Posts Tagged ‘crisis’
“These are the times that try men’s souls”*…
Last January, (R) D looked, via Adam Tooze, at the concept of the Polycrisis: “I know it is relentless. That is also a feature of the polycrisis we are in. It comes from all sides and it just doesn’t stop.” He’s developed his thinking, summarizing in a recent Financial Times piece…
Pandemic, drought, floods, mega storms and wildfires, threats of a third world war — how rapidly we have become inured to the list of shocks. So much so that, from time to time, it is worth standing back to consider the sheer strangeness of our situation…
Of course, familiar economic mechanisms still have huge power. A bond market panic felled an incompetent British government. It was, you might say, a textbook case of market discipline. But why were the gilt markets so jumpy to begin with? The backdrop was the mammoth energy subsidy bill and the Bank of England’s determination to unwind the huge portfolio of bonds that it had piled up fighting the Covid-19 pandemic.
With economic and non-economic shocks entangled all the way down, it is little wonder that an unfamiliar term is gaining currency — the 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. Is the mighty Mississippi really running dry and threatening to cut off the farms of the Midwest from the world economy? Did the January 6 riots really threaten the US Capitol? Are we really on the point of uncoupling the economies of the west from China? Things that would once have seemed fanciful are now facts.
This comes as a shock. But how new is it really?…
“Welcome to the world of the polycrisis” (gift link)
Then, in his newsletter, he goes more deeply into the concept and its roots…
Polycrisis is a term I first encountered when I was finishing Crashed in 2017. It was invoked by Jean-Claude Juncker to describe Europe’s perilous situation in the period after 2014. In the spirit of “Eurotrash”, I rather relished the idea of picking up a “found concept” from that particular source. On Juncker check out Nick Mulder’s wonderful portrait of “Homo Europus”. It turned out that Juncker got the idea from French theorist of complexity and resistance veteran Edgar Morin, who is a whole ‘nother story…
“Polycrisis – thinking on the tightrope“
Both pieces are fascinating and useful; both, eminently worth reading in full…
* Thomas Paine, The American Crisis
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As we ponder profusion, we might recall that it was on this date in 1898 that an American institution was born.
The University of Minnesota football team (for our non-American readers out there, I’m of course referring to the kind of football where you’ll get a penalty for using your feet) was playing their final game against Northwestern University. The U of M’s team had been having a lackluster year, and there was a general feeling on campus that this was due to lack of enthusiasm during the games. So several students, lead by Johnny Campbell on a megaphone, decided to lead the crowd of spectators in a chant: “Rah, Rah, Rah! Ski-U-Mah! Hoo-Rah! Hoo-Rah! Varsity! Varsity! Minn-e-so-tah!” The crowd went bananas, as they say, and an energized Minnesota team won the game 17-6.
That day Johnny Campbell and his (presumably drunk) friends became the first cheerleader squad.
[source]
“A great sound is given forth from the empty vessel”*…
Pakistan’s economy appears to be in pretty bad shape. Riffing on a provocative thread from Atif Mian, the redoubtable Noah Smith compares the economic condition of Indian’s nuclear-armed antagonist with its island neighbor (and current basket case) Sri Lanka…
Many of the particular root causes of Pakistan’s situation are different than in Sri Lanka — they didn’t ban synthetic fertilizer or engage in sweeping tax cuts. The political situations of the two countries, though both dysfunctional, are also different (here is a primer on Pakistan’s troubles). But there are enough similarities at the macroeconomic level that I think it’s worth comparing and contrasting the two.
In my post about Sri Lanka, I made a checklist of eight features that made that country’s crisis so “textbook”:
• An import-dependent country
• A persistent trade deficit
• A pegged exchange rate
• Lots of foreign-currency borrowing
• Capital flight
• An exchange rate crash (balance-of-payments crisis)
• A sovereign default
• Accelerating inflation
[He then examines each as it pertains to Pakistan]
… Pakistan shares a lot in common with Sri Lanka. It doesn’t have a pegged exchange rate, it’s not as dependent on imported food, and it doesn’t have quite as much foreign-currency debt. But the basic ingredients for a slightly more drawn-out version of the classic emerging-markets crisis are there, and there are some indications that the crisis has already begun.
Because Pakistan didn’t peg its exchange rate and didn’t borrow quite as much in foreign currencies as Sri Lanka, it made fewer macroeconomic mistakes than its island counterpart. But in terms of long-term economic mismanagement, it has done much worse than Sri Lanka. No, it didn’t ban synthetic fertilizers — that was an especially bizarre and boneheaded move. But one glance at the income levels of Sri Lanka and Pakistan clearly shows how much the development of the latter has lagged:
Pakistan went from 3/4 as rich as Sri Lanka in 1990 to only about 1/3 as rich today. That’s an incredibly bad performance on Pakistan’s part…
Another emerging-market crisis looms: “Pakistan is in big trouble,” from @Noahpinion.
Oh, and the weather’s not helping either.
For a consideration of the interesting (that’s to say, challenging) questions that Pakistan’s predicament (and the travails of other debtor nations) pose for China, which is an increasingly large lender across the developing world, see the first set of items here.
* Pakistani proverb
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As we batten the hatches, we might spare a thought for Fazlur Rahman Malik; he died on this date in 1988. A scholar and philosopher, he was a prominent reformer in Pakistan, who devoted himself to educational reform and the revival of independent reasoning (ijtihad). While his work was widely-respected by other reformers, it drew strong criticism from conservative forces– who eventually forced him into exile. He left Pakistan in 1968 for the United States where he taught at the University of California, Los Angeles and the University of Chicago.
“You know why the French hate us so much? They gave us the croissant… We turned it into our croissandwich”*…
There’s a looming crisis in France. Over the last year, the wholesale price of butter there has almost doubled, to over $5,000 per ton. Exploding demand in Asia and a shifting of producer priorities to cheese and cream help explain the spike.
But whatever the reasons, it’s creating a tight squeeze for the 30,000 bakeries in France (a $9.5 Billion industry); butter is 25% of the ingredient make-up of a croissant.
More at “Croissant Apocalypse.”
* Denis Leary
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As we eat ’em if we have ’em, we might recall that today– the birthday of Sir Frederick Gowland Hopkins, who won the Nobel Prize in Medicine for the discovery of vitamins– is National Vanilla Milkshake Day.
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