A general theme throughout my posts on COVID-19 is that many of the cracks that existed prior to the pandemic were already there. Those cracks that we chose not to see or were too busy to see are exposed by the pandemic. This theme is described eloquently by Economist Tyler Cowen in his work on The Great Reset. He uses a metaphor of canaries in coal mines to describe the warning signals that represent greater and broader stress. In the past week, I’ve seen multiple references to dead canaries knee deep in coal mines. In a recent New York Times Article authored by Neil Irwin he echoes this sentiment:
“But one lesson of these episodes of economic tumult is that those surprising ripple effects tend to result from longstanding unaddressed frailties. Crises have a way of bringing to the fore issues that are easy to ignore in good times.”
The article goes on to explore the world economy post-pandemic. It looks at the complicated and interconnected web of our economy, and the difficulty in seeing beyond our direct relationships within that web. What happens when that web is torn apart? History tells us that the initial shock creates a ripple effect that we can’t see in the present. Mr. Irwin provides historical examples. He asks: who would have thought that a crisis that began with mortgage defaults in American suburbs in 2007 would lead to a fiscal crisis in Greece in 2010? In an example that I find a little unnerving in my own research is the New York stock market crash in 1929. It contributed to the rise of fascists in Europe in the 1930s — but who could have connected those dots back then?
As unpredictable as these events are, history has a way of connecting dots invisible in the present. I explored this journey through history when I recently looked at A Post Pandemic Society. The author points to the same era that I explored in my post. He says that over the last 12 years, it has felt as if the world were reliving the period of 1918 to 1939. He states:
“That era also featured a global financial collapse; a rise of authoritarian governments; the emergence of a new economic superpower (the United States then, China now); and a pandemic, though not in that sequence.”
So why so many dead canaries? Examples from the article include: a world economy with the United States at its center was already falling apart; and the weakening of the globalization foundation was already underway. The pandemic yet again serves as an Accelerant. Case in point: The author states that trade as a share of global GDP peaked in 2008 and has trended lower ever since. An every-nation-for-itself mentality was emerging before Covid-19 — and the pandemic reinforces it. Experts now believe that we will rethink how much any country wants to be reliant on any other country.
Resilience and redundancy now become critical; a point made in the article as well. Here again, the need was there, but unseen because of a focus on quarter-to-quarter efficiency. Our exponential pace was going to make these characteristics critical anyway. Add in natural disasters, the climate crisis, pandemics, and other shocks, and you quickly have a burning platform. Mr. Irwin closes the article as follows:
“We may not know exactly where this crisis will lead, for the world economy or anything else. But one thing seems clear: History sure can be scary when you don’t know how it ends.”
For additional thoughts on the pandemic, see my previous posts.