An enduring crisis (part 1)

The world was thrown into disarray by the financial crisis in 2008 as it was forcibly pushed out of its previous very definite state, with its own momentum and its own very effective endogenous systems of control. This previous world order drove the economic success of western countries, but the world must now find a new stable framework with a new dynamic and different systems of control. The structure for this new order still remains very unclear and while there are a number of potential options, the transition from this previous – and very familiar – state to the new ill-defined set-up makes for a time of crisis.

The certainties of the past are now being called into question, and the new world order is only just emerging, so the certainties of tomorrow are not yet fully formed. This situation makes for a crisis as the past world has gone, while the world of the future is struggling with seemingly – and sometimes actually – contradictory signs.

The world as we know it in 2019 is nothing like the pre-crisis world of 2007. Our reference points have all completely changed and this is highly disconcerting. So it comes as no surprise that more radical political movements have developed and are all very similar in that they hark back to the past to try to find their bearings. Our ability to imagine these changes creating an ultimately coherent environment where we can see ourselves living comfortably is shaped by anxiety and uncertainty, which drive our behavior.

Today’s crisis is multidimensional. It is obviously a source of disruption, but contrary to common belief, it is not necessarily characterized by financial watershed. The financial aspect is merely just another source of uncertainty and while it is probably the most impressive at the time, it is actually not the most difficult aspect to address. Rather it is our changing world that lies at the heart of everyone’s gloom – and this scaremongering is excessive and contrived.

We are witnessing a very diverse and extensive range of changes that have taken place in a fairly short space of time, and it is this vast array of change that can seem frightening.

Phenomenally fast technological change is creating a new and unprecedented situation, e.g. visual recognition, which impinges on personal freedom, and feelings of being just another anonymous user, useful only as a target for personalized in-app advertising. An incredible revolution is taking place at unparalleled speed, yet this transformation does not feel like it provides a major or sustainable improvement in our wellbeing. What recent innovation has contributed more to our comfort than the refrigerator? None.

The world is also changing massively for the middle classes. Polarization of the labor market means that work for highly educated and for unqualified workers is increasing – albeit in very different ways – while intermediate jobs for those with few or poor qualifications are decreasing, with innovation primarily driving this trend. This middle class played the lead role in economic growth during the three post-war decades of boom in France, but now they just feel like bit players. This feeling is further aggravated when these employees live far from large cities with less access to healthcare, education and other public services. Here again the context has changed and the future looks much more bleak for this group. However, this situation is not just specific to France, as the Deaton review in the UK also reveals startling inequalities. This does not mean that the situation is the same across the board, but rather we must entirely overhaul some of our projections as past trends will not continue into the future.

The world balance is also changing dramatically. The same manufacturing methods are now being used in both developed and emerging countries, so the size of the world labor market has increased considerably, and this is another factor fueling difficulties for the middle classes.

Yet there are other aspects to this change in scale for the world economy. Tension between the US and China was inevitable as the real issue at stake here is political leadership, pursued via technological domination. China very quickly and relentlessly made up its previous lag as a result of vast efforts in the country, and also perhaps because of inadequate public investment in the US. This now casts doubt over US leadership in innovation: given China’s size and its increasing contribution to world growth, the balance of power in this battle of wills is fairly even. China is also developing a new way of managing its dealings with the rest of the world via its Belt and Road Initiative for example, which harbors a highly political dimension. The country’s expansion does not depend on Washington, unlike the situation in the west since the end of the Second World War.

This situation means a reallocation of resources for the US – and all to the detriment of Europe. So Europe must now stand united: the UK’s current ill-judged move is set to have drastic consequences. The world will not go back to its pre-globalization state, unless walls are built between countries around the globe. China is powerful, making it a key partner in future choices on global systems of control, whether in terms of people, goods, services or capital. Three-party communication between Europe, the US and China is vital, and a Europe that fails to stand united cannot have any influence in this trio, which would be highly damaging.

Another aspect of China’s rise is the fracture in the world’s historical dynamics. The industrial revolution took place in Europe and then extended naturally to America, so the shift towards China marks a huge swing in the world balance. French historian Fernand Braudel’s economic history went from the Mediterranean to Flanders via the Champagne fairs before making it to London and then New York – maybe China will be the last stop on this trip.

This all makes for a radical shift in the world’s reference points, with the feeling of losing our bearings and our grip on the future. America was easily seen as a natural successor to Europe, with a full range of virtues, but the same cannot be said of China.

To be followed…

This column was posted on the French Forbes’ website. You can retrieve it here

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