fed has had to invoke emergency clauses about "unusual and exigent circumstances", dating from the Great Depression, to prevent the collapse of household names.

In Britain, the crisis has meant that mortgage issuance is down by two thirds, year on year. If lending is like oxygen to an economy, we are now 20,000ft up a mountain, without breathing apparatus.

It would be nice if our leaders told us how we got here. Did Alan Greenspan's policy of holding interest rates below their natural level drive asset prices beyond sanity? (Is Mr Greenspan still Mr Brown's informal adviser on these matters, by the way?

Last year, our new Prime Minister proudly announced that he was, but we do not hear much about it now.) Did our leaders expect oil to be $150 a barrel, or the world to be short of food? Do they plan that China should become top nation?

It would be even nicer to know where they think we are going. Is the biggest risk now inflation and "stagflation" - must we therefore maintain high interest rates and risk the collapse of hundreds of banks?

Or is it rather deflation, in which case, interest rate rises such as the latest from the European Central Bank will destroy most of a continent's chance of early recovery?

Of course some of the remedies here are technical - the regulation of banks' capital requirements, say, or the way in which banks are allowed to fail - but in the end, it comes back to politics.

It is our political leaders who will have to react to the fact that we have become indebted consumers in a world in which power now rests with producers.

It is they who will now have to deal, very quickly, with our energy insecurity, and bring us nuclear power and clean coal. They will have to decide that we can no longer afford the levels of public spending we have been used to. They will have to confront our falling populations, our cultural weakness, our welfare burden.

They will not be able to leave things to the central banks. How much longer, for example, can the ECB go on imposing pain on Spain and Ireland, let alone France and Italy, without political power coming into play?

The ninth figure, who always attends the G8 without being an official member of it, is the president of the EC (at present, José Manuel Barroso). Perhaps the current crisis will give the EU a political identity to match its financial one, and the United States of Europe will truly be born.

Perhaps the opposite will happen, and the strains will tear the thing apart. Again, what do the leaders want?

The spookiest aspect of this week's G8 photograph is the presence in the line-up of the Russian President, Dmitry Medvedev. He is standing between Berlusconi and Mrs Merkel, both of whom Russia is keen to suborn. But he and his real boss, Vladimir Putin, are no friends of the Western economic and political order.

In the world of free markets, it is bad manners to suggest that big countries make big economic decisions for non-economic motives, but it is hard to avoid noticing that the current price of oil points a knife at the throat of the dollar. Russia is holding the knife.

As Russia decides its current, falling level of oil production, are its thoughts never tinged with the desire for revenge for the humiliation of the end of the Cold War? Does it never laugh at the spectacle of American weakness?

If Russia gets even nastier in Georgia or the Ukraine, or throws its weight about in eastern Europe and pushes back against Nato, who has the power to stop it? The Russians may no longer be Communists, but they still know how to enjoy the crisis of capitalism.

Similar questions, to greater and lesser degrees, can be asked about other countries with lots of oil, and little goodwill towards the West. Saudi Arabia is in a position to get what it wants. Iran is in a position to threaten, unpunished. Islamists can carry a scimitar in one hand and a petrol pump in the other.

Study this week's G8 photo-call, and you realise you are looking at a group of people with little power, no answers and no will to come up with any. That is frightening. But it also makes me think - given that democracy, for all its faults, has the capacity for renewal - that there is a gap in the market for leaders.

It becomes urgent to know whether the likes of David Cameron and Barack Obama want to tell the truth about the state of the world, and what they want to do about it.