"Things fall apart; the centre cannot hold; Mere anarchy is loosed upon the world...”

Dominique Strauss-Kahn, the managing director of the International Monetary Fund, did not actually resort to reciting Yeats on Monday. But he came close to the same apocalyptic vision as he warned that the global economic crisis could ignite social and political unrest.

The alarming tone he struck went well beyond the standard IMF econometric projections and statistical analyses.

And rightly so. This is far from a standard downturn, with orthodox repercussions that call for orthodox responses. Daily, the stakes in this crisis are raised and the dangers grow. The latest fears centre on the way recession is sweeping the world and infecting countries thought to be at least partly immune. After China reported sharply slowing factory output, Mr Strauss-Kahn predicted that runaway Chinese growth could slow to a positively pedestrian pace of only 5 per cent next year. That is hardly going to be the locomotive that drags the world economy out of the mire.

As the economic and political risks mount, so does the temperature of the debate over how governments should respond.

On one side are those such as David Cameron — who on Monday won a powerful ally in Jean-Claude Trichet, President of the European Central Bank — who urge that governments must beware of throwing aside all fiscal restraint as they try to use tax and spending measures to bolster their economies or they will risk undermining confidence. Justifiably, this camp fears that massive borrowing to beat the slump now will impose an unsustainable burden on the long-term future. Better a short, sharp shock than a long, debilitating slump.

On the other side are those, such as Mr Strauss-Kahn, who believe that the stakes are higher. The choice is not merely between a long, shallow downturn and a sharp, deep one. It is between a nasty but manageable recession and a shock that could cause social and political chaos around the world. Were economic upheavals to destabilise a nuclear-armed China or a fragile Pakistan, the risks to the West would be more than economic.

Mr Strauss-Kahn is surely right to highlight the dangers we face. Whether Gordon Brown cutting VAT by 2.5 points is going to prevent the “blood-dimmed tide” being loosed is another question.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive