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Facing a time of many tests

by Tony Blair

LONDON — This is a tough time to be a decision-maker. We live in an era of low predictability. The world appears in constant flux. The challenges are immense. And most of all, there is in many instances a clash between the correct short-term politics and the correct long-term policy.

On the economy, the climate debate and security, the immediate pressures pretty much run one way: increase the role of government in the economy; put the climate deal off to more congenial financial times; and get out of substantial military commitment to fighting global terrorism. Yet in each case the right long-term policy almost certainly points to the opposite course.

What is the way to bridge this gap between short and long term? To decide how to do that is to decide fundamentally what we believe in and what we want from our future. In deciding this, only the head can guide us in how to do it; but the heart must tell us what it is we truly believe in doing.

In the economy, the near universal conventional wisdom after the collapse of the banking system was that the market had failed and the state had to step in. Old copies of John Kenneth Galbraith’s “The Great Crash of 1929″ and Keynesian tracts were dusted off and avidly re-read. And it is true: the market did fail and the state had to step in. The fiscal and monetary stimuli were important in themselves, but even more so because they indicated that the strength of government was going to be utilized to prevent contagion and further collapse.

But if we move to analyzing what sort of recovery we can expect and what sort of future economy we are trying to fashion, it is by no means clear that we need a continuing, intrusive state role. On the contrary, we need the private sector to regain its sense of enterprise, innovation and vigor; we need to be careful of regulating so as to squeeze the availability of credit; and we should certainly avoid protectionism.

True, the private sector will have much restructuring to go through and the big deficits that have been accumulated in the crisis must be unwound. This will mean a radical restructuring of the state and its services. But in the end, business not government will power the global economy forward.

In other words, the claim that “the market failed” is too alarmingly broad. Actually, one part of the market failed, but government and regulators were part of that failure. If we believe that this is true, it will ultimately be the creativity (in the best sense) of the private sector that will see us return to prosperity. So we need to make decisions in the coming weeks and months that help the private sector and not harm it.

Likewise, in respect of the environment and energy, whatever the financial pressures, if we think that the Earth’s climate is probably changing as a result of human activity, we need to set the global economy on a low-carbon path to the future. This doesn’t mean that we can come out with unrealistic propositions as we struggle for a new global treaty to succeed the Kyoto Protocol. We should not make the best the enemy of the good.

There are major things we can do on the basis of existing knowledge — on deforestation, energy efficiency and renewables — to make a big difference over the next decade. We will then require a long-term framework of incentives to develop the technologies of the future. But now isn’t the time to put off action.

The seriousness of China on this issue, and now India, the enthusiasm of Brazil and others in the emerging markets to participate in tackling climate change: all of this offers an opportunity that should be grasped. And for the West, we should all remind ourselves about $100-a-barrel oil. For energy security we need to reduce carbon dependence.

In security questions, the choices here are perhaps the hardest of all. A public, understandably disheartened by the length of the current military campaigns and loss of life in Afghanistan and Iraq, is sympathetic to the idea of disengagement. But this is also where, most of all, we need to decide what it is we truly believe in.

The reason it is hard going in Afghanistan right now, for example, is that the forces we are facing are making it so. They are doing this by the use of terrorism and by brutal intimidation of the civilian population and in defiance of the expressed and plain will of the international community.

Time and again what is clear is that people, given the chance, do want governments that are accountable, proper rule of law and the ability to choose their own destiny. Those using terror, whether in Afghanistan, Pakistan, Iraq, Somalia, Yemen — and the list could go on and on — do so to destabilize nations and to thwart the will of the people to live in peace.

Disengaging now will not leave people free from our interference; it will put them at the mercy of groups whose extremism threatens the very way of life that we stand for and to which they aspire. So no matter how difficult it is, we should remember what it is we believe in and why. So now is a moment, even among all the uncertainty, for some clarity and that clarity comes best from a worked-out strategy based on a strong set of convictions.

Tony Blair was U.K. prime minister from 1997 to 2007. © 2010 Project Syndicate