If the current financial meltdown causes the US and Europe to sneeze, will poor countries catch cold, succumb to pneumonia, or have they discovered a new flu vaccine in the growing economic presence of China? I’m currently on a visit to East Africa, and that is the question that is preoccupying many of its leaders.

The extent of the immediate chill from what increasingly looks like both a financial crisis and economic recession in the North will depend on how any given developing country has integrated into the global economy. Russia, with a highly integrated financial sector, had to suspend the stock market for several days last week and the government bailed out three large banks. But it could afford it because, like many of the ‘emerging economies’, it has amassed a vast war chest of international reserves that affords it some degree of insulation. Big players like China, whose phenomenal growth is increasingly driven by its domestic market, and which trades more and more with other developing countries should survive a Wall Street or European slump with some ease.

Not all developing countries are so fortunate, however. Africa faces a fall in demand for its exports to Europe - people will be buying fewer Kenyan and Ugandan beans and flowers in the supermarkets. They will have to find new markets to supplement their dependence on Europe. The same goes for countries on the fringe of other big markets in recession, such as Mexico, Central America and the Caribbean, which still mainly export to the US. The good news is that buoyant demand in China and elsewhere will keep the price of their agricultural and mineral exports high - there won’t be a repeat of the collapse of commodity prices that followed the Great Depression of the 1920s and 30s, which caused a huge crisis in the developing world. But another major export - people - may suffer, as remittances to developing countries from migrant workers overseas (currently running at over twice the value of global aid) are likely to be hit.

Even in good times, many governments were reneging on aid promises; those now facing recession are more likely to follow suit. And other international processes may also be threatened - governments hunkered down against recession are less likely to have the political imagination and courage to reach the kind of agreements required on climate change (negotiations on a successor to the Kyoto protocol are scheduled to climax in Copenhagen in late 2009). East Africa is already suffering the onset of climate change, in the shape of unpredictable and devastating combinations of floods and drought.

If this really is the biggest financial crash since the stockbrokers hurled themselves off Wall Street tower blocks and soup kitchens traumatised America’s collective psyche, the reverberations will be much greater. Crises resemble earthquakes not just in the devastation they wreak, but in the way they release pent-up pressures and trigger social and political change.

Expect the balance of power between rival models of capitalism to shift away from the battered Anglo-Saxon variant, towards the more statist Asian or (continental) European variety.

The trauma of the 1930s prompted a profound rethink of the role of the state, with the advent of the New Deal in the US, Keynesian demand management of the economy and subsequently the creation of welfare states in Europe and elsewhere. That triggered the ‘golden years’ of sustained growth and prosperity across the rich world, but came crashing down in the inflation and recession of the late 1970s. Out of those ashes arose a global experiment in deregulation and laissez faire economics, bequeathing us a combination of stuttering growth and soaring global inequality. Today the richest 500 individuals earn as much as the world’s poorest 416 million people.

This latest crisis may mark the end of that period. History seldom repeats itself, but the widespread demand for re-regulation could see a swing back to recognition that the state and the market are not alternatives, but are interwoven and interdependent. A new economics is likely to replace the ‘greed is good’ nostra of the last 30 years. Now that really would be a cold worth catching.

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