ARTICLE - THE UNDEVELOPING WORLD

THE UNDEVELOPING WORLD
(Foreign Policy) - By Nate Haken, Alessandra Wasserstrom

The Eurozone's weakest have taken a hit in the latest Failed States Index.

Over the last three years, the world's blockbuster economic instability has been staged in some unlikely settings. Developed countries like Greece, Portugal, Iceland, Ireland, and now Spain -- hardly the usual suspects -- are now producing the most alarming headlines. And as a reminder that no country is immune to fragility, all these countries saw their performances on the Failed States Index worsen in the last couple of years, highlighting the fact that economic pressures on a state can be linked to political pressures -- and the combination can be destabilizing.

Economically, Ireland has shown the sharpest downward trend. One of the index's 12 indicators is an excellent proxy for just how bad things got: Ireland's score on Poverty and Economic Decline (PED) worsened by almost two full points on a 10-point scale over the past four years, jumping from 2.1 in the 2007 Failed States Index (which looks at the year 2006) to 3.9 in the 2011 index (which looks at the year 2010). Like Ireland, Greece's scores show a similar worsening trajectory beginning in 2006. That year, the country scored 3.5 for PED, with an unemployment rate of around 8.7 percent; today Greece has an unemployment rate of around 14 percent and a PED score of 5.1. Portugal's PED score also worsened by a full point. In each of these cases, the deterioration reflected rising unemployment and declining economic growth.

The FSI, however, is not so much a deep economic analysis as it is a broader overview of the linkages between economic, social, and political drivers of instability. Viewed through this lens, it becomes clear that the crisis in the eurozone is not just economic; it has had severe political ramifications as well. Countries across Europe have been compelled to implement austerity measures to cut government spending and relieve the burden on stretched state finances. Unsurprisingly, such measures are unpopular, which translates into frustration and political problems for governments.

Greece was the poorest performer on political indicators by far, reflecting a general lack of confidence in the government's ability to handle the crisis. In a recent poll, 77 percent of Greek respondents said they did not trust the prime minister to solve the problem; 80 percent said they did not trust the finance minister. Massive protests have at times turned violent. In one incident, several people were killed in clashes with police, during which protesters set fire to a bank in Athens. In Portugal, Prime Minister Jose Socrates resigned in the midst of the crisis there.

Yet what is perhaps most alarming about the eurozone crises is that they have spread like wildfire, a contagion that also shows up in the Failed States Index. Spain, for example, which has not yet received a bailout, shows serious signals of decline. Its indicators for state legitimacy -- that is, the degree to which the population views the government as acting in its interest -- and economic performance have deteriorated since 2006, by 0.5 and 1.1 points, respectively. Unemployment has soared to 20 percent, and approval ratings of Prime Minister José Luis Rodríguez Zapatero have plummeted. This May, thousands came out to protest the political and financial establishment, which they feel contributed to their economic troubles.

Europe's recent woes highlight the difficulties in shoring up the weaknesses in any state. Often, an attempt to address problems in one area, such as imposing austerity measures to improve the economy, can have a negative effect on another, such as state legitimacy. Strengthening state performance is thus often a two-steps-forward, one-step-back affair. Often long-term stability and prosperity require hard choices in the short term. But the Failed States Index makes clear that in the end, success requires understanding that there is no escaping the long run.