The Permacrisis
Apparently, “Permacrisis” was Collins Dictionary´s word of the year for 2022. For Collins Dictionary it meant the weary resignation in the face of successive crises: Economic and Financial Crisis, Sovereign Debt Crisis, COVID-19 Pandemic, the Russian invasion of Ukraine … “Not another crisis”. “Just one crisis after another”. “When are things going to get back to normal?” But it can also mean that a permanent state of crisis is the new normal. Historically speaking, it is the period roughly between 1990 and 2008 – a period of relative stable and smooth economic growth (in the US and Europe at least) – which appears to be the anomaly. If we take the 19th century as an example, we see a series of economic and financial crises, outbreaks of pandemic diseases, diplomatic crises, revolutions and wars. Government was little more than an exercise in crisis management. Geoffrey Parker, in his magisterial “The Global Crisis”, shows how pandemic disease, climate change, revolution and warfare combined in the 17th century to reduce the human population by some 30%. The main difference between previous centuries and now may be that the level of interconnectivity and complexity in our globalised society reduces the time gap between crises while speeding up their propagation and contagion.
Another important difference is that, in the 21st century, neither governments nor citizens (in Europe and the US) see crisis as the normal state of affairs. Crises are now seen as states of exception that puncture the normality of stability and steady economic growth. Citizens expect their governments both to protect them against the immediate consequences of the crisis and ensure a rapid return to normality. In the case of pandemics, this partly reflects the growing confidence that medical science can protect us against disease and premature death. But it also reflects what Philip Bobbitt has described as the transition from the nation state to the market state. In the nation state, the citizens owe loyalty to the state. In the market state, citizens become consumers demanding ever more services from the government. Politicians compete not through ideology but through offering ever more services to the consumers. Governments must buy the loyalty of their consumer-citizens. Ultimately, in the normal of perpetual crises, Governments cannot guarantee the services they offer, or that their consumer-citizens demand.
It is instructive to compare the reactions to the so-called Hong Influenza (H3N2) outbreak in 1967-68 and the outbreak of COVID-19 in 2020. H3N2 may have killed as many as 4 million people world-wide. Proportionate to the global population (which has doubled since 1968), this is comparable to COVID-19. Vaccines were easier to develop than for COVID-19 as H3N2 was a variant on the H2N2 influenza which had struck in 1957-8. But when the vaccine was produced it was given primarily to the military rather than the population as a whole. Some schools and hospitals closed early in the northern hemisphere for the Christmas holidays, but otherwise few if any preventative measures were taken. No countries sought to lock up their populations within their homes or shut down their economies. In part this reflects different circumstances: the 1968 pandemic occurred in the middle of the Cold War; there were no digital technologies to support home working or learning. But it also reflects different social attitudes, especially in the levels of protection against natural disaster that citizens expect from their governments.
If crisis is the new normal, then it has cosequences for how we think about government. Governments respond to each crisis as a state of exception. Governments (and central banks) can and must take exceptional actions to tackle the immediate effects of the crisis without thought for long-term negative consequences. These long-term consequences can be dealt with once the crisis is over and things have returned to “normal”. During the economic and financial crisis, central banks could cut interest rates to zero and below, print money and buy corporate bonds, even though they knew that this would over-inflate their balance sheets, debase the currency and increase social inequality. These negative consequences could be dealt with once the crisis was over. Governments could respond to the pandemic by locking up their populations and closing down their economies despite the economic and psychological damage and the implications for more serious long-term diseases. These consequences could be dealt with when the pandemic was over, and society and the economy had returned to normal. But if perpetual and repeated crises are the new normal – rather than states of exception – the long-term consequences never get dealt with. A new crisis strikes, and the negative consequences of the previous crisis continue. In the current energy crisis, moves to reduce carbon emissions have been abandoned with a return to coal-fired power stations. This is a temporary measure, we are reassured, which can be reversed once the energy crisis is over. But will the next crisis give us the space or time to do so?
Predicting exactly what the next crisis will be is a mug´s game. We all have our favourite candidates: finance/banking, sovereign debt, diplomatic, military conflict, pandemic disease or climate change. But it is reasonable to predict that the next crisis will strike before we have recovered from the current crises (fall-out from COVID-19, Russian invasion of Ukraine and the consequent energy crisis). There will be no recovery period in which we can return to normal and sort out the consequences of our previous emergency measures. This is both historical reality and the result of living in a highly complex adaptive system. It has profound implications for how both governments (and central banks) and companies operate in the 21st century. We will return to those in future blogs.