We do not yet know what the polycrisis is

We are doubtless being called upon to reform the world. But we first need to understand, as well as catalogue, what is causing the current economic carnage

Each generation doubtless feels called upon to reform the world. Mine knows that it will not reform it, but its task is perhaps even greater. It consists in preventing the world from destroying itself. Heir to a corrupt history, in which are mingled fallen revolutions, technology gone mad, dead gods, and worn-out ideologies, where mediocre powers can destroy all yet no longer know how to convince, where intelligence has debased itself to become the servant of hatred and oppression, this generation starting from its own negations has had to re-establish, both within and without, a little of that which constitutes the dignity of life and death. In a world threatened by disintegration, in which our grand inquisitors run the risk of establishing forever the kingdom of death, it knows that it should, in an insane race against the clock, restore among the nations a peace that is not servitude, reconcile anew labour and culture, and remake with all men the Ark of the Covenant.

The passage above is from Albert Camus’s speech upon being awarded the Nobel Prize for Literature in 1957. It is a reminder of the horrors that ‘the greatest generation’ witnessed — and perpetrated — in the middle of the twentieth century. But also of the fact that humanity survived ‘the kingdom of death’ to unleash an unprecedented wave of prosperity, eventually encompassing much (by no means all) of the world.

It would perhaps be judicious to conclude that today’s predicament, no matter how serious, is not quite as serious as that consisting of world wars, prolonged economic depression, industrialised genocide, and — even as the West stabilised — the ever-present threat of nuclear annihilation.

Judicious, but also complacent.

There was, eventually, a route through humanity’s last period of existential peril. There was a set of economic ideas, accompanied by policy instruments, which allowed for a relatively stable growth model in which large parts of the Western working class were rewarded for their part in economic expansion. American imperialism enabled the European and Japanese empires to be wound down, for the most part, and for many parts of the global periphery to attain ‘middle income’ status. The spread of liberal ideas around human rights and democracy inhibited inter-state war, at least to some extent, even if far from fully realised.

Underpinning all of this, of course, was oil.

The present crisis is many things (I’ll get to that) but one of these things is the growing scarcity of fossil fuel-based energy, quite apart from the environmental impact of our excessive reliance on this energy source. The oil is of course running out, but this does not mean today’s scarcity is absolute: it is also a product of a breakdown in the political and economic structures which connect supply and demand, as well as a product of depleted reserves (as Helen Thompson argues, profound dependence on fossil fuels is a double-edged sword, creating both stability and instability). And this does not mean that we do not already have alternative sources of cheap and abundant energy; yet we lack the political and economic structures necessary to enable transition to these alternatives anywhere near quickly enough.

In my view, it would be complacent to imagine that present circumstances represent the height of the crisis. Many of the ingredients which could jeopardise global production systems (including basic necessities) and increase the prospect of large-scale conflict are already in place, and not going away anytime soon. We are already seeing the emergence of the ideas and institutions we need to mitigate humanity’s worst instincts, but we should not assume they will be adopted quickly enough to prevent catastrophe — because they rarely have been in the past.

It is not unreasonable to speculate therefore that we are experiencing merely the early ripples of a rising tide of epoch-defining horror.

The present crisis differs from previous episodes in one devastating regard. Insofar as it encompasses changes to the climate which threaten to make Earth largely uninhabitable — whether we see climate change as cause or symptom of the crisis — we may soon arrive at the point whereby even the most powerful among us have no scope at all to prevent worldwide destruction progressing towards apocalyptic conditions.

We should worry about such a future, which might be a century or so ahead. But we should worry just as much about the kingdom of death already upon us, as our ability to sustain bearable lives — which, viewed globally, remains highly selective — collapses more rapidly than the planetary ecosystem. As Kai Heron argues (only a little hyperbolically):

[E]xtinction isn’t the worst that can happen. It’s much more likely that climate chaos will intensify existing processes than bring about the end of times. Instead of the final collapse, we should fear a world of unfathomable suffering.

Once upon a time

Surging inflation, stuttering growth, financial volatility; a global pandemic that very nearly exceeded our responsive capacities (and continues to kill thousands of people each day, and devastate many more lives); growing inequality, cutting across class and age; a concentration of power among tech elites with more interest in financial engineering than purposeful innovation; a rise in reactionary politics, and declining faith in democracy. Trade wars, cold wars, hot wars, and the breakdown of multilateral institutions.

It’s a lot. Worse, many policies aimed at addressing one or more of these issues have ranged from ineffective to counter-productive. Some of these issues have been with us for a long time, and have threatened to evolve into widespread disorder before. It is fair to point out that there are reasons to be cheerful too, not least recent election results in South America, which might — somehow, eventually — help us to forge a new path.

But the overall picture, for the foreseeable future, is one of mounting crises.

The question of how we got here should be pre-empted by the question of where we started from. For example, neoliberal ideology defined the crisis of the Keynesian state, and fuelled the neoliberalisation of economic policy and social structures in key centres of domestic and international power. But this paradigm generated a highly unstable form of accumulation, equally in thrall to fossil fuels — with the neoliberal era characterised by intensified competition over oil — and over-reliant on decoupling finance sectors from the real economy. The 2008 financial crisis might in this account be seen as a critical juncture, although one at which we, regrettably, chose to intensify rather than upend the basic logic of neoliberalism.

From the perspective of the longue durée, however, it would be just as plausible to see today’s conditions as part of a process which has been playing out since the co-evolution of capitalism and industrialisation. A series finale more than two centuries in the making, whether we view the precise mechanism as the depletion of natural resources via over-accumulation, or the inevitable emergence of jobs-lite industrial processes, both of which undercut key foundations of capitalist processes.

Both timelines rightly centre class relations, albeit in different ways. The neoliberalisation story is partly about the dilution of employment rights undermining the unseen social foundations of financialised capitalism, and the refusal of Treasury brains to extend old welfare to new risks faced by a younger and more diverse working class. The industrialisation story, on other hand, is partly about how an antagonistic relationship between capital and labour came to be woven into the DNA of human organisation — presenting as liberty, in the wake of feudalism — with capital struggling to devise evermore elaborate forms of exploitation as demographics evolve.

We might see the Great Depression from 1929 onwards as the critical juncture in this account, albeit one in which the basic logic of industrialism was only partially transformed, by the expansion of large-scale public services and welfare provision within frameworks of macroeconomic management. Equally, we could see this moment as the starting point of today’s crisis, as it crystallised a productivist paradigm, encompassing measurement tools such as GDP, collapsing all distinctions between progress and production. (Neoliberalism would as such be seen as a development within rather than displacement of productivism.)

Crucially, while this paradigm might have supported the deceptively peaceful period after 1945, it should never be forgotten that it had already helped to generate the tools, systems and infrastructure of total warfare and mass genocide.

It is essential not to see today’s conditions through only a Western lens. It is a crisis of the Western-centred world order, but this order has always depended on subordination of the rest. The mechanisms of subordination — both coercive or consensual — have never been entirely stable, but now seem increasingly exhausted, as the West is no longer able to reliably provide capital (conditionally) for industrial development, markets for industrial output, or even the pretence of multilateral security.

Many developing and emerging economies have instead been drawn into financialised capitalism in order to access global capital markets, further embedding an extractivist model of development which is proving unsustainable. China’s growing political and economic power is even more central to turbulence in the West. Chinese labour has been as important as oil to neoliberalism, but also created opportunities for China to challenge Western hegemony. The West is caught between resisting this threat to its own supremacy, and the recognition that volatile political and economic conditions in China mean that its role as junior partner in global capitalism cannot be sustained without increasing the potential for systemic instability.

Polyfiller

Economic historian Adam Tooze refers to today’s circumstances as a ‘polycrisis’:

A problem becomes a crisis when it challenges our ability to cope and thus threatens our identity. In the polycrisis the shocks are disparate, but they interact so that the whole is even more overwhelming than the sum of the parts. At times one feels as if one is losing one’s sense of reality.

There has been some disquiet about the term, and more precisely the epistemology it implies. It is clearly true that most capitalist crises are polycrises, encompassing the breakdown of multiple political and economic norms and institutions, whether in a slowburn or explosive fashion. We must be careful not to accept only the victor’s version of events; neoliberals may, for instance, narrate the 1970s as a crisis of Keynesianism, but it was a crisis of many things (arguably implicating the limitations placed on Keynesianism in the West, and a developmentalist challenge from the East, which highlighted neoliberalism’s limitations).

Tooze of course acknowledges the similar complexity of the 1970s crisis, and wonders whether today’s circumstances are merely a continuation:

So have we been living in a polycrisis all along?

Either way, the more serious complaint is that the concept does not tell us what this crisis really is. There are many visible elements. But what is a cause, what is a symptom? What fundamental aspects of the previous order have malfunctioned, and what are the possible routes out of crisis, on a scale of reform to revolution?

I am reminded here of Scott Lavery’s recent paper in Renewal, which criticised Tooze’s empiricist reading of Karl Marx, at the expense of Marx’s more abstract account of capitalist development. For Lavery, ‘[t]he empirical and the abstract Marx cannot be separated’. We could perhaps say something similar about the identification of polycrisis. The assumption that this crisis is not only characterised by, but actually defined by, the assemblage of its plentiful manifestations, may be serving to obscure the new order that is being constructed amid the chaos.

The suspicion, of course, is that Tooze does have a view of the abstract: one would clearly require a ‘sense of reality’ in the first place, in order to be capable of losing it. Recognition of capitalism’s inherent instability is one half of this worldview, but the other half is of public-minded state managers usually turning up to stabilise economic processes through fiscal and monetary policy innovations that originate beyond the left/right spectrum of visible political life.

As such, this is an unusual crisis because the technocrats are clearly operating at the outer limits of their capabilities (and imagination).

There is nothing inherently wrong with this worldview. Many on the left in Britain, for instance, adhere to this perspective, even if presented with a slightly more radical veneer. And I think it leads to an account of historical agency which is too often missing from, say, a conventional Marxist perspective on capitalist (in)stability, in the process helping us to fit many of the pieces of the puzzle together empirically (a task which political economists tend to neglect).

But let us be clear that it is also a simplifying version of the crisis, even if it turns up in your inbox as a proclamation of the opposite.

Paradigm shift

Insofar as the polycrisis can be understood in more structural terms, various explanations have been ventured:

1. Climate change is making the planet less hospitable for both production and agriculture (as well as people). This is beginning create supply shortages which undermine efficiency and feed through to higher prices.

2. The COVID-19 pandemic has led to business closures, widespread ill-health, and a more difficult environment for cross-border trade, undermining productive capacity across many sectors. Increased public spending pressures has led to higher government borrowing costs, the impact on supply chains feeds into inflation, and the ongoing uncertainty is inhibiting business investment. (Note that some argue that the public sector response to the pandemic exacerbated economic malaise by propping up firms that could and should have been allowed to fail, and others argue that new forms of remote working necessitated by the pandemic are negatively affecting productivity.)

3. Labour shortages resulting from population ageing, and more immediate causes such as COVID-19, affect both everyday business operations and long-term growth prospects. Some argue that labour shortages are presently driving inflation through earnings growth, but in practice they are instead slowing production without remedy. Labour shortages have also contributed to problems in public services provision.

4. Financialisation leads to misallocation of capital to unproductive activities, and greater opportunities to shield wealth and income from tax, exacerbating inequality and intensifying capital market volatility. Relatedly, the significance of financial assets influenced the design of quantitative easing (QE) programmes following the 2008 financial crisis; this has exacerbated structural issues in many economies, and recent efforts to reverse QE have led to fears of further volatility.

5. The declining labour share of income reduces incentives to train workers, and makes it more difficult to reproduce labour over the long term. It also undermines aggregate demand and appears to be jeopardising faith in liberal democracy.

6. The challenge of China to US (and dollar) hegemony threatens one of the main source of global economic stability, but is arguably a product of domestic instability in China. A trade war between China and the US is merely the latest manifestation; it will increase global economic volatility, and jeopardise the role of Chinese trade and investment within many Western economies.

7. Over-dependence on fossil fuels means the world economy is vulnerable to energy shocks. Accordingly, the Russian invasion of Ukraine has jeopardised global energy supplies, leading to higher inflation. The resulting cost to government of subsidising energy bills has panicked bond market investors, especially given the likelihood that such interventions will become more frequent.

8. Right-wing populism is undermining norms of economic governance. For example, right-wing governments are introducing barriers to trade and migration, hindering short- and long-term growth prospects.

This is obviously not an exhaustive list, and various interpretations (both complementary and contradictory) of how these issues are contributing to the present circumstances are possible. Trying to make sense of the various threads, it is difficult not to sympathise with the polycrisis concept, assuming generously it represents an attempt at synthesis, rather than a surrender to complexity.

But this must not inhibit the urge for a deeper understanding, combining the abstract and the empirical.

My view, which is gradually solidifying is that this crisis — and the reason its severity will surpass all others since the 1930s — is a product of the lack of synergy between the emerging technologies such as artificial intelligence, robotics, nanotechnology, biotechnology, etc., and the socio-economic structures that would furnish a relatively stable accumulation regime for capital. It is not yet an industrial revolution, as some suggest: capital cannot yet commit to the new, but is increasingly unable to profit from the old.

This understanding draws upon my IIPP colleague Carlota Perez’s scholarship on techno-economic paradigms. What remains to be seen is whether today’s technological frontier is a new paradigm, or will remain wedded to the last industrial revolution (associated with advances in telecommunications and computing technologies).

One of the issues here is that the task of creating jobs is becoming detached from the productive sphere. The last industrial revolution will remain the main source of jobs growth in most parts of the world, albeit in low-paid service sector jobs involved in deploying rather than developing the relevant technologies. But these industries are very energy-intense, especially in supply chains — despite lingering optimism about the ‘weightless’ economy — which creates obvious boundaries around their accumulative potential.

From this perspective, financialisation of the corporate sector — effectively, productive capital converting to finance capital — is as inevitable as it is destructive, since it is a more secure source of (short term) profits. The financialisation of everyday life is at the same time a form of discipline for the (global) working class, in place of slices of growth pie — but a highly unstable one, with fewer opportunities for value extraction. (Uncertainty over the near future of industrial relations is therefore serving as a further impediment to productive investment, yet workers have little choice but to rebel in the hope of holding off further insecurity and immiseration.)

This gets us a lot closer to a structural explanation for the concurrence of inflation (arising from profiteering and resource scarcity) and poor productivity, the foreclosing of opportunities for industrial development, and ultimately intensifying inter-state rivalry.

In a sense, we might simply be entering another period of interregnum between epochs. New forms of production and concomitant forms of social organisation will eventually develop.

Of course, this does not mean the transition will not be marred by an intensified period of conflict, oppression and depravity. Moreover, a cyclical process cannot be taken for granted, this time around, since climate change is advancing too rapidly.

Climate change is of course woven into my account but, in truth, I do not think enough of us — particularly elites — are yet conscious enough of its destructive potential for it to be driving political and economic behaviour beyond those directly affected. This consciousness will come; when it does, some things will improve, as it leads to more jobs in alternative energy and adaptive practices, and imbibes a stronger will to innovate. It is more likely, however, that things will get significantly worse, as capital becomes increasingly concentrated on the short term in the absence of a reliable future, and international politics becomes more aggressive as national economies falter.

Credit: Stefan Doerr (CC BY-ND 3.0)

Any ideas

The above argument notwithstanding, we will fail to understand the trajectory of this crisis if we adopt a purely materialist perspective. Ideas will be part of the solution, but they are also part of the problem. Clearly, many elites do not see a crisis or, more precisely, see it only through a narrow lens with simplistic solutions available.

And what looks like a crisis to some may, to others, represent the paradigm operating normally. Nationalism, white supremacy and authoritarianism were part of the ideological foundations of twentieth century productivism, not aberrations. Today, while the same forces are present again — indeed resurgent — the crisis is mainly being narrated at the moment by elites who see fiscal insolvency as a threat to the liberty of finance capital, rather than groups who see notions such as fiscal insolvency and finance capital supremacy as part of the problem. For the former, spending cuts and higher interest rates appear as perfectly reasonable solutions.

We should conclude not that agency and ideas are absent, but that they are failing. We are unable to apply the reforms to energy production, welfare provision, public services, corporate governance, and financial regulation that we know will alleviate some of the causes and symptoms of the polycrisis.

This is partly about the continuing power of old ideas, such as economic growth. The notion of growth remains the lubricant of all serious political programmes, left and right. ‘Rank boosterism’ dominates UK economy policy debates, according to Thompson: it is as if we think we can have growth just because we ask for it. Many green campaigners are just as guilty of this fantasy. Similarly, local leaders — overwhelmingly Labour — engage in crude place-based boosterism without seriously assessing the risks involved in levelling up to London, even if this were remotely possible. I doubt we would know what to do with growth even if we did get it back.

The failure is also partly about the state, remade by neoliberalisation. State managers mainly fret now about maintaining the store of ‘fictitious capital’ that underpins financial accumulation — a.k.a. ‘the markets’ — rather than how to embed public goods within the operation of centrally planned capitalism (see Carolina Alves’s recent paper on fictitious capital for further discussion). In the process, the taxes states need become evermore impossible to levy, and the incentive to fuel finance intensifies.

The failure is also partly about mobilisation. Tooze has rightly highlighted the tendency, including on the left, to define the polycrisis as primarily a ‘cost of living’ crisis, essentially swallowing the central concern of the financial elite that inflation is a threat to our way of life. Instead we need to think critically about the opportunities for progressive politics that inflation may represent, including the opening of fiscal space, and the re-institutionalisation of earnings growth.

We should also remember that, for many people, today’s circumstances may not (yet) feel like a different kind of crisis at all. To be honest, this is something I personally struggle with. If you will forgive an autobiographical detour… I grew up in poverty, in deindustrialised Northern England. My dad did the same job as his dad (still does, in the construction sector) but we were twice as poor as my paternal grandparents, mainly because of a hugely increased cost of living (especially housing), and partly because the job by then paid less well as the sector M&A’d. My mum — unlike her mother-in-law — worked too (still does, as an administrator), and has been a perennial victim of public sector outsourcing, corporate restructuring, welfare retrenchment, and mental health neglect, even during the best of times.

My point? Every single day feels like a crisis for some people. In my childhood, inflation, for instance, was an everyday phenomenon, irrespective of what was going on at the aggregate. As a result, I will not never not feel that my livelihood is fragile. Climate change obviously means that we cannot now not act. But we should never underestimate the difficulty of mobilising working class people in support of transformation when there are no guarantees they will be among the beneficiaries, and there are, sadly, charlatans in every political direction offering less arduous solutions.

I suspect we will get our best shot at transformation only once the crisis has further intensified. The task now is not to wait, of course, but rather to do as much thinking and experimentation around alternatives as we can. We should do this in hope, perhaps, that the worst manifestations of crisis can be averted; but we should do it mainly because it might enable us to narrate the next phase of the crisis, when it arrives.

We do not currently have all of the language we need to articulate this endeavour, let alone the tools to operationalise it. This shortcoming is a product of the epistemological foreclosures that prevent paradigmatic breakdown being identified until it is already too late. But new ways of understanding are emerging, as corrections to a failing paradigm. They will expand and evolve as they interact with the real world — and it is this interaction which must now be prioritised. Alas, the real world is probably going to get very, very real, for most of us, before this project is complete.