We are in a period that could be called the Great Instability, created by a health crisis and ensuing economic crisis, followed by a geopolitical crisis, all against the background of a climate emergency and rapid digital transformation. Individually, each would be a major challenge, but they interact to amplify each other’s impacts, and policies to address one question may make others worse. Efforts to save the environment that would make some people already struggling worse off, for example, could provoke a political backlash that threatens social cohesion and makes solving problems more difficult. Similarly, the technological revolution we are living through, while creating major opportunities, also risks leaving some people behind.
The OECD’s New Approaches to Economic Challenges (NAEC) initiative has been arguing for a number of years that if we want to find sustainable, equitable solutions to the issues confronting us, we need to see the economy, society and the environment as parts of a complex adaptive system, constantly evolving as they influence and react to each other. In September 2019, before the outbreak of the Covid pandemic, a NAEC conference on “Averting systemic collapse” warned that in today’s deeply integrated, highly interconnected world, a small local shock to one system can be amplified and transmitted quickly, causing cascading failures in the systems we have come to rely on in our daily lives.
Unfortunately, that warning turned out to be prescient. Since the start of the pandemic, NAEC has been working with a range of Nobel laureates and other leading researchers and thinkers to propose strategies not just to limit the damage and contain the shock waves from crises, but to ensure that the recovery leaves our systems better able to deal with damage and seize the opportunities that the new situation may offer. The new approach based on complexity theory and systems thinking is however grounded in the OECD’s solid tradition of providing evidence-based policy advice. We start with the facts and analyse the data to identify causal relationships before drawing conclusions and proposing solutions.
At the time of writing, we are facing a new crisis, war in Ukraine. Again, the consequences will be long-lasting, at every level from the individual to the global. Our response has to be long-term too. The work summarised in this publication proposes a framework that will help us not just to react to crises, but to be prepared for them. It has its roots in the pre-pandemic analyses of NAEC, as well as a number of conferences, papers and research collaborations instigated since.
The main lessons are now entering mainstream policy analysis and decision making. Resilience is now seen as major policy goal, since it is clear that all systems fail at some point, so the ability to recover from shocks is important, not just the ability to absorb them. There is also less reluctance to admitting that the drive for efficiency, usually defined in purely monetary terms, had a negative influence on resilience, and left many systems without the spare capacity to react to unexpected circumstances. Health systems in some countries nearly collapsed when case number surged due to the coronavirus. Global supply chains are a wonder of technology and organisation, but they could not cope with sudden, unexpected fluctuations in supply and demand.
The former UK Prime Minister Liz Truss summed this up when she said that we have “focused too much on getting cheap oil, cheap electronics, cheap goods at the expense of our freedom and security”. The US President’s Emergency Plan for Adaptation and Resilience (PREPARE) will support developing countries and communities in vulnerable situations around the world in their efforts to adapt to and manage the impacts of climate change. Australia has set up a National Recovery and Resilience Agency not just to help communities affected by disasters, but to promote initiatives to reduce risk and lessen the impacts of future shocks.
This report presents a framework and insights for designing policies to assist a recovery. It would be a contradiction for it to set out a policy roadmap. Another important lesson from our analyses of complex systems is that what we do will involve trade-offs between competing claims and unintended consequences of our actions. That means that we have to update our decisions, and perhaps even goals, as circumstances change. We would do well to remember that the origins of our word “governance” lie in the Greek word kybernan, "to steer or pilot a ship”. Navigating the troubled waters we find ourselves in requires knowledge, experience, and humility. I hope that the findings presented here are a useful aid in that journey.
Mathias Cormann
Secretary-General
OECD
Albert van Jaarsveld
Chief Executive Officer
IIASA