How to navigate a world of polycrisis

At this point, we’ve all gotten used to the word “crisis”. It’s entrenched in our daily vocabulary. We can barely pass a week without something being referred to as a crisis. 

In this blog entry, we will revisit some of the main points shared during the Journée de l’Economie event held in late March 2022, particularly how the world — and Luxembourg — responded to the COVID pandemic, what lessons were learnt from it and how we can anticipate, understand and navigate the multiple crises we now realise we are likely to face going forward. 

But first, what makes a crisis… a crisis? Where does this word come from?

An interesting article from the BBC explains that the Greek verb krino means judge or decide, and from it came the noun krites, that is, “judges” — from which we get critic, and kriterion, a test to judge by. The akin word “krisis” meant the preference of one alternative over another. In the Greek New Testament, the Day of Judgement is referred to as hemera kriseos — surely a crisis for those at risk of doom.

A crisis is usually a point of uncertainty before events move on, a transitional phase leading to something. Think of war or peace, illness or recovery, fortune or ruin, the rise or fall of a government. As an example, some events end in wars, while others end when a war is deterred.

Oftentimes, however, we use it to refer to an extremely serious thing that has happened. For instance, the financial crisis: when we talk about people being hit by it, what we actually mean is that they were affected by unemployment, insolvency or austerity. Or, look no further, the COVID-19 crisis. It all boils down to people getting sick and recovering from it or, sadly, not. 

In fact, the latter was at first the main theme of the 15th edition of the Journée de l’Economie. But, as the American film director Woody Allen once said: “If you want to make God laugh, tell him your plans.” 

Whether you believe in God or not, the underlying message is that from initially focusing on the COVID pandemic, the scope of the event ended up being expanded as a new crisis unfolded in Ukraine. The focal point became, “How can we make ourselves more resilient to the next crises?”. And suddenly, “polycrisis” turned into the word of the conference.

Polycrisis, what’s that about?

It’s now scientifically proven that the human brain isn’t wired to multitask. Does the same apply to handling crises? Perhaps not, but either way it seems we don’t have a choice. We live in a globalised and interconnected world, and, as a consequence, we have to face multiple challenges at the same time. 

For that reason, Jean-Claude Juncker, then President of the European Commission, referenced the Greek word “polycrisis” to invoke the challenges facing the European Union (EU), which in those days were mainly around the euro-area stability, the global economic crisis, and the migration crisis, to name a few. He also used the term to describe the external crises the EU had—and still has—to handle.

So, by now we have established and agreed that we live in a world of polycrisis. However, as mentioned during the Journée de l’Economie conference, we human beings tend to quickly forget that. Because not long ago, we were allowing ourselves to believe that we were in a post-crisis phase, and in so doing ignoring what else was going on in the world: the aftermath of the 2008 financial crisis, the democracy crisis in the US, climate change, Ukraine. And COVID-19 is still something very real, even if it’s not as present in our daily lives as it used to be. Sadly, that crisis is not over. 

Another aspect of the human mind that hinders crisis management is that we tend to think that bad things only happen to others, so when they do happen to us, we have a hard time believing it. “Why did this happen to me?”, “Why was I so unlucky?” we ask ourselves. 

In truth, we didn’t think that a banking crisis or a health crisis could happen to us. Well, it did. That means we need to step up our predictability skills.

Can we predict the next crises?

It’s in situations such as the COVID-19 pandemic that we think how great it would be to have a crystal ball. Since that’s not possible, we must rely on the next best thing — our capacity to anticipate.

Let’s take a closer look at how the COVID-19 pandemic unfolded. We knew this could happen. Bill Gates had warned us in a famous TedTalk from 2015, but we didn’t really want to consider that possibility. When the first cases appeared in Wuhan and started to spread around, reaching Europe, we continued to be in denial. 

That’s the first lesson from the pandemic, which also applies to the recent events in Ukraine. Today, every crisis, even if it’s taking place on the other side of the globe, has a direct effect on us. Just like the butterfly effect in the chaos theory, a small change in one state can result in large differences in a later state. 

Thus, we need to pay attention more to what’s going on beyond the region we live in, beyond our borders, and our continents. We have the capacity to anticipate and prepare for a crisis, but for that we need to truly grasp what globalisation is all about.  

What comes first, the present or the future?

There is a caveat however, because while anticipating and preparing for future crises is important, we shouldn’t disregard what’s happening right now. As mentioned before, we need to multitask. That’s the complexity of our reality. 

Governing bodies at national and EU levels are starting to realise that. In 2019, the European Commission, for instance, has put, for the first time, a member of the College of Commissioners in charge of strategic foresight. In Luxembourg, the Ministry of the Economy has done something similar by creating a foresight team and aLuxembourg Stratégie” programme. The goal is to take in any new factors like climate change and loss of biodiversity into a model for what Luxembourg’s economy should look like in the future. 

In a nutshell, the issue isn’t so much to balance the future and the present, but to actually dissolve the future into the present. Taking carbon-cutting as an example, it’s clear that we need to fundamentally change the way we consume, produce and operate. As suggested during the Journée de l’Economie, a corporate “short-termist” approach to reducing carbon emissions quarter by quarter — the same way it’s usually done for profit or revenue targets — is the way to go. 

This would make both the private and public sectors accountable on a quarterly basis, and lead to the collapse of the distinction between the future and the present. Ultimately, it should become a daily struggle that also involves individuals, not only governments and businesses, asking themselves, “What did I do today to decrease my carbon footprint?”

Solving today’s problems, or trying to, requires a reconciliation of future goals and present imperatives. 

Lessons learnt from the pandemic

Over the course of the Journée de l’Economie conference, the speakers outlined several lessons drawn from the COVID-19 — some of them we’ve already mentioned. Here are a few others we would like to highlight.

Fixing what we can control 

We’ve already mentioned some important lessons, but there are more. The pandemic also showed us the need to focus on what we can control and fix things that are technically complex, but don’t present wicked trade offs. By fixing them now, we can better prepare ourselves for future crises. As an example, banks survived 2020 because they had learnt from the 2008 financial crisis and in the meantime improved their mechanisms, such as early warning systems.

Incomplete projects can make a comeback

Sometimes we easily discard or ignore what we think will no longer serve us. For instance, when we are asked to prepare a training to give to our organisation, only to find out that in the end this training will no longer take place. So, we put the materials aside… or we might even delete or throw them away in a bout of frustration. But the reality is that we don’t know what we don’t know. Maybe in a year or more, we’ll be asked again to perform this training. Voilà, our hard work wasn’t thrown away in the end, we might just need to update it a little bit. Plus, we probably gained insights while working on it and revamped our skills.

That’s what happened with the work done on the SARS vaccine. Many people thought the research on it was a waste of money but, it turns out, it became vitally important in the development of the COVID-19 vaccines.

Taking lessons from the past seriously… but not too much

We mustn’t forget what we’ve learnt from past events. That said, we shouldn’t mix up old and new challenges either. Instead, we should reflect on the old wisdoms and how they can be applied into the present, while taking into account the uniqueness of the current situation. For example, the context in which sanctions were applied to Iran isn’t the same as in Russia’s case. 

The motto “Together we are stronger” is true

Another lesson we can draw from the pandemic is that we can find strength in numbers and in alliances. While normally the EU institutions don’t have a coordinating role when it comes to health matters — it’s a jurisdiction of each EU Member State — extraordinary situations call for extraordinary measures. The EU bodies were adamant about the fact that “every man for himself” wouldn’t work when dealing with the COVID crisis; Member States had to navigate it together. In the aftermath of the lockdown, it’s now clearer than ever that we can’t ignore our neighbouring countries. 

Member States also came together under the EU umbrella to mitigate the economic impact of the pandemic. With a multinational approach, the European Commission (EC) used existing crisis management elements, which were set in place from the previous crisis, so that Member States could allocate more funding to companies to avoid their bankruptcy. Additionally, recovery plans were set up as well as subsidies.

Last but not least, the EC created the temporary Support to mitigate Unemployment Risks in an Emergency (SURE) programme to mobilise significant financial resources to fight the negative economic and social consequences of the coronavirus outbreak on Member States. This was a big investment, but an important one to build up the future. 

For small countries, membership in larger alliances proved to be essential. Luxembourg, especially in the health sector, is very vulnerable. Hence, it’s crucial that it positions itself better for the next crisis.

Empathy, adaptability and resilience are the keywords

The past two years tested people’s humanity as well as adaptability and resilience capacities. As new information was coming in every day, rules changed quickly; this required individuals and organisations alike to adapt accordingly. Here, open, transparent and constant communication by the health authorities and governing bodies was key. 

Looking back, we should be positively marvelled at the impressive amount of decisions and mechanisms that were put in place in such a short period of time at EU, national and local levels. There was little to no time to reflect and assess; societies, governments and companies, first and foremost, focused on solidarity, flexibility and acting fast. The EU Digital COVID Certificate and the Re-open EU website are great examples of this.

Yet another fascinating aspect of the crisis is how every country responded to the crisis. It showed governments have a mission to take care of their citizens, even low-income countries. In fact, the discussions during these harrowing times revolved mostly around threats to society, inequality, the state of health systems, and the importance of empathy; most societies decided to choose the health of their population over the economy.

Navigating the COVID crisis: the business side of the story

As the global interconnectedness grows, each and every crisis — be it social, geopolitical, health-related, environmental — echoes further and more intensely, rendering our financial ecosystems more complex. This means that for both global companies and Luxembourg small and medium-sized enterprises, the challenges don’t cease to exist.

This begs the question: have we gone too far with globalisation? Well, as usual, there are two sides of the same coin. On the one hand, it has allowed companies to optimise production and reduce costs. On the other hand, COVID-19 and now the war in Ukraine, made disruptions clear — in the car and steel industries, and the energy sector, for instance. And these supply chain issues might remain for a while. 

Having a sustainable supply chain to answer to the climate crisis and become more autonomous from the global supply chains is indisputable. How to go about it is the million dollar question. It’s not an impossible task — and here automation and digitalisation can help — but it takes time, logistics are complex and the upfront investment is big. However, time isn’t something we have in abundance right now.

So, while decarbonisation is a given, the Luxembourg government believes it’s crucial to make sure that the industrial players in Luxembourg, such as in the plastic and cement sectors, remain competitive. At the same time, autonomy from global supply chains can only be achieved together, under the EU umbrella, and not individually by each Member State. Hence the importance of initiatives such as the EU “Open Strategic Autonomy”.

During the implacable times of the pandemic, many businesses saw their revenues sharply decrease. And at first there were no State aid schemes. This compelled businesses to change their business models quickly; those who could go online did so as fast as possible. For those who didn’t have this possibility, the massive State’s intervention, which was something never seen before, was a great blessing. There was also room for immense solidarity among businesses. For example, some companies that boomed too quickly during this period welcomed employees from other companies that had to shut down completely — a win-win for all parties.

In terms of the economic impact on business, it’s too soon to tell. The medium- and long-term view might reveal a different picture than the numbers available do now, which only depict the short term effect. The government schemes and loans helped in preventing more bankruptcies than expected, but we have to take into account the VAT and social security payments that were delayed and State subsidies that are now stopping or need to be repaid. Once all these aspects are factored in, we will be able to get a real picture of how fragile companies are. 

When polycrisis is the norm

We are living a succession of crises, with different layers, happening at the same time: the ongoing coronavirus pandemic, stagflation, banking and financial challenges, the international supply chain disruptions, the new threat posed by the Russian invasion of Ukraine, climate change, as well as social shakeouts related to racial inequality — and the list goes on.

The interconnectedness of the world also means interconnectedness of crises and that’s part of the new normal. We live in a time of “polycrisis”, where moving from one state of emergency to another isn’t enough. It’s also true that we can’t solve the world’s problems right away and at the same time — we must pick our battles and tackle them step by step.  

To end this entry on a positive note, solidarity is fundamental— it was during the pandemic and it is now and in the future. Today’s atmosphere feels quite different from the pre-COVID one; there’s a stronger sense of unity within the Member States, and the hope is that it will remain this way, particularly on matters where current practices and views are still quite diverse — namely, the acceleration of the decarbonation agenda, the need to build a common defence policy as well as to give NATO a new purpose.

The crises we face right now are a critical moment for the EU; the union has now a deep political momentum and it’s on the Member States to decide, together, in which direction they want to move. The COVID-19 pandemic may well be the compass we’ve been looking for to stir us back in the right path: to become more independent, more resilient, more green.

Learn more about the “Journée de l’Economie 2022” here.

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