If there is a bright side to the turmoil that has roiled the global economy since 2008, it is that not every part of the world has erupted simultaneously. The first blow was the subprime mortgage crisis in the United States, to which Europeans responded with self-satisfied reflections on the superior resilience of their social model. Then, in 2010, with the outbreak of the European debt crises, it was America’s turn for schadenfreude, while Asian countries pointed to the over-extended welfare state as the root of the problem.

Today, the world is obsessed with the slowdown in China and the woes of its stock market. Indeed, to some, what is happening in China may be a modern version of the American stock-market crash in 1929 – a shock that shakes the world. And it is not only the Chinese economy that has hit turbulence; Russia and Brazil are in much worse shape.

As globalization connects far-flung people and economies, the consequences are not always what was expected – or welcome. And, with the economic crisis becoming ever more global in nature, the next challenge for policymakers will be to try to mitigate its effects at home – and to contain their constituents’ impulse to reduce engagement with the rest of the world.

By now, it has become clear that every success story has its dark side, and that no economy is likely to continue to rocket upward indefinitely. But, to paraphrase Leo Tolstoy, it is important to remember that every unhappy economy is unhappy in its own way, and that a fix for one country’s problems might not work for another’s.

Europe’s problems, for example, cannot be attributed to a simple, single cause – such as the adoption of a common currency. In the run-up to the euro crisis, Italy had undergone a long period of stagnation, while Spain had experienced an American-style housing bubble and Greece was suffering from too much government-fueled growth. The uniting factor was that each had adopted unsustainable policies that required corrective action.

Nor was the crisis in the United States evenly experienced; Florida and Arizona had different problems than Michigan did. Similarly, the economies of Russia, Brazil, and China are all slowing for different reasons. Russia is suffering from its decision to become a big energy producer at the expense of diversification. The roots of China’s problems lie in its attempt to shift from exports and investment in infrastructure to a growth model based on higher domestic consumption. Brazil is weighed down by costly consumer credit and real-wage gains that have been outpacing productivity growth.

There are ways to deal with each of these problems, but the most effective long-term strategies for raising productivity cannot be reduced to a simple formula. Unfortunately, part of the standard political response to an economic crisis is the demand that something be done quickly. And, during the ongoing economic troubles, there is a policy that seems to have worked well so far: currency devaluation.

It is a policy that has had success in Japan, where a weaker yen is the only real accomplishment of Abenomics, and in Europe, where a weaker euro is helping to stave off recession. Europeans also like to maintain that a weak dollar was behind the US economy’s rapid rebound. Now it is China’s turn to hope that currency devaluation will help it regain competitiveness.

The trouble, of course, is that all countries’ currencies cannot depreciate simultaneously. In the aftermath of the Great Depression, efforts to do just that pushed governments to adopt increasingly protectionist trade policies, constricting growth for years. The protectionist impulse has been absent from the response to the current crisis so far, but that could change.

Another uncomfortable consequence of globalization is its tendency to put people and capital on the move. As large emerging economies hit the skids, more people could be driven to seek a better future elsewhere. The type of migration that attracts the most attention is the plight of refugees from conflict zones in the Middle East and North Africa. But that flow is also accompanied by a surge of more economically motivated migration, from the Balkans and West Africa, for example. And both are triggering nativist responses in destination countries.

Meanwhile, instability in emerging economies leads their wealthier citizens to try to rescue as much capital as possible, driving a surge in real-estate prices in global safe havens like New York, London, and Geneva. That makes those cities look very glamorous and dynamic, but it also generates huge difficulties as impossibly high housing prices mean overcrowding, longer and difficult commutes, and a decline in the quality of life for the local population.

So far, the advanced economies have dealt with the recent downturns effectively. But while the economic response has been much more effective than it was in the 1930s, social tensions and resentments have been left to simmer. Europe and the US now face a new challenge: They must respond not only to their own economic difficulties, but also to the deep human suffering produced by economic and political failure elsewhere.

This article is published in collaboration with Project Syndicate. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Harold James is Professor of History and International Affairs at Princeton University, Professor of History at the European University Institute in Florence, and a senior fellow at the Center for International Governance Innovation. 

Image: A woman holds a Union flag umbrella in front of the Big Ben clock tower (R) and the Houses of Parliament in London. REUTERS/Luke MacGregor