“Owing to past neglect, in the face of the plainest warnings, we have entered upon a period of danger. The era of procrastination, of half measures, of soothing and baffling expedients of delays, is coming to its close. In its place we are entering a period of consequences …We cannot avoid this period, we are in it now…” Winston Churchill, November 12, 1936
COVID 19 is not a ‘black swan’ – a singular, unexpected event. It is the first in a series of what NYT’s Tom Friedman referred to as a ‘herd of stampeding black elephants’ – multiple, predictable and economically catastrophic events. Events that everyone knows are coming but our political and business leaders have consciously chosen not to deal with.
Choices have consequences….
Having a global pandemic with devastating economic impacts used to be one of these predictable 1 and catastrophic ‘black elephants’. Then it arrived – but we had chosen not to prepare. The others are now stampeding toward us, including climate change 2 , the collapse of the fossil fuel industry 3, social and economic inequality 4 , ocean and eco-system collapse 5, famine 6, mass refugees 7 and others. As well as their direct economic impact, many will also drive social instability, civil unrest, nationalism, debt and credit crises 8, protectionism, geopolitical realignment and military conflict 9 – further magnifying the economic consequences.
That these are all stampeding toward us is known. What is unknown is whether we – taking the lessons of COVID-19 – will now decide to make different choices. Will our political and business leaders decide to act? We will we demand they do so?
If we choose not to, the consequences are clear. While each event will have varying national, regional and global economic impacts; collectively, they risk merging into a mega crisis and triggering global economic collapse. That is an arguable risk. But there is near certainty they will together unleash devasting economic, security and social consequences.
So have we suffered enough yet? What would it take to drive the level of transformational change we need – not just on climate change but on inequality, ecosystem collapse and all the others impacts now so clearly on the horizon?
In considering this question, we should first recognise there is no real dispute on the risks. Very few question they are real and coming our way. But we then make three errors.
- Firstly, we see them as ‘risks’ i.e. events that could occur, whereas most are as close to certain as the future ever gets.
- Secondly, we fail to look at the whole system and therefore miss the negative economic synergies. Synergies that mean they accelerate each other while also making each one harder to manage (e.g. inequality has driven worse health and economic outcomes from the pandemic).
- Thirdly, we suffer from some combination of optimism bias and denial – assuming these events are somewhere ‘out in the future’ and ‘we always figure these things out’. The pandemic was like that. Until it wasn’t. And we didn’t. Observe the consequences.
So why do we – particularly business and political leaders who have both the knowledge and the power to act – get this so wrong? Why do so many still see COVID 19 as a singular economic event, in a linear chain of events, that we will deal with and move on from?
Partly because each event does have differences in consequences and timescales. For example, COVID-19 is historically unique and sudden in its economic impact. Governments deciding to turn off major parts of the economy, in a relative synchronised global way, has no parallel. Many then assume that because we effectively ‘flicked the switch’ to off, we can just ‘flick it back on’. Then, within a few years, we will get back to growth and things will be ‘back to normal’.
This is a linear view of the global economy. It is profoundly wrong – and incredibly dangerous because it means we aren’t ready for what’s coming.
This is the main reason we misdiagnose the problem. When you consider the system as a system, you can see those other economic events still stampeding towards us. You also see the negative synergies, which both magnify each of the risks and shorten the time to others.
Even though most people don’t see things this way, it is not a radical thought. Indeed, it is a process very well understood from history. As the Bank of America Merrill Lynch argued in a recent economic analysis of the impacts of the pandemic:
“Historic global crises like wars, revolutions, and pandemics often feel like they put history on fast-forward”…”Processes that normally take decades or longer to play out unfold in a couple of weeks.”
“Coronavirus is the political, economic, and psychological event of our lifetimes that will drive disruption and transformation for years to come. It will bring a radical transformation of the kind that occurs only once in a generation.”
How will this all play out practically? In many and diverse ways, but consider these:
- The collapse of the fossil fuel industry – good for climate action but bad for geopolitical stability 10 – has long been understood as a systemic financial risk. The pandemic may have just triggered it 11, leading not just to economic losses but major global power shifts.
- The pandemic has highlighted inherent structural weaknesses in some of the worlds largest economies, but none more so than the US. Their weak response to the pandemic combined with inequality will likely tip the US into depression 12 – or worse. Social commentator Umair Haque describes the current state of the US as “A nation in which income, savings, life expectancy, happiness, trust are all in free-fall. This is the stuff of epic social collapse”. I think he’s right. The collapse we’re witnessing will likely lead to violent civil unrest and political chaos – but certainly to ugly polarisation and instability, manufactured trade conflicts, nationalism and protectionism.
- Just those two examples, happening on top of the renewable energy and electrified transport revolution already underway, will precipitate massive global shifts in political and economic power – not just from the US to China but more broadly – with far reaching implications 13. As argued by the Bank of America report, it could lead to “….some of the largest shifts in power ever seen in modern economic history.” The US will be an empire in decline, with all the risks that entails.
Events of this nature – if not these precise ones – will almost certainly happen. That’s why most of these ‘risks’ are best understood not as ‘risks’, nor black swans, but as stampeding black elephants. We can see them clearly; we know they are very dangerous and there is a large herd of them racing towards us.
The only way to avoid them is to force a collective recognition amongst policy makers and the business community as to what this is really about. We have a system problem and unless we address it in a systems way, we will fail.
Will we do so? Or will we launch some token version of a “Green New Deal” programme, add on a slightly stronger social safety net and call it a revolution? Will we use this opportunity – or will we just apply unfocused monetary policy – basically spend lots of money – still deluded that we can restart the economy as it was?
History is brutal teacher on this topic. As we have seen with COVID 19, it’s only when an existential crisis hits – with direct and immediate impact – that we then embark on truly dramatic change. Will this crisis be enough to trigger a broader understanding of, and appropriate reaction to, the greater systemic crisis?
The evidence so far is probably not. Not until things get worse. A lot worse. It may or may not be a synchronised global depression, and it may not be global collapse, but it will be very bad, and it will last for a long time.
My writing is often referred to as ‘optimistic’. So let me be clear – I’m not having a bad day. My views on all this – and how it will likely unfold – have largely stayed the same for 25 years. I have a powerful belief in human ingenuity and our capacity to change. I study history and note that when we decide to change, there is virtually no limit to how fast or how dramatically we can do so.
But first we have to decide to change.
This is about choice, not about our capacity to deliver. Each and every ‘black elephant’ is fixable – if we act in time. We have the technology, the financial capacity, the intellect, the humanity and a visceral instinct to survive. But if I dwell on that potential here, I risk triggering your optimism bias and the opportunity for denial.
I don’t want you to think ‘We always figure these things out.’ I want you to face reality. We won’t act until we shift to what activist and writer Margaret Klein Salomon calls “Facing the Truth”. When we face the truth about the state we are in, what’s at risk and how bad it could get – we will act. But that moment is not here yet.
It will get much darker before the dawn.