“The world economy is more dangerous and less stable now than in 2008”

Nearly ten years on from the global financial crisis of 2008, Colin Hay, researcher at Sciences Po’s Centre for European Studies and Comparative Politics, and Tom Hunt (University of Sheffield) have edited a little book which provides a timely warning as to the dangers still present and building in the global economic system. In The Coming Crisis (Palgrave, 2017) they draw on research on the political economy of growth, stagnation, austerity and crisis, placing each in the context of the wider environmental crisis. Interview with Professor Hay.

Why this book? Haven’t elements been put in place to prevent a crisis similar to that of 2008?

One might hope so; but things are not quite so simple. When one analyzes the global economy in any detail, it is clear that very significant risks still exist. That is the simple conclusion of the fourteen leading political economists who have contributed to this work. Each chapter dissects the global political economy in a different way, uncovering and exposing the current sources of disequilibrium and instability.

Each contributor offers a distinct perspective on the symptoms of the present moment, reflecting and speculating on the extent to which the world economy has become more dangerous, and less stable, since 2008.

The book explores multiple dimensions of the coming crisis through issues such as the contagion effects of financial markets, secular stagnation, widening global inequality, the European migrant crisis, the Eurozone, China’s development and the ecological crisis. 

Isn’t it rather pessimistic to presume that we are the verge of another crisis?

Yes and no. To prepare ourselves for the possibility of a coming crisis certainly sounds pessimistic. But it can also be thought of as the very condition of any realistic optimism. It is better to be optimistic having considered the potential reasons for pessimism than to allow one’s optimism to prevent one from acknowledging the very possibility that there might be things to worry about in the first place. Put slightly differently, optimism sounds good, but optimism today is typically accompanied by a certain complacent naivety. Our aim in this book is, in effect, to stress test the characteristic optimism of mainstream economic approaches.  

What should we be worrying about?

It is at least credible to think that the world we live in today is a more dangerous place and is less stable systemically than it was in 2008. In the economies from which the contagion effects of the last crisis radiated outwards, there has been little if any ‘rebalancing’ of the domestic economy. Such economies remain stubbornly dependent on credit and an overgrown financial sector, with growth once again associated with alarming asset-price inflation.  

And on a global stage there is little to lift the gloom. The period since 2008 is likely to be remembered as one in which the opportunity for global financial market re-regulation and genuine governance was missed. Our banks remain too big or too interconnected or too correlated in their behaviour to be allowed to fail and yet too big, too interconnected or too correlated to bail. What that means is that a second crisis has certainly not become less likely. And what we also know is that the capacity to deal with such a crisis has been significantly eroded by the nature of the public response to the first crisis – to the point where it is no longer clear what the response to a second crisis might now be.

Are there new phenomena that add to the previous risks and our failure to address them?

Absolutely, especially in Europe. First there is ‘Brexit’ – a genuine threat not just for the British economy. If Ricardo taught us anything it is that a worsening of the terms of trade between partners hurts all parties. ‘Brexit’, in other words, may be self-inflicted but it is not a victimless crime. And ‘Brexit’ feels to us to be part of a wider dynamic – a tipping-point, perhaps, in which European integration starts to give way to a no less protracted but rather different process of European disintegration.  

What is also clear – indeed, rather more clear (for very little about ‘Brexit’ is clear at this point) – is that austerity is ravaging Southern Europe and, in combination with the migration crisis, is contributing to the resurgence of a political right likely to accelerate the pace of European disintegration, not just economically but also socially.

Why are phenomena such as migration in Europe or the ecological crisis creating economic risks?

Both pose not just economic risks, but risks of a more general kind – indeed, both might be thought of as profound humanitarian crises. These dwarf in a way their economic effects. But the economic risks of each are also considerable and should not be understated. Take the implications of the migrant crisis for Greece, for instance. Here, in a country already mired in economic crisis, suffering profoundly with the austerity imposed upon it, the migrant crisis has produced a flourishing of the informal, illegal and illicit economy, with major consequences both for the capacity of Greek institutions and the Greek economy to rebuild and for the deepening of social inequality. If anything the potential effects of the environmental crisis are more profound still – in that they are genuinely global and genuinely system threatening. The escalating costs of adaptation to, and compensation for, accelerating global environmental change alone threaten to push public spending and, above all, public indebtedness beyond what have already proved historically unprecedented and unsustainable levels. It is in this way that these crises are mutually reinforcing – ‘a perfect storm’, as we suggest.

And how might we guard against these risks?

The book makes the case for a form of prospective precautionary thinking to anticipate and protect ourselves against a coming crisis. What is required is a change in mind-set and disposition. Instead of reassuring ourselves that we have entered a post-crisis period and are now on the road to recovery, we suggest that we should instead be looking out for the frailties and contradictions that remain within the system. We need to identify these and to start to build potential scenarios around them. The book starts to develop some of these, but its contribution is less to provide a definitive resolution of these issues than it is to re-focus thinking on the difficulty and necessity of the task that still remains. That might not sound very optimistic – and in a sense it is not. But it is, we feel, a necessary step in developing the kind of precautionary thinking that can best protect us from the risks present in the economic system. It is, in that way, a first step on the path from blithe and blinkered optimism to a more tempered realism.

Colin Hay, Tom Hunt (Eds.), The Coming Crisis, Palgrave, 2017

Read more

Colin Hay is Professor of Political Science at Sciences Po’s Centre for European Studies and Comparative Politics

Subscribe to Cogito, the Sciences Po research newsletter

Qui seront nos diplômés 2019 ?

Qui seront nos diplômés 2019 ?

Des étudiants et des étudiantes brillants et engagés. Des invités d’honneurs inspirants. Des parents débordant de fierté. Consécration de l’année universitaire, la cérémonie du diplôme rassemblera, vendredi 28 et samedi 29 juin 2019, près de 2500 diplômés et leurs invités, pour la première fois à la Philharmonie de Paris. Qui sont les étudiants de la promo 2019 ? Découvrez leurs profils. 

Lire la suite

Success story à Bombay

Success story à Bombay

Antonia Achache et Jérémie Sabbagh sont les créateurs de Suzette, une crêperie française, et de Kitchen Garden, une enseigne de salades et sandwichs bios. Deux marques de restauration bien connues des jeunes urbains et des expatriés de Bombay ! Les deux entrepreneurs se sont rencontrés lors d’un séjour d’échange en Inde en 2005, pendant leurs études à Sciences Po. Aujourd’hui à la tête de 200 salariés, ils ont lancé avec un troisième partenaire, Pierre Labail, leur première affaire en 2011. Récit d’une success story.

Lire la suite
Français et Italiens, quels sentiments réciproques ?

Français et Italiens, quels sentiments réciproques ?

Jeudi 20 juin 2019, la deuxième session des Dialogues franco-italiens de Sciences Po et de la LUISS est l'occasion de révéler les résultats d'un sondage IPSOS sur les deux pays. Comment se porte la relation entre France et Italie ? Réponse en vidéo avec Marc Lazar, professeur à Sciences Po et président du comité scientifique des Dialogues franco-italiens pour l'Europe.

Lire la suite
Enseigner l’écriture

Enseigner l’écriture

Après Kamel Daoud, Marie Darrieussecq sera la prochaine titulaire de la chaire d’écrivain en résidence de Sciences Po. L’auteure et psychanalyste est notamment lauréate du prix Médicis pour Il faut beaucoup aimer les hommes. Elle débutera ses enseignements auprès des étudiants de Sciences Po en septembre 2019.  

Lire la suite
Les coulisses du Grand Oral

Les coulisses du Grand Oral

Du discours de politique générale devant l'Assemblée nationale aux émissions de télévision, le “grand oral” a la cote et sera bientôt partie intégrante du nouveau Bac. Né à Sciences Po, le “Grand O” a, tout comme l’institution, profondément évolué au cours des dernières années. Qu’attend-on des étudiants en 2019 ? Loin du concours d’éloquence et des effets de manche, reportage dans les coulisses de ce rite de passage.

Lire la suite
Relations internationales : un pied dans le grand bain

Relations internationales : un pied dans le grand bain

Sciences Po pour les Nations Unies est une association qui rassemble des étudiants passionnés de relations internationales et de diplomatie. Forte de son succès, elle a récemment vu trois de ses membres (Antoine Da Col, Roland Martial et Mounia El Khawand) être primés au WorldMUN. Rencontre avec sa présidente, Eve de Seguins Pazzis, et sa vice-présidente, Chloé Bernard, étudiantes en master. 

Lire la suite
L’Allemagne, le pays où les hauts fonctionnaires se forment à l’université

L’Allemagne, le pays où les hauts fonctionnaires se forment à l’université

Par Cornelia Woll (CEE). Le débat sur la suppression de l’École nationale d’administration est d’autant plus vif qu’il se situe à la convergence de plusieurs enjeux : principes de la méritocratie, ascension sociale, fonctionnement de l’administration publique, réseaux d’influence et rentes professionnelles que procurent les grands corps. D’autres modèles existent chez nos voisins. Une comparaison avec l’Allemagne éclaire le rôle que peut jouer l’université dans la formation de la haute fonction publique.

Lire la suite
En classe avec Kamel Daoud

En classe avec Kamel Daoud

Initiative originale visant à renforcer l'expression créative des étudiants, la première chaire d'écrivain en résidence de Sciences Po a été lancée en février dernier. Pendant un semestre, le premier titulaire de la nouvelle chaire, Kamel Daoud, a enseigné aux étudiants. Qu’apprend-on lors des classes dispensées par l’écrivain, telles que “L’écriture à rebours" et "L’écriture, la lecture et la construction du sens" ? Retour en vidéo sur une expérience inédite dans le paysage universitaire français.

Lire la suite
Les universités veulent peser sur l'agenda politique

Les universités veulent peser sur l'agenda politique

Une alliance internationale regroupant plus de 45 universités de référence mondiale a été lancée ce 5 juin 2019 à Paris, au cours d’une conférence de presse qui s’est tenue à Sciences Po en présence de la ministre française de l’Enseignement supérieur, de la recherche et de l’innovation, Frédérique Vidal. Baptisé U7, ce regroupement d’universités prestigieuses a pour objectif d’aborder les défis mondiaux majeurs.

Lire la suite