Since the beginning of 2020, the planet has been living at the pace imposed by the health crisis. It is in this context that the Economy Day was held, organized this Tuesday by the Ministry of the Economy, the Luxembourg Chamber of Commerce, Fedil and PwC.
“Dealing with the crisis. Who would have thought that this subject would be so relevant in the month of March?” Yet wondered, at the opening of the conference, Carlo Thelen, director general of the Luxembourg Chamber of Commerce. “As the world finally appears to be recovering from the Covid pandemic, it faces a new and even greater threat with the war in Ukraine.”
Facing the crisis. Who would have thought that this subject would be so relevant in the month of March?
In two years of activity in his current post as Minister of the Economy, Franz Fayot has known only an environment of crisis. “The crisis has been the new normal for me since I took office,” he quips.
A lack of predictability
Just after a rebound in the economy from the pandemic, Carlo Thelen laments the disruption caused by the emergence of war in Ukraine: “Tensions in supply chains, high volatility in energy markets and raw materials, and the lack of predictability on the various international markets are now increased by the war in Ukraine.”
The Director General of the Chamber of Commerce adds that we are directly concerned by the dangers of this conflict, both for international security and for the prosperity of the economy. “Events over the past two years have left the economy in dire straits; those of the last five weeks jeopardize expectations of the post-Covid recovery.”
Events over the past two years have left the economy in dire straits; those of the last five weeks jeopardize expectations of the post-Covid recovery.
Faced with the appearance of one crisis following another, Adam Tooze, an economist and professor of history at Columbia University, describes, not without a certain touch of humour, the situation: “It’s a much like the old saying about London buses: you wait for hours, and then six of them arrive in the space of three minutes.”
Does this mean that each of these crises takes us by surprise? According to Franz Fayot, the answer is clearly no. “It’s not a black swan,” he states, referring to the theory of the same name which compares a surprise event with a major effect and is often inappropriately rationalized after the fact with the benefit of hindsight.
Difficulty accepting crisis scenarios
“The pandemic and the war in Ukraine, if you look closely, were both predictable,” the economy minister said, adding, “We just didn’t know when they were going to happen.”
In his reflection on the question, Adam Tooze joins the point of view of Franz Fayot: “You could say (…) that these crises have nothing to do with each other. (…) I think it is wrong from the causal point of view, from the analytical point of view.” The professor at Columbia University goes even further, calling into question the ability to anticipate. “We find it very difficult, even in the face of clear evidence pointing in the wrong direction, to believe that something terrible is actually going to happen.”
We find it very difficult, even in the face of overwhelming evidence pointing in the wrong direction, to believe that something terrible is actually going to happen.
“The only people who really talked about Putin’s invasion are the military, people who don’t talk about politics, who put aside all their other preconceptions and just watch how battalions are deployed on the front line… “, deplores Adam Tooze, while according to the majority of public opinion and experts, there was only a low probability of this happening.
Adam Tooze thus sheds light on an evil that gnaws at us in the West. “We find it hard to believe that bad things are going to happen to us.” And he continues with the example of the Covid pandemic: “We did not believe that people like us were going to die of infectious diseases. (…) The EU held press conferences until early March 2020, insisting that Covid was an African problem (…) It then became an Italian problem.” Ditto at the level of the financial crisis of 2008: “We did not think that large-scale banking crises could still occur in the advanced economies”, insists Adam Tooze.
And in the future?
Mentioning the Covid-19 crisis, the Minister of the Economy judges that the latter has highlighted some of “our vulnerabilities as societies, on inequalities, the state of our health systems, the limits of ‘a globalized world facing a shutdown due to a simple virus’.
However, as in any crisis, weaknesses can be a source of opportunities. Franz Fayot expresses himself in this sense: “Resilience has become the new buzzword and we have been promised the advent of a new era of resilience, based on more local and regional supply chains.” He also points out that the pandemic “has accelerated digitalization and has shown that, at least in Luxembourg, we are well prepared for this challenge”.
We need to move away from fossil fuels, not just because they’re bad for the planet, but also because they’re the main source of income for regimes that don’t share our core values.
With “a return to a form of cold war, but this time a little warmer”, and against the backdrop of an ideology “of fascism combined with kleptocratic capitalism”, the Minister of the Economy insists on the lessons to be learned draw from this new crisis. “We see that EU members are moving forward together,” he notes, continuing on “accelerating the decarbonization agenda.” On this last point, “we must move away from fossil fuels, not only because they are bad for the planet, but also because they are the main source of income for regimes that do not share our fundamental values”, he specifies.
Finally, the Minister of the Economy welcomes the lesson learned in terms of defence. “Europe has become aware of the need to put in place a common defense policy and we see a new objective for NATO.”