A Systemic Recovery

1. Introduction and Overview

Abstract

This chapter summarises the trends and system characteristics that enabled the SARS-CoV-2 virus to provoke so much devastation so quickly worldwide. It outlines the main argument of the publication that we have to understand the interactions of multiple systems across different times and places to cope adequately with present and emerging threats to global well‑being. Resilience should be seen as a guiding principle in efforts to ensure that systems can continue to function in spite of the inevitable disruptions they will face.

The Covid-19 pandemic exposed and amplified the very trends and system characteristics that enabled a local disease outbreak to spread worldwide, paralysing society and crippling the global economy within a few months of being detected. The impacts of the health crisis cascaded through systems ranging from global supply chains to education. No area of society was left untouched, almost always with negative consequences. Even the temporary improvements in air and water quality were short lived, with little impact on deep-rooted trends that have led to the climate emergency. A study of over 3000 counties in the US for example, found that a small increase in historical exposure to PM_2.5 microparticles leads to a large increase in the Covid-19 death rate, after accounting for many area-level factors (Wu et al., 2020).

The various contributions to this publication share a common view that to understand the pandemic (and other emergencies facing the planet) an approach based on complex systems theory offers a pragmatic way of studying the multiple interactions acting across multiple time and other scales that determine how the crisis arose and developed. A complexity-based approach is also the most fruitful way of bolstering system characteristics, notably resilience, that will allow society to be better prepared for the next crisis.

A fist lesson from a systems approach is that in describing a given complex system and its interactions with other complex systems, the point in time and the place where the narrative starts strongly influences the description. This in turn shapes the policy advice on ow to deal with similar situations in the future. Starting the Covid-19 story in Wuhan at the end of 2019 would lead one to concentrate on better laboratory standards or stricter control of wildlife trade, depending on what the origins of the coronavirus turn out to be. Starting with the decision to stop funding research on coronavirus vaccines in 2016 casts a different light (Hoetz, 2020). Starting the story a decade earlier gives a different perspective. The coronavirus struck just over 10 years after the 2008 financial crisis, and the impact of that event, and measures taken to deal with it, were still being felt. The recovery after the Great Recession of 2008-9 was among the slowest on record. Central government debt in OECD countries rose from around 30 per cent of GDP countries in 2007 to 75 per cent at the end of 2019 (OECD, 2021). The IMF’s Global Debt Database shows that public plus private debt reached $197 trillion in 2019, up by $9 trillion from the previous year (IMF).

One consequence of the austerity policies implemented to manage this debt was a cuts in public services and a drive for “efficiency” that left health services for example without the spare capacity to cope with the sudden surge in patient numbers. An investigation by the WHO’s Pan-European on Health and Sustainable Development found that: “Many European health systems have suffered from chronic underfunding and underinvestment in the health workforce, often as a legacy of the 2008 financial crisis” (WHO, 2021). Other public services also found themselves unprepared for the consequences of the pandemic on their workload (and staff). The outbreak caused an explosion in the amount of medical waste, masks for instance, and hospitals produced far more infectious and biomedical waste every day than before the pandemic (Ashraf et al., 2022). Ashraf et al. also highlight the difficulties for municipal waste services in dealing with the increase in the amount of packaging caused by the growth of online shopping, and the potential ecosystem consequences of the vast amounts of disinfectant used to clean surfaces.

The drive for efficiency had unintended consequences far beyond public services. Before the crisis, it was less obvious how trends that enabled global value chains to become more efficient had at the same time made them far less resilient, producing the conditions that made the supply shock worse and contributing to a demand shock as well (McManus, 2021). Supply chains have become both more extensive and more concentrated. Apple buys inputs for its iPhones from 43 countries for example, and the world’s biggest semiconductor manufacturer, TSMC (Taiwan Semiconductor Manufacturing Company) had a 55 percent of market share at the start of 2021, followed by Samsung with 17 per cent. A disruption to their operation has almost immediate consequences, as when Samsung’s foundry in Texas shut due to power outages in 2021 (Dobberstein, 2021).

The following chapters look in more detail at the issues raised here. Chapter 2 examines how human and other systems interact to produce new situations, and discusses the features of systems that policymakers and their advisors should consider when designing responses to current challenges, as well as strategies to deal with the risks and opportunities future challenges may present. Adopting a resilience approach means rethinking our priorities, and especially the relative importance of resilience and efficiency. The radical uncertainty associated with complex systems makes it impossible to predict where the next crisis will come from, but our influence on the evolution of our systems must be designed to have resilience as the primary objective, and the means to achieve that have to be constantly adapted over time to provide them with the capacity for recovery and adaptability regardless of the challenges they may face.

Chapter 3 argues that traditional policy approaches ignore how systems interact and how their systemic properties shape this interaction, leading to an over-emphasis on a limited set of characteristics, notably efficiency. The emphasis on efficiency in the operation, management and outcomes of various economic and social systems was not a conscious collective choice, but rather the response of the whole system to the incentives that individual components face. This has brought much of the world to rely upon complex, nested, and interconnected systems to deliver goods and services around the globe. While this approach has many benefits, the Covid-19 crisis shows how it has also reduced the resilience of key systems to shocks, and allowed failures to cascade from one system to others. A systems approach based on resilience is proposed to prepare socioeconomic systems for future shocks.

Chapter 4 defines concepts related to systemic threats and reviews the analytical and governance approaches and strategies to manage these threats and build resilience to contain them. This should help policymakers build safeguards, buffers and ultimately resilience to physical, economic, social and environmental shocks. Recovery and adaptation in the aftermath of disruptions is a requirement for interconnected 21st century economic, industrial, social, and health-based systems and resilience is an increasingly important theme and a crucial part of strategies to avoid systemic collapse.

Chapter 5 explains why a new approach to economic analysis and policy is needed. It sets out the multiple challenges now facing almost all economies and proposes a new set of overarching policy goals: environmental sustainability, a reduction in inequalities, improved wellbeing, and system resilience. Achieving these goals requires policymakers to look ‘beyond growth’. The chapter argues that the dominant approach to economic policymaking over the last forty years, based on an orthodox and subsequently revised model of neoclassical economic theory, is not adequate to address these challenges. It describes the various analytical advances which have been made in economics in recent decades which offer a richer understanding of how economies work. It suggests that overcoming these challenges requires structural rather than incremental reform, and sets out a range of policy approaches, drawn from the new analytical frameworks, which might help achieve these wider economic and social goals.

Chapter 6 presents a conceptual asset, Brain Capital, to inform novel policies. The concept builds on previous work, the Brain Capital Grand Strategy, that considers Brain Capital in-all-policies and offers a comprehensive investment plan and the development of an index or a dashboard. The premise, enablers, and barriers towards a Brain Capital Building Policy Agenda are outlined. Engagement with communities is proposed, and approaches for educating policymakers are described. Brain Capital building policies should be considered in sectors such as human development, migration, gender issues, social justice, multi-cultural affairs, economics, protections, and international relations. Novel approaches for public investment including brain bonds and social impact investing are considered.

The last chapter, Chapter 7, summarises the main conclusions of preceding chapters on the characteristics of the systemic threats facing society and how to deal with them. It notes a shift in thinking among decision makers towards some of the positions argued for by this publication’s authors, notably the need to build resilience into important systems; to pay attention to the human aspects of crises, notably the psychological aspects; and the advantages of a systems approach in identifying and prioritising areas of intervention.

References

Ashraf, M. A., Faheem, M., & Hassan, M. A. (2022), “Impact of COVID-19 on environmental ecosystem”, Environmental science and pollution research international, 29(9), 12554–12556. https://doi.org/10.1007/s11356-021-17664-3

Dobberstein, Laura (2021), “Silicon foundries surge to new revenue records, but Texas cold snap sent Samsung backwards”, The Register, 1 June 2021 https://www.theregister.com/2021/06/01/q1_2021_foundry_revenue_trendforce/

Hoetz, Peter (2020), Testimony of Peter Hoetz before the Committee on Science, Space, and Technology of the United States House of Representatives, March 5, 2020 https://science.house.gov/imo/media/doc/Hotez%20Testimony.pdf

IMF, Global Debt Database, https://www.imf.org/external/datamapper/datasets/GDD

McManus, James (2021) “Supply and demand: the Covid effect”, Nutmeg, 25 August 2021 https://www.nutmeg.com/nutmegonomics/supply-and-demand-the-covid-effect/

OECD (2021), Sovereign borrowing outlook in OECD countries, OECD Publishing, Paris http://www.oecd.org/daf/fin/public-debt/Sovereign-Borrowing-Outlook-in-OECD-Countries-2021.pdf

WHO (2021), Rethinking policy priorities in the light of pandemics: a call to action, Pan-European Commission on Health and Sustainable Development, March 2021 https://www.euro.who.int/pan-european-commission/policy-priorities-pandemics

Wu, X., et al. (2020), “Air pollution and COVID-19 mortality in the United States: Strengths and limitations of an ecological regression analysis”, Science advances, 6(45), p.eabd4049 https://projects.iq.harvard.edu/covid-pm