By Ian Bremmer

Ecuador rarely makes headlines outside its immediate neighborhood, but a brief dust-up there two weeks ago helps tell a broader story. Faced with mounting budget problems, President Rafael Correa announced sharp salary cuts for police officers last month, and some of Quito's cops responded by trying to "arrest" him. Informed of the unfolding drama, an alarmed Venezuelan President Hugo Chávez took to Twitter to warn that "They are trying to oust President Correa" before a more loyal group of officers rescued the Ecuadorean president by shooting their way into a hospital where he had taken refuge.

This is what sometimes happens when leaders of potentially unstable developing countries try to balance the books at the expense of people with access to guns and tear gas. It's also part of the cost of defaulting on Ecuador's debt two years ago. Outsiders aren't exactly lining up to loan this government money.

This episode underscores a broader problem: Lingering effects of the global economic slowdown are forcing vulnerable governments across the developing world to take actions that can provoke bursts of public outrage, particularly in countries where trouble was already brewing beneath the surface.

Despite painfully slow growth, the world's leading economies don't face these sorts of threats. We've seen plummeting popularity numbers and ugly election results in the United States, Western Europe and Japan. Yet, jokes and election-year rhetoric aside, these governments aren't at risk of violent collapse. Nor is there much to fear in the major emerging markets. China, India, Brazil, Indonesia and Turkey continue to recover nicely from the global slowdown.

The countries at real risk are those where extended economic hardship has sharpened fears and frustrations that threaten vulnerable (and potentially vulnerable) governments. Start with two other examples from Latin America.

Financial realities have persuaded Cuba's Raul Castro to take drastic steps. The Cuban state employs more than 85 percent of the country's labor force, and Castro has announced plans to trim the state payroll by laying off nearly a million workers -- about 9 percent of the island's population. Though the Castros are unlikely to repeat Correa's mistake of slashing wages for cops, it's not at all clear this plan can be safely carried out.

In Venezuela, Chávez and his party fared surprisingly poorly in last month's parliamentary elections, perhaps because Venezuela is the only country in the Western Hemisphere other than Haiti to see its economy contract this year. Though he has firm control of the levers of power for the moment, product shortages, high inflation and high unemployment persist. Production is steadily falling at PDVSA -- the country's state-owned oil company and the government's primary cash cow -- and the Venezuelan economy will not improve anytime soon. An emboldened opposition could make things interesting on the streets of Caracas in advance of a presidential election in 2012.

In Asia, an experiment in economic reform in North Korea was reversed, then reversed again earlier this year, as a burst of public outrage rattled the leadership. To atone for the unrest his government generated, Kim Jong Il's prime minister publicly apologized, and the country's finance minister was executed by firing squad. Now Kim appears poised to pass power to, depending on whom you believe, his bewildered 27-year-old (or maybe 28-year-old) son, the country's military brass, Kim's sister, his brother-in-law, or some combination of all of these. North Korea's troubles long precede the global economic slowdown, and ongoing hardship and a brittle authoritarian state in transition have the region on edge.

Pakistan's military has every incentive to act as ultimate guarantor of that country's stability, but a weak state response to catastrophic flooding earlier this year has badly undermined what's left of the civilian government's credibility. The country's main opposition party, led by former Prime Minister Nawaz Sharif, remains content to watch from the sidelines as the government founders, because governing Pakistan is not a job anyone really wants these days. The residual impact of economic crisis leaves the country in a very tough spot.

Threats of unrest persist even in Europe.

Greece will benefit from committed support from the European Union and International Monetary Fund. But Spain, with one of the ugliest economic outlooks on the continent, faces national and local elections over the next year -- and the resulting temptations for elected officials to spend money they don't have in search of extra votes.

Though Spain doesn't face the sorts of threats that Cuba, North Korea and Pakistan must withstand, large-scale demonstrations in Spanish cities triggered by painfully slow growth and nearly 20 percent unemployment could fatally undermine any political consensus in the country in favor of the belt-tightening on which the country's longer-term solvency will depend.

Order has been restored in Ecuador, and Correa has spent the past several days looking for a scapegoat. He charges that the "extreme right" in the United States -- though not the Obama administration -- has financed a bid by some within his country's opposition to topple his government.

In reality, Correa and other political leaders of cash-strapped developing countries face a much less complicated -- though much more dangerous -- problem: Economic turmoil can generate earthquakes, and their governments are built on fault lines.

Ian Bremmer is president of Eurasia Group and the author of "The End of the Free Market: Who Wins the War Between States and Corporations?"

 

Available at Amazon.com:

The End of the Free Market: Who Wins the War Between States and Corporations?

Running Out of Water: The Looming Crisis and Solutions to Conserve Our Most Precious Resource

Bottled and Sold: The Story Behind Our Obsession with Bottled Water

Water: The Epic Struggle for Wealth, Power, and Civilization

The Great Gamble

At War with the Weather: Managing Large-Scale Risks in a New Era of Catastrophes

 

© Ian Bremmer

World - Economic Woes Put Brittle Nations on Edge | Global Viewpoint