By Dilip Bobb
“For people around the world, the war [in Ukraine], together with the other crises, is threatening to unleash an unprecedented wave of hunger and destitution, leaving social and economic chaos in its wake. No country or community will be left untouched by this.”
—António Guterres, United Nations Secretary-General
The world has never been in such a bad place. The pandemic, the war in Ukraine and supply chain disruptions have led to a perfect storm of a global economic crisis with rising energy prices and cost of living across the developed world and extreme weather conditions—unprecedented heatwaves and floods stemming from climate change—all contributing to what is becoming known as a permacrisis.
Till now, global connectivity was seen as a positive thing, made possible by the wonders of science and technology that kept the world economy ticking along quite nicely. Then came the pandemic, what is termed a Black Swan event, and turned everything on its head. Global connectivity produced a negative cascading effect that affected every economy, rich and poor.
Effects of Pandemic
The pandemic has exacerbated trends contributing to cataclysmic effects on development progress, with millions of people around the world pushed deeper into extreme poverty and a growing gap between developed and developing countries. While governments struggled to cope with the medical and economic challenges posed by the pandemic, the global corporate sector went into meltdown. The hardest hit were construction, manufacturing and contact-intensive services like trade, transport, retail and tourism and its allied sectors like travel, aviation and leisure. Thousands of small businesses shut down and, in countries like India, the informal labour market collapsed alongside.
The pandemic also changed work culture and offices in general, with WFM (Work From Home) or hybrid workplaces becoming the norm. That crisis also led to salaries being slashed and employees being laid off. We see the impact now as airlines and airports struggle to cope with the sudden surge of travellers attempting what is being called Revenge Travel. Research groups and forecasters like Brookings and McKinsey forecast that key sectors will continue to suffer and hopes of a recovery to pre-Covid levels could extend to 2025.
Impact of Ukraine war
The invasion of Ukraine added hugely to the current period of permacrisis. Around 6.9 million refugees fled Ukraine while an estimated 8 million people had been displaced within the country. As Christine Lagarde, President of the European Central Bank, wrote in an article: “The war (in Ukraine) has only heightened the sense that our world is in constant flux, moving seamlessly from one emergency to the next. In just over a decade, we have faced the largest financial crisis since the 1930s, the worst pandemic since 1919, and now the most serious geopolitical crisis in Europe since the end of the Cold War.” That crisis has pitted NATO countries against Russia, with an increasingly aggressive China adding to the volatile mix. In a recent issue, The Economist wrote: “The energy crisis unleashed by Russia’s invasion of Ukraine is crushing Europe’s consumers and panicking its politicians. Natural gas prices are eight times higher than they were last summer…global oil prices are nearly twice their level in January 2021.”
The world in turmoil
Meanwhile, the world continues to see the impacts of carbon emissions on global climate and a geopolitical crisis that is driving refugee flows, causing severe disruptions on global supply chains for essential commodities and contributing to food insecurity. Add to this high inflation and international interest rate hikes by central banks, the re-emergence of Covid-19 in many countries, and unprecedented extreme weather conditions—Europe battled record temperatures in July—and you can see the outlines of the permacrisis. The pandemic and the Russian invasion of Ukraine revealed how closely connected and inter-dependent our economies and our societies are. Be it health, economic, military or political, a crisis can now easily spread and its impact felt across the world. Russia and Ukraine turned out to be the world’s biggest suppliers of wheat, fertilisers and edible oils to global markets. Russia was also a major source of energy (oil and gas) to Europe and other markets. Before the invasion, India imported 77.2% of edible oils (84% of sunflower oil) and 11.7% of fertilizers from Ukraine, apart from sensitive components for nuclear reactors.
The economic fallout from the pandemic alone has meant that over half of least developed countries and other low-income states are now in or at risk of debt distress—Sri Lanka is a prime example—with estimates that one in five of them will remain below pre-pandemic levels by the end of 2023. Most other countries, including the so-called West, are experiencing slow or stagnant economic recovery. Britain faces a protracted recession as inflation surged over 13%, causing the worst squeeze on living standards for more than 60 years, says the Bank of England. It is seeing unprecedented contraction in household incomes, the worst since records began. The Rest of Europe is also feeling the strain of high energy bills and record inflation, putting many of their citizens in middle class or low-income brackets facing possible starvation.
Threatening global peace
Global insecurity has never been more acute, and divisive. The face-off between Russia and NATO over Ukraine has just not led the world to the edge of the nuclear precipice, but forced countries to choose sides amid a raft of sanctions and threats. It has brought two authoritarian, repressive and aggressive powers, China and Russia, closer together, threatening world peace in an atmosphere not seen since the Cold War (1947-1991). As a recent opinion piece in The Guardian Weekly said: “While Russia is contesting the US-led security order in Europe, China is challenging it in Asia. A geopolitical transition has begun, and the results may not be fully apparent for decades…The post-Cold War order that has governed the world for the past 30 years is drawing to a close. From its demise, a new balance of power will emerge.”
The geopolitical tension between the United States and the Soviet Union and their respective allies, the Western Bloc and the Eastern Bloc, during that period seems to be repeating itself. It was most recently seen in the impact of just one bilateral visit—by US House Speaker Nancy Pelosi, to Taiwan. The retaliatory Chinese military exercises around Taiwan, with missiles fired into Taiwan’s territorial waters and even into Japan’s, could disrupt one of the world’s busiest shipping zones, highlighting Taiwan’s critical position in already stretched global supply chains. Taiwan is critical to the global supply of vital semi-conductors and electronic equipment to global markets. Moreover, nearly half the world’s container ships pass through the narrow Taiwan Strait—which separates the island from the Chinese mainland—in the first seven months of this year, according to data compiled by Bloomberg.” Given that much of the world’s container fleet passes through that waterway, there will inevitably be disruptions to global supply chains due to the rerouting,” according to James Char, an associate research fellow at Singapore’s S Rajaratnam School of International Studies.
More damaging for the rest of the world will be China’s response in de-coupling trade relations between Beijing and Washington, a move that will send additional tremors across world markets, including India. China has also suspended climate talks with the US at a time when environmental disasters are on the rise. China and the US are the world’s worst polluters.
Like Vladimir Putin’s aim of reviving the old Soviet Union, China’s leader Xi Jinping says its goal is “national reunification”(read Taiwan) by 2049. Some military experts believe that post the Pelosi visit, that deadline could now be shortened and an invasion of Taiwan could take place much sooner than officially declared. If that does happen, America will be forced to intervene militarily, leaving the world with the threat of another global crisis, staring down the nuclear barrel. China and Russia are headed by two aggressive, paranoid, nationalistic strongmen who thumb their noses at the international order and crave to go down in history as empire builders or restoration of empires.
Signs of permacrisis
Hanna Arendt in her book Crisis in Culture writes that any crisis that takes place in a particular place or region shows it can happen anywhere. Due to globalisation and interdependence, crises can “cause a domino effect that accentuates their duration and disruptive nature.” She wrote that this was a distinctive sign of a permacrisis. She goes on to say that what really impacts a permacrisis is the feeling of pessimism that prevails in global society. Science and technology have made the modern world possible, but also created the global problems that threaten our future: the climate crisis, the pandemic, environmental degradation, overpopulation, refugees desperate to find a better life, the lethal impact of modern war and the threat of a return to the dark days of the Cold War, this time with China as a major disrupter. Rising energy prices are accelerating the cost-of-living crisis and sustaining the vicious cycle of constrained household budgets, food insecurity, energy poverty, and rising social unrest. The crisis is deeply impacting vulnerable populations in developing countries, threatening hard-won gains in the access to energy.
If there is one feature that even more profoundly marks our current era as one in a permacrisis, it is the increasing environmental damage. This has shown up not just in terms of extreme weather events, but also the pandemic itself which was the result of man’s exploitation of nature. Experts are warning that the cascading effect of multiple crises could lead to a lengthy global economic contraction. According to the UN, 828 million people are going hungry every night and 50m are on the brink of famine. Some doomsayers are even predicting a repeat of the 2008 financial and economic crisis. The onset of a permacrisis means that rather than “defeating” Covid-19, we will have to live with the pandemic and its consequences for years to come since its impact is structural, not cyclical.
Political uncertainty and change, say experts, will remain our constant companions. What the pandemic has also done, according to most political analysts, is that it has allowed authoritarian populism to emerge and become stronger along with divisive disinformation campaigns. In short, we have entered a volatile “New Normal.”
The world we live in will continue to be challenged by high levels of uncertainty, fragility and unpredictability. In such times of permacrisis, decisions that affect a large portion of humanity may be taken on the basis of partial evidence, even move beyond the boundaries of the law. This series of crises is one that many of us have not witnessed in our lifetimes. The International Monetary Fund (IMF) says the “outlook is dire” In a blog, one of its senior analysts wrote: “We expect global economic activity to decline on a scale we have not seen since the Great Depression. This year, 170 countries will see income per capita go down—only months ago, we were projecting 160 economies to register positive per capita income growth. The blog ends with this line: “This is a moment that tests our humanity.”
Globally, as of August 8, 2022, there have been 64,10,961 deaths because of Covid-19 and unlike the other pandemic, the Spanish Flu of 1918, which ended in two years, Covid-19 is producing more variants and is still causing deaths and long-term effects since it was officially declared as a pandemic in early March, 2020. Here’s the bad news. While most countries have lifted Covid-19 restrictions and are allowing life to assume some normalcy, WHO, in its latest report, says that one million people have already died in 2022 from Covid-19-related causes. No one can predict when we will see the end of the pandemic.
Meanwhile, the dizzying price of fuel and household groceries dominate the front pages and stock market warnings are scary. Europe, especially countries like Germany, could face a winter of discontent as gas and fuel become scarce, owning to Russia cutting supplies. A YouGov survey found almost a third of respondents in America—the richest country in the world—anticipated life-changing disaster in their lifetime. A separate poll in France, Italy, the UK and the US believe that civilization as we know it will collapse in the years to come.
But there is one feature that even more profoundly marks our current era out as one of permacrisis: the deepening environmental disaster. In a study published recently in Nature Climate Change, researchers tried to understand the relationship between major environmental changes related to higher greenhouse gas emissions—including global warming, rising sea levels, storms, floods, drought, and heat waves—and the outbreaks of 375 human infectious diseases caused by viruses, bacteria, and other pathogens. They found that 58% of these public-health threats were fuelled by climate change. In France, heatwave and raging wildfires have ravaged several regions near the Atlantic coast and parts of the south, forcing thousands of residents to flee their homes. Other countries in the US and Europe faced similar devastation from drought and wildfires. Water restrictions have come into force in France and the UK. The UK has officially declared a drought which comes during the driest and hottest summer in half a century. Droughts have also contributed to the soaring energy costs as rivers and dams providing hydro-electric power dry up. Europe faces the worst drought in 500 years. France, Spain, Croatia, and southern Greece, are going through a “severe precipitation deficit”. While it seems paradoxical, the mechanics of atmosphere make it possible for record-breaking floods to take place alongside heatwaves and drought. Accelerating climate change is the cause.
China faces the worst drought in 60 years. In Sichuan province, officials were forced to cut outdoor ads, subway lights and neon signs on buildings last week in a bid to save energy as the region fights a power crunch triggered by record high temperatures amid a prolonged heatwave and a record-breaking drought. Factories have been forced to shut to avert a crisis as power is diverted to residential areas. Shanghai, China’s economic hub, was shrouded in darkness for brief periods as a power crisis looms large. In France, the Loire, the country’s longest river, can now be crossed on foot in places. In Germany, the Rhine is becoming impassable for barge traffic, a major carrier of freight, including coal for energy. Germany’s Federal Institute of Hydrology said the level of the Rhine, whose waters are used for transport, irrigation, manufacturing, power generation and drinking, will continue dropping, with serious economic consequences. The droughts in Europe have once again made visible the “Hunger Stones” in some Czech and German rivers. These stones were used to mark desperately low river levels that were used to forecast famines. The ones exposed on the river Elbe dates back to 1616 and the inscription on it says, “If you see me, weep.”
—The writer is Senior Managing Editor, India Legal magazine