The ongoing financial crisis has not only had very serious economic consequences for countries around the world, it has also given rise to new security policy threats. In a new FOI report titled Strategic Outlook 2009 – Whitewater rafting for security policy? FOI research director Johannes Malminen describes how the global economic crisis may pose a threat to national security.



According to Malminen, the explosive nature of the current economic crisis is the result of the combination of far-reaching financial globalization and the profound imbalances in the world economy that developed in recent years. We have not seen an economic crisis of this magnitude since the Great Depression and therefore have very limited experience of how to deal with it. The rapid redistribution of resources caused by the crisis has not only led to severe economic problems; it is also creating new security policy threats and challenges. For example, the crisis is shifting the balance of power and therefore has the potential to intensify existing conflicts and create new ones both domestically and internationally.

Malminen highlights three areas with the potential to cause the economic crisis to worsen: a move toward protectionism in the global economy, the policy decisions of marginal actors, and the lack of sufficient international coordination to manage the crisis.

In a very unstable economic situation such as the current one, politicians are often tempted to resort to populist measures. If consideration is given first and foremost to national interests, protectionist currents are difficult to resist. Since Sweden has a relatively small, open and highly globalised economy, it would be badly damaged by increasing protectionism in the global economy.

Marginal actors in the global economic system tend to have limited resources to withstand economic shocks and they have therefore been hit particularly hard by the current crisis. This is particularly evident in the Baltic states. The ability of Latvia, Lithuania and Estonia to weather the crisis may play a central role in determining how Sweden is affected. Swedish banks have large market shares in the Baltic states, which means that Sweden’s financial line of defence passes directly through the Baltic area.
 
Finally, the economic crisis could be worsened if a new, internationally-coordinated approach to managing the global financial system is not established quickly. When financial flows became globalized, international institutions failed to develop sufficiently in order to meet the needs for control, monitoring and support. The United States has been hard hit by the ongoing crisis is no longer in any position to take sole responsibility for a functioning global economy. An international effort is required to lead the world out of the current economic crisis.