Mindset impacts of crises-impaired economies
This article is a scenario-based invitation to closely consider the development of public opinions and mindsets in countries whose economies are under severe pressure due to multiple crises. The findings apply to countries as different as India and Mexico, the Philippines and South Africa. All these societies navigate a sequence of crises triggered by the war in Ukraine, extreme weather events, and the pandemic. We propose that the coming years offer both challenges and opportunities, defining future socio-economic pathways. These will heavily depend on two mindsets in particular — the levels of social trust, and the extent to which people see capitalism and democracy as viable economic and political systems. It is vital for all civil society actors working in this space to be aware of opportunities and risks to accelerate positive or negative change when engaging with their disrupted audiences.
The war in Ukraine unleashed a “perfect storm”, accelerating the crisis in countries already strained by the pandemic and climate change. This war threatens to devastate the economies of developing countries, especially those already food- or energy-insecure. Rampant inflation fosters consumer insecurity and anger, while excessive accumulation of national debt constrains governments’ means of mitigation. These crises quickly turn the aspirations for more prosperous futures and social mobility into dreams of the past. They mark a new age dubbed the Perma- and Omni-crises.
Significant chunks of these vulnerable populations have lived through innumerable years of fragile situations that include shifting between accessibility and inaccessibility to formal labour, a certain standard of life and inclusion. Ever so often, depending on the political and economical dynamics, the hope for a better future comes along and fades away just as fast.
While precarity concerns increasingly many, social unrest also presents an opportunity for fundamental and systemic change.
It is precise amidst such extreme turmoil and disruptions that societies shape new beliefs, values, identities and norms. The coming one or two years will give birth to the narratives giving meaning to these crises and how to handle the future.
We believe that two mindsets, in particular, will have a defining role in the socio-economic and political directions in which these countries will find themselves heading:
- The beliefs about the health of the current socio-economic system, i.e. capitalism and democracy: On the one extreme, we could see an optimistic view that our systems are fit for purpose. On the other extreme, we can expect people to consider them fundamentally broken and an urgent need to find alternatives.
- The levels of social trust: On one side, a strong belief in honesty, integrity, and reliability of other people and institutions, including the government; on the other side, a breakdown of social trust, polarization and fragmentation and a disbelief in the nation’s institutions.
Different collective emotions and narratives can emerge, depending on the “levels” of trust in society and confidence in the systems that govern it. Some combinations can lead to societal and institutional breakdowns, unrest, and demand for new designs, while others can induce complacency and action paralysis.
We use these two mindsets to illustrate four archetypical scenarios. We look particularly at three areas of society-wide impacts:
- Economic impact and its management, with a specific focus on whether there is space for opportunities for economic alternatives (system change)
- Societal narratives, norms and emotions
- Political power
It is important to note that these four scenarios are not exact predictions or exhaustive. They should be taken instead as a motivation to consider the role of public mindsets in systemic change, rather than focusing the advocacy debate solely on specific solutions to problems. Moreover, when reading them, one should also realise that all countries are not in a neutral starting position waiting to evolve into one of these scenarios. They might be already on one of these pathways, and the proliferation of these two mindsets can either fortify that trajectory or induce a new one.
Scenario 1: We will fix this
Social and system trust is high. The continuous economic stimulus is perceived as a sufficient response to sequential crises. Initially, popular discussions about the need for new economic systems defaulted to being academic. They have also instilled hope that things are temporary and will go back to normal. Pride of having managed the crisis mixed with nationalism and religion stabilises systems and institutions.
Economics
Governments still respond to persistent economic havoc with emergency packages. They are also increasing debt, but they are becoming more cautious. Raising interest rates exacerbates the debt burden and the risk of bankruptcy. Despite all that, positive trends in some countries and some business sectors provide hope that things will improve. Some actors and groups emerge as winners, and stimulus packages cushion most people. But an ever-increasing number of people remain unemployed and thus are economically insecure. Inflation is high, especially on essential products like food and fuel. The combination of wins and losses creates a perception that we returned to normal, proving the system resilient. People are confident that they can fix the remaining calamity. As for the government, businesses and citizens also look for short-term opportunities arising from the crisis. Some of these result in creative alternatives to present economics, like more local production to shorten supply chains or agricultural crop substitution to increase sovereignty. But initiatives stay small and local. There are no overarching structures to proliferate successful innovation as most people, especially the elites, wait for a “past normal” to return.
Social narratives, norms and emotions
Despite multiple crises, the past is merely considered bad luck. Old development narratives and norms, anchored in the belief that limitless growth of wealth is possible, are maintained. However, the constant hardship has given these narratives a new edge of competition and perseverance. Narratives of the survival of the fittest erode humanitarian values and norms, providing more moral legitimacy for even illicit action — the spread and tolerance of corruption increase under these degrading norms. Occupied by managing their crisis-ridden lives, citizens embrace strong leaders who fix things. People generally feel resilient and optimistic, riding on nationalistic perseverance propaganda.
The parts of populations whose relative prosperity and economic status have crumbled often resort to national or religious identities to regain pride. Populist governments and institutions maintain the allegiance of these people by bolstering supremacy through ousting social minorities. The social fabric within identity groups is strong, but society’s tolerance for other identities degrades. Stability emerges from one majority identity strongly dominating other more marginalised groups.
Political power
Strong leadership that exerts increased control over narratives emerges in societies with broadly aligned majorities. Even in democracies, autocratic structures develop. Governments “herd” the public by designing mainstream narratives through media and social media control and propaganda. In more fragmented societies, the struggles of rival leaders can dominate the landscape and widen other gaps between social identities. As governance is about power and short-term solutions, essential reforms get postponed.
Scenario 2: On to new ways
Despite the numerous attempts to tackle every further disruption as it comes, governments, businesses and citizens run out of means to patch up the broken system. Nevertheless, the trust in people’s ingenuity is high. The focus on the system as the problem, rather than individuals or institutions, has maintained social trust. But economic hardship requires cautious facilitation not to erode this trust. The failing economy results in the diminished power of governments and businesses to steer and control the development of solutions. The public needs to be motivated and mobilised to join institutions and businesses to develop and drive the change.
Economics
There is no light at the end of the tunnel. Governments cease emergency packages as the Omni-crisis has drained their resources. More and more economic institutions become unreliable or break down. Bankruptcy rattles private households and businesses. Even governments and public institutions fail to meet their financial commitments. Political leaders declare the need for reforms, but in the absence of a comprehensive alternative and empty pockets, they can only stimulate frameworks that focus on bottom-up innovation. And this button-up innovation is happening all around the country. It is a good time for innovators and early movers. Formal and informal structures merge to create networks that disseminate ideas and scale approaches. Localised economies and currencies develop, as do prosumer networks and sharing economies. While at the national level and for some industries, globalised supply chains and trade continue, increasing parts of the economy dropped out of formal structures like taxation, insurance or institutional investment.
Social narratives, norms and emotions
“We are precarious” is a widely shared slogan to express pride in a new identity emerging from the crises. It is an inclusive community struggling collectively and being creative in discovering diverse new ways to improve life outside of the past prosperity model. “There is no way back,” another strong narrative, is an expression of acceptance that “the old normal” has died. It is also an expression of pride and confidence that people have created alternatives worth maintaining. The shared struggle also provides purpose and agency and strengthens communities. While there is no clear light at the end of the tunnel, the journey becomes the destination.
Nevertheless, the system is volatile and uncertain. Sceptics and conservative forces romanticise the past and emphasise the friction between the coexisting economic systems. The perceived agency temporarily creates strong psychological and social resilience. Still, resilience will disintegrate, and disillusionment will surface if things do not improve over time.
Political power
People see the government as weak but trust in its new role as a facilitator. The government and institutions are constantly under threat on one side of being seen as obsolete. On the other side, outspoken leaders claim their right to replace them. Even being constrained to maintain certain national functions like defence, governments are also under constant threat from assaults from other nations, be it military or cyber warfare. Sceptics are also constantly challenging the process and its facilitation. During the transition, political resilience is low, and there is a constant danger that governance models collapse and the system transitions into Scenario 3.
Scenario 3: Disintegration
Like the previous scenario, the recession hit, and emergency support resources of governments and businesses have vanished. Everybody realises the system is broken, and things must fundamentally change before getting better. But social trust is also at an all-time low because people blame governments, institutions, and outsider groups for their misery. Anger leads to violence and civil unrest. Societies fragment, and ideas on how to proceed become disputed ideologies. Governments strike back violently to maintain political power and the integrity of nations.
Economics
The recession has hit the countries’ economies. Bankruptcy is widespread, and lots of people lose their jobs. The state struggles with the debt burden and empty pockets, resulting in the termination of all relief packages or economic stimuli. Shortages and infrastructure breakdowns lead to further disruption. Power cuts, water and food shortages, and generally empty shelves become common. There is a lot of rhetoric about fixing the system, but not much is happening. Businesses, politics, and people are stuck blaming each other for the bad management of the crisis and the poor resilience of the economy.
Driven by desperation, people create new ways to survive. The informal economy flourishes within localised and ideological networks. Societies fragment, increasing pressure on social systems (rising criminality) and ecosystems (poaching and illegal land conversion). Benign initiatives like urban community agriculture suffer from theft and destruction by criminals and hostile grudgers.
Social narratives, norms and emotions
Society is angry and frustrated. Social unrest is erupting as desperation is growing. The youth lack perspective, with few future opportunities. People disengage in depression or revert to violence in anger and frustration. Those who can afford it divert their attention to entertainment and hedonism or leave the country. Social Darwinism becomes the standard narrative; only the fit survive. People are forced into short-termism as they manage the next day, week, or month, always expecting things to worsen. Conspiracy theories flourish and create narratives for further fragmentation as people try to make sense of their misery. People mistrust everybody outside one’s tribe.
Politics
There is no trust in the government and even separatist initiatives in parts of the country. Governments revert to authoritarian mechanisms. They control the media and social media. The police suppress social unrest while the armed forces keep separatists in check. Frequent curfews increase the disruption of life and the feeling of isolation. Politics has primarily become a battlefield of ‘Warlords’; those that control armed forces also hold power. Domestic disintegration makes countries vulnerable to aggressions from other countries, especially cyber warfare, to polarise societies and different strategies to divide and conquer.
Scenario 4: From Hope to Disillusion
The economic emergency packages make the system appear vulnerable yet functional. People blame governance, institutions or foes (other identity groups) for their misery. Societal fragmentation leads to increasing disputes about how to solve the crises. Relief packages are used to soothe citizens even if the outcomes of this spending are questionable. As in scenario one, governments, businesses, or citizens do not attempt to change the broader underlying problems. If the crises worsen or the government runs out of resources to patch up the system, this scenario quickly disintegrates into Scenario 3.
Economics
Multiple crises have created sustained economic problems. The system fails, with supply chain and production shortages in numerous industries. Inflation is high, and the living costs are increasing while salaries stagnate. People are tired of the crisis, blaming the government for their deteriorating financial conditions. Governments are creating more debt to stimulate recovery and maintain social peace. Stabilisation through debt creates the impression that the system is stable but economic resilience is low. If the situation continues and governmental support drops, this scenario deteriorates into Scenario 3.
Some economic innovations are happening, but they are primarily designed to stabilise the system. More fundamental reforms happen in isolated pockets, but society rejects them as renegades. Businesses innovate to overcome supply chain constraints, but investments are limited to the absolute necessities since markets are weak. Thus, changes stay incremental and isolated.
Social narratives, norms and emotions
Narratives of failure dominate the discourse. The culture does not encourage trial and error or fail fast and learn. People use every mistake or failure to blame the responsible. As the system is apparently working, people feel entitled to be compensated for the mistakes of others. As they often feel insufficiently compensated or lack the perspective of tangible improvement, they are irritable and angry. They are tired of enduring crises and worried about their economic insecurity. As some of the worst impacts are buffered by stimulus packages, anger does not yet turn into aggression or violence. Even though people are disillusioned, they maintain some passive hope that soon things will improve. Some groups are taking advantage of the situation to instil distrust in the government and among social groups. These efforts destabilise the society whose patience is running out. Hope keeps most social connections and structures functional, but resilience is only skin deep, and this scenario can quickly turn into Scenario 3.
Politics
Trust in the government and its institutions is low. While stimulus packages soften the hardship, they are insufficient to increase governmental popularity. Upcoming elections are still a challenge for the party in power (unless it is already a de facto autocracy). Democracy has lost its allure, and particularly young democracies struggle with nostalgic narratives of how things were better before democracy. The government is under constant attack by the opposition and business leaders. Clever governments shift narratives from economics to national identities or religion. The volatile state of power persuades governments to control narratives by controlling traditional and social media.
Conclusions: No walk in the park
Looking at the Omni Crisis through the lens of social and system trust mindsets shows no easy solution to emerge from this substantive disruption. Solutions will require risk-taking and careful facilitation as social, political and economic resilience is low when already stretched societies need to solve underlying problems.
While postponing the system change creates stability temporarily, it makes countries increasingly vulnerable to future disruptions. It also becomes clear that governments and institutions need to actively cultivate social trust to prevent societies from fragmenting and force their hands to adopt increasingly undemocratic leadership styles to retain power.
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