Risks, crises and challenges in modern political economy

Three notions define presently all discourses concerning political economy’s both globally and nationally: challenges, risks and crises; they are also at the core of recovery process. These notions quite often are used interchangeably, both in politics and economics (which is, of course, questionable), as there are serious differences among them. A peculiar aspect presently is in the fact that a lack of clear understanding of their context and origin makes the decision-making process and governance less effective. 

Modern political economy is rapidly changing; most often using such key words as challenges, risks and crises as the main cognitive “instruments”. A proper understanding of these notions, particularly concerning socio-economic development, can assist governance in taking efficient resilient decisions; hence in order to clarify the differences, it is better to have a closer look at corresponding definitions and concepts.
Besides, attention to these notions and terms used in political economy goes far above just an academic discourse; it is becoming instrumental to practical decision-making and governance, as “transferring” political economy is becoming vital in national governance and decision-making, as well as in present global leadership and facets of international cooperation.

Precise terms in correct solutions
Thus, a crisis (or crises, in plural) is a situation in which something or someone is affected by serious problems, like natural disasters, corporate, financial and/or economic crises, etc. depending on the “patient”. Generally, crisis is characterised by a crucial or turning point(s) in a “regular” course and/or sequences of events, which often is the result of unstable period in social development, as well as in politics and/or economics. As a rule, crisis is a time of great danger or trouble to a country and/or regional economy, politics, business, etc. which threatens the course of regular events; hence, it is often associated with emergency measures. A distinctive crisis’ feature is reflected in its human-made nature, like economic, financial and/or recent coronavirus and/or energy crises.
As to challenges, as a noun it is a kind of a call or summons to engage in any situation, event and/or happening, i.e. something that by its nature can serve as a call to taking special efforts (for example, to challenge a policy or procedure); hence, there are some synonyms to challenge, like question, dear, doubt, etc. Thus, a situation can be “challenged” (such as challenging the outcomes and/or results), while risks can be managed, not the other way around…
The risks imply future uncertainty concerning the expected results from realising a certain decision or policy outcomes; when there is a possibility that something bad or unpleasant could happen. That is why quite often the risks are being similar to threats. However, there are different types of risks depending on the originating circumstances: e.g. sovereign and corporate risks, that of liquidity and insurance, etc. As seen, most risks are the result of actions and/or inactions leading to “unpleasant” results; however, most risks could be calculated or managed.
For example, a phrase appeared recently in the WEF’s report: “discover solutions to your biggest challenges with cutting-edge thought leadership and resources” doesn’t make sense: there are no “solutions to challenges”: it’s like asking yourself: “why I’m doing this”, it sounds just rhetoric. One can challenge the results, the actions and/o their outcomes, whether they were done right; but finding solutions to challenges (!?), seems conceptually strange.
Reference to: https://www.himss.org/news (retrieved on 5.05.2022).
Bottom-line: calling an event a wrong name makes it difficult for the governing institutions to rake a right decision, as challenges, risks or crises are approached at tackled differently: any “substitution” of an idea, notion or a concept might be fatal for political economy.

Risks in modern challenges: WEF’s vision
World Economic Forum publishes yearly “Global Risks Reports” in which WEF’s experts examine five categories of risks: economic, environmental, geopolitical, societal, and technological. It is true: risks are covering presently almost all spheres and aspects of contemporary development; more than that, examining political-economy’s transformations in adapting to risks and changes involves sufficient scientific expertise and complex involvement of numerous parameters in finding optimal recovery and resilience solutions. Tracing contemporary risk’s agenda, it is vital to see the main risks’ “ingredients” while keeping in mind possible solutions in order to distinguish risks from other corresponding notions.
In numerating some risks, the WEF’s experts take into account “global risk perceptions”; our institute provides some comments only to a few of them:
• risks associated with the post-pandemic effect: the report postulates that “societal and environmental risks have worsened since the start of the pandemic”, with critical importance for such spheres as “social cohesion erosion” and “livelihood crises”. Besides, some other risks (which WEF-experts identified with the pandemic) are also important to deal with, e.g. “debt crises”, “cybersecurity failures”, “digital inequality” and calling them a “backlash against science”.
Our comment: in this assumption there is a first “notion substitution”: the pandemic, which of course represent numerous risks, is not a risk in itself; it is a human-made sickness that spread around the world. The pandemic has been a result of human mistake in the researchers’ regular work procedures in bacteriological laboratories. And this needs a specific way to treat the whole post-pandemic circumstances by the political-economy’s instruments. In fact, it is not a risk but a challenge to political economy in general “being ready” for any external risks.

• risks in global economics: the report acknowledges that only about 10 percent of respondents (it is not clear the numbers in the pools) thought that “the world” can manage recovery by 2024, while about 90 percent perceived in the short-term a volatile, fractured, or even increasingly catastrophic outlook; besides, about 84 percent expressed “pervasive pessimism”, i.e. with some negative feelings about the future.
Our comment: as soon as “global economics” is a conglomerate of about 200 international actors/states and several coordinating teams (e.g. G-7 and G-20, to name a few) actively formulating the global political economy, it is at least strange to call global economics a risk. It is more appropriate to see modern “global-regional-national” socio-economic relations as a crisis in the global “multi-actors” order and governance system. Besides, the WEF depicts other risks in the longer perspectives, such as “geopolitical and technological risks”, “geo-economic confrontations”, “geo-political resource contestation” and “cybersecurity failure”; the contents of which, in fact, depends on the states’ ability to recovery and resilience. Hence, they are more challenges than risks.

• risks in “social cohesion”, which – according to WEF- includes, e.g. “livelihood crises” and “mental health deterioration”, as well as environmental risks, as they are “leading at least potentially to social damages nationally and globally.
Our comment: WEF’s approach to social cohesion is a clear mixture of both crises and risks, adding up such notions as e.g. “debt crises” and “geo-economic confrontations”, as being among top ten global risks by severity in the next decade. It is more appropriate to treat “social cohesion” in a cohesive society as oriented towards peoples’ well-being, combating exclusion, creating a sense of belonging, promoting trust, etc; thus, social cohesion is becoming a constituent part of national “inclusive development”.
Source: https://www.oecd.org/dev/inclusivesocietiesanddevelopment/social-cohesion.htm.
The OECD e.g. uses a multi-dimensional approach and assesses key sectors: fiscal, labour, educational, environmental, social protection, etc. to enhance social cohesion. This approach is far from a “risk-approach”, but rather orients political economy towards more active governance actions and national priorities in wellbeing.

• International mitigation: the analysis of the WEF’s pools acknowledges that “most people in the world view modern national governance systems incapable of effectively managing international risk mitigation efforts”. Among most effective mitigation efforts WEF depicts “trade facilitation”, “international crime” and “weapons of mass destruction” (of course, these are pools taken before the Russia-Ukraine conflict). By contrast, “artificial intelligence”, “space exploitation”, “cross-border cyber attacks and misinformation”, “migration and refugees” were seen as “the areas where international mitigation has not started”.
Our comment: mitigation efforts in international relations identify and evaluate economically efficient and socially responsible policy pathways to achieve a positive and effective result in any political-economy sector; they can be hardly treated as risks to national agendas. On the contrary, the means of international mitigation are used to “coordinate” global discourse on all relevant governing areas economy sectors to support countries for the significant policy reforms in reaching global goals. For example, these means are taken in the UN Global Agenda-2030 with its famous 17 global development goals, SDGs. So, international mitigation is hardly “a risk”, but rather on opportunity to effectively reach a desired goal and transform national political economy’s patterns.
More on climate mitigation in: https://www.oecd.org/climate-change/theme/mitigation/
All references to the World Economic Forum’s report at:
https://www.weforum.org/reports/global-risks-report-2022/digest

Risks/challenges in short- and long-term recovery
WEF’s report keeps mixing up different terms even in approaching present recovery-resilient plans in the states: “uneven recovery trajectories risk the emergence of divergent priorities and policies”, in post-pandemic, argues the report.

Here are some examples:
• Pandemic is still regarding as a “serious challenge” in economic stagnation: the macroeconomic outlook remains weak, with the global economy expected to be 2.3% smaller by 2024 than it would have been without the pandemic, argues the report. Commodity prices, inflation, and debt are rising in both the developed and developing worlds. Along with labour market imbalances, protectionist policies and widening disparities in education and skills, etc. are associated with the negative socio-economic consequences in the post-pandemic (which are still regarded as risks), which are seen in global recovery differences. References to: https://www.weforum.org/reports/global-risks-report-2022/digest

• Green economies and fossil-fuel reduction. Net-zero economies’ transition exposes increasing pressure for national governance: possible decisions would have both positive and negative effects: on one side, increasing environmental quality (as a result of fossil fuel reduction), on another sides, having severe negative socio-economic impacts with growing unemployment and energy-related tensions.
• Digital economy and society. Accelerated pace of ICTs has fundamentally altered socio-economic situations with such unexpected consequences as cybersecurity threats and personal digital “freedom”, through e.g. attacks on critical infrastructure, misinformation, fraud and fake data, which impact public trust in digital systems and increase public expenses.
• Growing insecurity in the forms of economic hardship, worsening impacts of climate change and growing global political insecurity. In this regard, the global “climate health” shall be treated as it is done in medicine: first tracking symptoms (degraded nature and biodiversity), finding remedies (the actions states and companies shall take), and imposing strict control on cure, e.g. “actors’” behavior (i.e. through strong accountability).
Yet in many countries, insecure post-pandemic period, coped with varied and increased forms of protectionism, new labour market dynamics (resulting from the 4th Industrial Revolution), etc. make unstable existing global natural and social “balances”.
General source and references to: “Global risks report-2022 by World Economic Forum experts published in January 2022, as well as previous “risk reports” in 2019-21, in: https://www.weforum.org/reports/global-risks-report-2022?utm_source=sfmc&utm_medium=email&utm_campaign=2773733_Si-PublicSeries-03-EventFocus-Production-07-04-2022&utm_term=&emailType=&ske=MDAxNjgwMDAwMDdQUEl3QUFP

Something for the conclusion: in the perspective trajectory, for example, challenges can slowly turn into critical situations (i.e. into crises) in global and national agendas, while ignoring associated risks could lead to deficiencies in governance and decision-making.
Thus, scientists, politicians and military strategists have been exploring outer space for decades; recently these activities included active additional private and public attention, which created both new opportunities and involving risks. That a vivid example of a “supplementary” challenging effect on decision-making and a resulting risks; the example that is signaling that science, research and innovation is a constant process, while the implementation of results is in the hands of governance structures.
It means that any challenge –from an objective point – is a “substance” that appears either as a result of a previous evolution or scientific/innovative achievements; all other challenges are “subjective”, i.e. being the result of socio-economic and political development.

 

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