In 2019, the New Approaches to Economic Challenges (NAEC) Initiative, a group established at the OECD to distil the lessons from the Global Financial Crisis, suggested that “a new crisis could emerge suddenly, from many different sources, and with potentially harmful effects”. It was at a Conference called “Averting Systemic Collapse”. In 2020, the collapse came, albeit only partially.

The COVID pandemic has revealed deep fissures in the socio-economic system, which have been developing for a long time. After the last crisis, analytical frameworks were broadened to assess better the nexus between economic growth and inequality on the one hand (inclusive growth), and between environment and growth on the other (green growth). Many of these modelling advances were the topic of the Fields-OECD Workshop “10 Years After the Crisis - modelling meets policy making”, held in Toronto on January 14-16, 2019.

Less progress has been made on the social-ecology nexus. There is an urgent need to understand and respond to the interconnections between financial, economic, environmental and societal systems. While policymakers generally focus on how to harden components of these systems affected by specific threats, such approaches do not often address cascading effects. Notably, this includes systemic risks, which result from the threat that individual failures, accidents, or disruptions present to a system through the process of contagion.   

Systemic threats are a particular challenge to governments due to their stochastic and relatively low frequency nature. This leads to the likelihood of systemic or cascading effects that are difficult to model and analyse with traditional tools of economic analysis. Such cascades, if not mitigated or checked, have the capability of triggering systematic degradation or collapse.

In order to promote social and economic change, a range of policies have to be integrated, including educational, demographic, employment, well-being, and technology and innovation policies.

The focus on economic recovery from the effects of COVID-19 should not blind us to the opportunity to do much more - repairing the damage to the natural environment and the climate system; weaving a new social fabric to replace the fraying one which we have allowed to develop and which has destabilized the socio-political system. Finally, once this health and mental-health emergency is under control, we need to build a more resilient system to protect ourselves from such events in the future.