Whose Polycrisis?

‘if God the Father had created things by naming them, Elstir recreated them by removing their names, or by giving them another name’.

Marcel Proust (II, 566)

An emerging consensus originated in the US has declared 2022 as the year of the ‘Polycrisis’, with a view to marking the beginning of an era of turbulence and unrest in the global economy.  Under this conceptualisation, recent events including the Covid-19 pandemic, climate change catastrophes, the Russian invasion of Ukraine and the rise in energy and food prices are generally postulated as separate crises, which can have an effect on each other but nevertheless have separate origins.  This centrifugal analysis of events predicates on the decline of the uni-polar world order, as well as acknowledging the emergent structural weaknesses in the traditional western powers; all of which can be loosely interpreted as occurring in a period during which power is dispersing and perhaps as a consequence of this dispersion, the current drivers of crisis have multiplied, leading to a multitude of crises, in contrast to preceding historical instances.

In spite of the current use of the term, the origins of the Polycrisis date further and can be more sparsely contextualised. However, there is no doubt that it has now become an important neologism for conventional western media and policy institutes, especially adopted by Bretton Woods Institutions, as well as other leading investors.

Civil society has also used this term as a neat summary, however, theirs is a critical response and is not interchangeable with how powerful International Financial Institutions (IFIs), policy think-tanks and investors use the term.  In this sense, the instrumentalisation of this neologism, seems to have more value than its meaning, with the discernible possibility that any perceived political mileage of the Polycrisis, is a complete transformation away from its intellectual roots. Nonetheless, as an artefact, the intellectual roots and the political role of the Polycrisis merits an integrated analysis beyond its instrumentalisation. 

A remarkable feature of liberal thought is the tendency towards identification of social phenomena through the selective elevation of their key distinguishing features, which are abstract enough to form ‘systems’ and neutral enough to subsume the inherent contradictions of capitalist development. Pandemics, climate breakdown, wars and global deflationary pressures are not mere externalities of the capitalist system but intrinsic to its operations- long predicted by a diverse group of thinkers. That these events converge in time is a political outcome, subject to planetary limits, not abstract systemisation, as the Polycrisis seems to imply.  

Critical responses to the Polycrisis have pointed towards its disregard in accounting for the long and sustained crisis of the capitalist world order and a resort towards ‘brute empiricism’ to conceptualise things as they appear to be,  rather than questioning what is occurring beneath mere appearances. Prima-facie accounts often seek to capture the zeitgeist in the endeavour to simplify things. However, there is a need to differentiate between simplification and reductionism. As a concept, the Polycrisis is simultaneously all-encompassing as well as abstract.

In an attempt to grasp both these aspects, this short blog starts with a focus on three messages of the Polycrisis: a) the qualitative nature of change, b) the drivers or causes of crises and c) the role of Bretton Woods Institutions in adopting the concept. In addition, the blog proposes an alternative way of understanding the contemporary crisis, which hinges on the decline of the western capitalist model, followed by some thoughts on multipolarity and geopolitics. 

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Beating around the Bush: Polycrisis, Overlapping Emergencies, and Capitalism

It is in vogue nowadays to describe the multifaceted and intertwined crises of capitalism without referring to capitalism itself. Obscure jargon of ‘overlapping emergencies’ and ‘polycrisis’ are brought up to describe the complexity of the situation, and they serve, with or without intention, to conceal the culprit, namely the totality of capitalist relations. This short piece discusses the content, function, and limits of these evasive practices with concrete examples.

A Hodgepodge of Risks

“A polycrisis is not just a situation where you face multiple crises” writes Adam Tooze, it is rather a situation “where the whole is even more dangerous than the sum of the parts” (Tooze 2022a). Even at first sight, he is able to count seven radical challenges on the radar, including Covid, inflation, recession, hunger crisis, climate crisis, nuclear escalation, and a ‘Trumpite’ Republican Party storming back to power.

Former long-time Harvard President, Larry Summers celebrates the term polycrisis for its capacity to capture the many aspects at stake, and adds: “I can remember previous moments of equal or even greater gravity for the world economy, but I cannot remember moments when there were as many separate aspects and as many cross-currents as there are right now” (Summers 2022). Make no mistake, the approval comes from a life-time mouthpiece of the establishment, foe of the working classes and the oppressed, frank enough to argue as the then Chief Economist of the World Bank that “the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable”.   

In Tooze’s view, in the 1970s, too much or too little growth, or late capitalism could be shown as the ultimate source of the problems at hand depending on one’s political position. What makes the current moment distinctive is the fact that “it no longer seems plausible to point to a single cause” (Tooze 2022b). He is thus quite explicit that one should avoid the use of grand narratives, or, in line with that, the designation of the capitalist mode of production as the root cause of the radical challenges upon us.

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Price Wars: How the Commodities Markets Made Our Chaotic World: Q&A with Rupert Russel

In Price Wars: How the Commodities Markets Made Our Chaotic World, sociologist and filmmaker Rupert Russell travelled to some of the world’s most chaotic places: war zones in Ukraine, Iraq, and Somalia, the climate wars in Kenya and Guatemala, and Venezuela’s economic catastrophe. Told as gonzo investigation into what made the 2010s so tumultuous, Russell links each of these eruptions to swings in commodity prices, and the financial speculators whose bets set their prices.

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Latin America: still caught in the capital flows trap

In a recent article, I discussed the poor state of Latin American economies drawing on some rather obscure works by Raúl Prebisch, explicitly addressed to the disturbing role of capital flows on (primarized and open) Latin American economies. I find that the post-2008 cyclical trend of capital flows is an exacerbated version of what has been affecting Latin America since the days of Prebich .

Mainstream literature on capital flows to developing countries has shared two important commonalities since the 1990s. This literature, for example in the tradition of New Institutional Economics,  tends to assume a beneficial effect of capital inflows, which leads to an improvement of peripheral institutions, whose deficiencies are ostensibly the main cause of economic turmoil and/or failure in attracting capital flows. In doing so, however, mainstream economists deliberately overlook the asymmetric characteristics of the international monetary system and the persisting hegemony of the US Dollar. 

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Return of the Bond Villains

In 1825 a Javanese prince named Diponegoro touched off a five-year, ultimately unsuccessful, war of resistance against the Dutch colonial government. As detailed by Peter Carey in his biography of Diponegoro, one of the causes was a land-rent system imposed by the Dutch on the Javanese sultanate of Yogyakarta. Under this system, landowners were encouraged to rent their estates directly to European plantation owners for the production of cash crops. This had a disruptive effect on the local economy and the Governor-General ordered it halted. But there was a catch. As the land-rent system was unwound, the Javanese landowners were forced to buy out the plantation owners in order to get control of their land back.

Many had already used the rents to buy imported luxury goods, and they fell into debt paying out large and often inflated sums to the plantation owners. The sultan was expected to back-stop these debts using payments he received from the Dutch for granting them the right to collect revenue on the kingdom’s toll roads. This created a situation where a Javanese merchant travelling from Yogyakarta to Semarang had to pay fees to the Dutch toll road agents. A portion of those fees then went to the sultan, who used them to back-stop debts being incurred by Javanese landowners as they bought back their own land back from European plantation owners.

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The perils of monetary policy in the global periphery during the Covid-19 pandemic

For several decades, countries of the periphery have been deeply in the grip of debt. The Covid-19-induced crisis has severely accelerated indebtedness and thus increased financial vulnerability. Recent policy measures by peripheral governments and central banks have brought momentary relief, but ultimately represent a manifestation of the interests of finance capital to get the most out of peripheral economies as long as it is still possible. 

Because of the dependence of their currencies on international capital flows, political autonomy in peripheral economies is extremely limited due to the possible effects of political decisions on the movement of such flows. The enormous power of financial markets over monetary policy in the periphery is again becoming evident during the current crisis. The crisis in the global periphery is generally much more severe than in the central countries, not only because of often inadequate health systems that have been abandoned under three decades of neoliberal policy. As peripheral assets do not serve as a store of value, “investors” withdrew almost 100 billion dollars from “emerging markets” within three months, constituting a historically unprecedented capital flight. Factors such as the deflation of prices of primary resources, the fall in external demand for manufactured products, and the fall in cash flows due to decreasing remittances and tourism mean that financial pressure has increased even more. Consequently, peripheral currencies significantly depreciated with the beginning of the crisis, in some cases by as much as 20-30%, as in the cases of Brazil and Mexico.

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Addressing the Pandemic in the Philippines Necessitates a New Economic Paradigm

Rodrigo_Duterte_delivers_his_message_to_the_Filipino_community_in_Vietnam_during_a_meeting_on_September_28In his late-night Talk to the Nation on COVID-19 on 6 April, Rodrigo Duterte, the populist President of the Philippines, echoed the affirmation of leaders from rich countries in North America, Europe, and Asia: to do “whatever it takes” for the economy to survive the pandemic. The problem, however, is that, on his own admission, Duterte is incompetent in economics. His stubbornly militaristic mindset and police-centric approach to governance is even more problematic when dealing with complex developmental causes and impacts of the coronavirus outbreak.

Yet the Philippine state’s inadequate institutional capacity to respond to the epidemic goes deeper. Given the national economy’s position in the hierarchical global economic system, its structural weaknesses impacts on how effective the government’s response can be. The current mainstream approaches to resolve the pandemic and the multiple crises of capitalism would fail to address the convoluted historical process of maldevelopment of the Philippines. Thus, a radical political strategy with a new economic paradigm for post-pandemic reconstruction is needed.    Read More »

Financing Needs of Developing Countries in the wake of Covid-19: The Role of Special Drawing Rights


Since the outbreak of the Coronavirus, developing countries have been exposed to massive withdrawals of capital flows. In this post, I unpack the financial challenges these countries are facing and consider what role the Special Drawing Rights (SDRs) of the IMF can play in easing the burden. 

According to the calculations by the Institute for International Finance (IIF), investors withdrew almost $80 billion over recent weeks from emerging markets (Wheatley 2020). During periods of crisis, investors ‘fly to safety’ by selling risky assets and purchasing safe assets such as US Dollars and the US Treasury Securities. As international investors flee to dollars amidst the financial turmoil caused by the Coronavirus, there is an acute concern that low and middle-income countries will be short of dollars. Furthermore, the scale of the withdrawal suggests that these countries will face great difficulty in raising funds for their sovereign debt payments. Besides governments, firms based in developing countries are also expected to face difficulties in raising foreign currency-denominated debt in international capital markets. Meeting this growing demand requires a global lender of last resort that can provide dollars on request. Within the existing global financial order, the Fed and the IMF are two major organizations that are capable of meeting this demand. 

The Fed can provide dollar liquidity through swap lines, which allows global central banks access to dollars in exchange for their own currency with the promise that the principal, as well as the interest, will be paid later. When engaging in a swap operation, the Fed provides dollars to the recipient central bank for an equivalent amount of their currency at a given market exchange rate. After a certain period, the two central banks resell to each other their respective currencies at the initial exchange rate. The recipient central bank provides the dollars to financial institutions in its jurisdictions at the same maturity and rate. This way, swap lines provide dollar liquidity to recipient countries’ central bank and financial institutions (Bahaj and Reis 2018).Read More »