Permacrisis: A Plan To Fix A Fractured World

Earlier this month, G20 leaders spoke of a planet gripped by “cascading crises.” Permacrisis: A Plan to Fix a Fractured World (out 28th September) is our attempt to understand and explain where we’ve gone wrong, and then go a step further by presenting a plan to better manage the future for the benefit of the many and not the few. 

Behind this permacrisis are failed approaches to growth, economic management, and global governance  In analysing these main drivers, we show why things will get even worse if policymakers fail to course-correct. But it’s not all doom and gloom. Far from it. Rather, our aim is to put forward a positive and realistic set of actions that can take us off this bumpy road and toward a better destination – reimagined models that can turn vicious cycles into virtuous ones.

‘Permacrisis’ originated from a series of Zoom calls among friends started during the first Covid lockdown. While Gordon, Mike, Reid and I came from different professional backgrounds and with different perspectives, we were united by a common concern about the world our children would inherit. And what kept us together is the desire to put forward an actionable agenda for improving their future.
 
What lies behind much of what has gone wrong, and is still going wrong, are those broken approaches to growth, domestic economic management, and global governance. The longer fractures persist, the more worrisome the global outlook. 

When we think of the stubbornly high inflation that has hit the poor particularly hard, climate emergencies increasingly met by a global shrug and not a groundswell, lagging growth within and across countries, ever greater indebtedness, worsening inequalities and spreading insecurity – we are reminded of the painful signposts that have come to define this permacrisis. Yet while approaches are broken, they are not beyond repair.

It is possible to deliver inclusive, sustainable and secure growth by harnessing strides in artificial intelligence and other innovations, fixing supply-side constraints, addressing labor and learning shortages and, where needed, restructuring debt for growth. 

Economic management, which as of late has come off as a contradiction in terms, can be made to better work by greater coordination and accountability, crowding-in more voices with diverse perspectives, and evolving new frameworks and targets that respond to – rather than reject – new realities such as a world facing supply rigidities. And a rapidly changing global order means we need to rethink governance structures and multilateral institutions so they can better cope with the shift from a unipolar to multipolar world, hyper-globalisation toward a globalisation-lite rather than fragmentation, and the slide toward neo-nationalism.
 
There is no big bang corrective measure. As hard as the four of us tried, the proposals we set out in ‘Permacrisis’ are not a singular silver bullet. Rather, we put forward a menu of actions that are both desirable and achievable –a set of steps that build positive momentum and open the way for virtuous cycles linking economics, finance, institutions, politics and, most importantly, societal wellbeing. New approaches to growth, economic management, and global governance, each on their own, will get us some of the way to a better destination. But acting on all three fronts at once is how we turn additive gains into multiplicative ones. That’s the kind of breakthrough needed to end today’s permacrisis. And it is within our reach. 

About the authors

Gordon Brown

Gordon Brown was Chancellor of the Exchequer, a role he held for more than a decade, then Prime Minister of the United Kingdom. He is credited with preventing a second Great Depression through his leadership at the 2009 London G20 summit where he mobilised global leaders to walk the world back from the financial brink. Today he is fully engaged in international development work serving as the United Nations Special Envoy for Global Education, spearheading efforts to deliver a quality and inclusive education for all of the world's children, and as the World Health Organization's Ambassador for Global Health Finance. Brown has a PhD in History from the University of Edinburgh. A Member of Parliament between 1983 and 2015, he lives in Fife, Scotland, and is married to Sarah, and the couple have two teenagers.

Mohamed A El-Erian

Mohamed A El-Erian is the President of Queens’ College, University of Cambridge. Since 2014, he has served as Chief Economic Advisor at Allianz, the corporate parent of PIMCO where he formerly served as Chief Executive and Co-chief Investment Officer. He is Chair of Gramercy Fund Management, a columnist for Bloomberg Opinion and a Financial Times contributing editor. He is a Senior Global Fellow at the Lauder Institute and the Rene M. Kern Practice Professor at the Wharton School of the University of Pennsylvania. He was previously a deputy director at the International Monetary Fund, a managing director at Solomon Smith Barney/Citigroup, and President and CEO of Harvard Management Company. From 2012 to 2017, Dr El-Erian served as Chair of President Obama’s Global Development Council. His books When Markets Collide (2008) and The Only Game in Town (2016) were New York Times bestsellers.

Michael Spence

Michael Spence is the Philip H. Knight Professor Emeritus of Management in the Graduate School of Business at Stanford University, a Senior Fellow at Stanford’s Hoover Institution, and a Council on Foreign Relations Distinguished Visiting Fellow. He is an adjunct professor at Bocconi University and an honorary fellow of Magdalen College, Oxford. In 2001, Spence received the Nobel Prize in Economic Sciences for his work in the field of information economics. He is the author of The Next Convergence: The Future of Economic Growth in a Multispeed World (2011). Spence served as Dean of the Stanford Business School from 1990 to 1999 and Dean of the Faculty of Arts and Sciences at Harvard from 1984 to 1990. He is a recipient of the John Kenneth Galbraith Prize for excellence in teaching and the John Bates Clark Medal recognising American economists under forty.

Transcript of audio recording

Permacrisis is both the perception and the reality that we are stumbling from one crisis to another. The G20 called it a few weeks ago, cascading crises and you think of it for the last 15 years we had the global financial crisis, then we had the European debt crisis, then we had the crisis of globalisation. Then we had of course COVID. And then we have the cost of living crisis. And the problem with these sequence of crises, is that you erode both financial and human resilience, which makes you more vulnerable to the next shock. So I think the reality is that we are more vulnerable to crises. We have found three contributing factors in most of these crises, if not all of them. One is the inability to grow the economy in an inclusive way that is also respectful of the planet. Second, is repeated policy mistakes that point to issues of cognitive capture and other failures that can be corrected. And third is the lack of global policy coordination, which means that when we hit with a global crisis, you don't get a global response.

So how does Mohammed think we can bring together growth and sustainability? OK.

The exciting thing is that we have an opportunity to revamp our growth models in a way that takes equity and the planet into consideration. There are three major revolutions going on that promise, not just higher productivity, but higher productivity consistent with our need to respect our planet. One is technology, and what generative AI is doing to that technological revolution. Two is life sciences, where we're seeing significant advantage. And three is the energy transition itself. And when we looked at it in some detail and consulted with experts, it was clear to us that if we exploit these revolutions, well, then we have the ability to enhance productivity, enhance growth in a way that is more equity and planet-sensitive.

Where some see the threats from technology, life sciences and energy transition, Mohammed sees genuine opportunity.

These come both with upsides and downside, but the balance is massively in favour of the upside, so one should not deny the upside simply because they are downside. As someone from AI put it the other day, it's 90:10, so absolutely we have to focus on the 10, which is the downside because it's serious, but we should also exploit the 90% and I think most times in life we are confronted with things that are not completely good and the key issue is to minimise the risk and to unleash the benefits and we believe that's doable. It will require of course, not just the private sector to take on social responsibility, but it will also require the government to have a dynamic approach to regulation.

He also emphasises the need to encourage people to be optimistic at such a challenging time.

It's very important to encourage people to be optimistic when we interacted with various audiences, we were struck by the pessimism capture, if you like that has occurred. And it's understandable, because every time we think we've got our head above water, another crisis comes along and puts our head underwater again. There's two elements to being hopeful. One is understanding why we've ended up in this situation. And two is seeing that there's a set of measures that are both desirable and feasible. And that's what we've tried to do in this book.

Mohammed feels that policy makers and influential figures are listening, but there are still challenges.

On the one hand, they share the concern that if we don't do anything about the path we're on, then it will get more and more difficult. It's this notion of a vicious cycle that one bad outcome increases the probability of a worse outcome after that. It's where economists go path dependent so. They share that concern. They also share the hope that we can exit. The major pushback is, of course, the politics where we are divided in so many countries. But the book goes around the world and shows instance of best practises and argues that if we simply adopt what other countries are doing, especially in economic management, we can take a step forward. We stress there is no silver bullet, but this is about change in direction. It's about turning a vicious cycle into a virtuous one.

And what advice does he have for our alumni, who may well be the ones tackling the crises of the future?

So when we met with students, which we have done quite a bit on this book, our message was one of hope, but one of hope that only gets realised if the people whose future is in play take more ownership for it. What brought the three authors together is the simple fact that we're parents and we are all worried about the world we're leaving our children. We're worried that we're leaving them with the world where growth is stagnant, where that is high, where inequality has worsened, where the climate crisis is facing us in a major way, and that if we don't do something about it, then all these elements will come together in a self feeding fashion. We also say the good news is that while you inheriting a very difficult situation. You're inheriting tools that our generation never had, and these are very powerful tools. So the hope is that with those tools and with commitments and with understanding of what's going on, the legacy that they will leave to their children will be better than the legacy we left them.

Mohammed El-Elerian is the president of Queens' College, Cambridge, and his new book Permacrisis, A Plan to Fix a Fractured World is out now. This interview was produced by me, Amy Mollett. For the University of Cambridge. Our interviewer was James Helm. Thanks to Mohamed El Erian and the Queens College team and the University of Cambridge's Development and Alumni Relations team.