This piece which was sent to me by Will Brown is a bit of futurology looking at some possible scenarios.

As heads of state gather in various permutations to tackle the world financial crisis, the IMF has warned that the world faces ‘imminent global meltdown’. What would a meltdown look like? Below is a guess – and some stories of other possible outcomes – positive and negative.

Global meltdown

Things have already gone too far. Governments don’t control enough of the economy to stop the storm. The different national interests preclude frightened strong countries making sacrifices for dying weak ones.

What has been a silent run on the banks over the last week breaks into the open. People start queuing for cash. Hedge funds, and all other shareholders financed by credit, are forced to sell driving price down further. No one can borrow money. An avalanche of banks go bust around the world. Weaker countries cannot borrow money. Iceland is the model. Next is Eastern Europe followed by Southern Europe and South America. The banking system collapses and international trade stops dead. Money stops meaning anything.

The model is Argentina in the early 1990’s or Germany in the mid 20’s. But on a global scale. People hoard food. Government declare martial law – security outside Tescos is armed. So are the police. Workplaces are taken over by workers’ councils. Barter becomes the means of exchange. The army threatens mutiny as soldiers stuck in Afghanistan and Iraq become desperate to get home. The government wants them home anyway. Prisoners, abandoned in overcrowded gaols, threaten mass break outs. The Queen addresses the nation about Dunkirk and God. A government of national unity launches a WW2-style austerity program including rationing, dig for victory and martial law.

Mandelson joins the euro

Will the Euro disintegrate or will it expand? The Irish unilaterally guaranteed their savers to stop a bank run. Angela Merkel felt forced to abandon coordinated EU action and take independent German action. The Mediterranean countries in the Euro already have to pay more to borrow money than Germany and France. The new Eastern European countries have small foreign currency reserves and weaker banks. Will the Germans and French be able or willing to rescue the Italian or Spanish – let alone the Poles or Czechs?

The British banks are exceptionally vulnerable. HSBC, half owned by cash rich China is safer – the rest are among the dodgiest big banks in the world. Their ratio of debt to capital is very high, they’ve lent billions to insolvent hedge funds and the British housing market is collapsing. The Treasury has offered them government money but it only transfers the potential bankruptcy to HM government. In a bold move Gordon Brown may be forced to mount an emergency bid to join the Euro. This would cement Britain into a much bigger currency block thereby protecting the banks. It would separate the UK from a floundering US economy and put us as a key player in a new united Europe that will either stand or fall on our involvement – and the solvency of our banks. Peter Mandelson, a euro enthusiast with strong European links, has been recalled to Whitehall. Such a move would split the Tory party forever in a neat reverse of 1931.

The appeal for the French and Germans is limited. They understand that Brown colluded as the US poodle in chief for 10 years with the continuation of the Thatcher/Reagan project of market ‘freedom’ and the cultivation of the mega rich. They understand that the British banks are on their knees. But this is a once in a generation opportunity to prise the UK from the US and to get control of the one time power-house of capital that was the City of London.

No worse than the last time

Maybe the world isn’t really on the edge of a precipice. Perhaps the IMF is wrong. So share prices have fallen heavily but buyers will soon start coming out of the wood work to snap up the bargains. Clearly we will have something of a recession in the Western economies but the tremendous momentum of growth in China, India and Brazil will the keep things going. Unemployment will rise somewhat and we’ll all have to tighten our belts for a couple of years. Modest public work initiatives will help with the unemployment. Barak Obama will lead the US in a more progressive direction with a suspension of home repossessions. The near collapse of the US car industry will be used as an opportunity for a big switch to sustainable transport. But as the dust settles and the journalists calm down everybody will realise that their pensions are safe as are their jobs (mainly) and will carry on as normal.

Chinese lead election of world president

The Big Recently Industrialised Countries meet up and come up with an alternative solution to George Bush and Gordon Brown. The Chinese and Russians have giant cash reserves. Along with Brazil and India they account for half the world’s population and control enormous reserves of raw materials – metals, oil, gas and coal.

The BRIC proposal involves a recapitalisation of the IMF and World Bank tied to the political reorganisation of the UN to reflect recent changes in global power. A strengthened UN would have an enlarged security council including India and Brazil. The recapitalized IMF and World Bank would be mandated to shore up the world banking system. They would underwrite countries on the edge of bankruptcy. They would be required to launch a UN commission to investigate the road of de-regulation that has led us to this impasse – and construct a new global financial framework. The commission will have powers to disqualify leading players such as the hedge fund managers from further economic activity – they can clean toilets.

The political legitimacy of these developments will be underscored with an extension of global democracy that will underpin the newly strengthened international institutions. The Secretary General of the United Nations will be elected at global elections. The new structure will require nations to vote for membership by popular referendum. A nation that votes to stay out will be free to go its own way – but will get no world money to support its banking structure.

The new United Nations will embark on a crash program to shift towards sustainable energy sources and to end world poverty. This will soak up the unemployment generated by the crash. General Motors will be making solar panels and bicycles as well as electric mass transport vehicles. The Work Bank will operate as a global central bank with a mandate from the UN to regulate the global banking system. The mandate will focus on stability to prevent future collapses and the construction of an economic order that drives to end world poverty and develops a sustainable global economy.

Will Brown

Totterdown