By Nader Mousavizadeh
The opinions expressed are his own.

The question of who will fill the global power vacuum has never before been felt as acutely as it is today – or in as many different arenas of politics and economics simultaneously. Last week, at the annual conference convened by the global advisory firm Oxford Analytica (where I serve as CEO), Robert Rubin joined Martin Wolf in a conversation about the perilous state of the global economy. Listening to the two wise men of global finance set out the steps necessary for Europe and the U.S. to escape the sovereign debt trap, there was a palpable sense of nostalgia for a time when concerted, timely, effective global leadership – in any sphere, by any one country or group of countries – was imaginable. There was also little doubt that the U.S. would not be returning to its pre-eminent leadership position any time soon – or that many countries would even welcome it.

Today, after a week’s geopolitical drama driven by the Palestinian bid for statehood at the UN, it is evident that the global power vacuum is not limited to economics and the Eurozone alone.  Rather, the world is facing a vacuum of leadership in each of the economic, diplomatic and strategic arenas – and what’s filling this vacuum is a mixture of the good, the bad, and the highly unpredictable.  Years from now, this may yet be seen as a period of global creative destruction – a transition away from a false and iniquitous stability towards a more sustainable, diversely founded equilibrium of global interests.  In the meantime, the process of filling the vacuum is likely to be volatile, dangerous, and deeply disorienting.

First, the vacuum in global economic leadership. The absence of concerted action is most acutely displayed in the Eurozone’s response to an economic crisis that as of the past few weeks is beginning to threaten a global contagion, with serious implications for emerging markets too. With each passing day, and every claim that Greece is not insolvent and that it – and the Eurozone – would not be better off long-term with a Greek default and exit, policymakers are running down their credibility on the far more consequential matter of whether they’ve properly understood the risks to the Italian and Spanish financial systems.  This is how contagion happens.

A widening chasm of credibility – between markets and policymakers, and between the politics of European unity and the economics of fiscal fragmentation – has its roots in part in the admirable German commitment to the European project as a political and economic enterprise. The problem, however, is that absent economic confidence-building measures of sufficient size to reassure markets, the vacuum is being filled by investors aggressively repricing assets for an ever-darker horizon.

Far more dangerous to global economic prospects is the risk of the current vacuum being filled by a backlash against globalization and free markets.  It remains a case of dog that didn’t bark – the absence of stronger populist movements in both creditor and debtor European countries during this deepening crisis. That doesn’t mean the dog will stay silent forever, and its bark may bring with it a spiral of currency wars, capital controls and tariffs that will only accelerate the current contraction through a wave of world-wide protectionism.