Europe’s Polycrisis: Call for strategic transformation

Every historical period is defined by its own challenges. After World War II, Europe had to find a way to end the recurring and relatively independent crises linked to market cycles, domestic politics, and great-power competition that had torn it apart for decades. It met this challenge by building stable nation-states and effective welfare systems in a context of strong European and international frameworks.

As wealth inequality in the United States has grown, so has the social status and influence of the superrich, many of whom parlay their economic success into an intellectual credential.

Since the turn of the century, Europe has been confronting a new challenge: responding to a highly complex polycrisis, comprising a broad set of interlinked crises. Many of these crises could, on their own, prove catastrophic, owing to self-reinforcing and cumulative processes, such as climate-change tipping points and the snowball effect of public debt.

But none is unfolding in a vacuum. On the contrary, today’s interconnected crises compound and reinforce one another. For example, a demographic crisis destabilises the welfare state, undermining economic well-being, which in turn fuels social and political disruption. A significant and lasting decline in social and political cohesion can contribute to other kinds of crises, such as the current crisis of liberal democracy, while hampering states’ ability to respond to still other threats, like climate change.

Deepen cooperation in key areas

The general failure to address the escalating polycrisis effectively has contributed to a sense of impending doom among a European public that feels increasingly powerless. But the existential threats we face, from armed conflict to catastrophic climate change, can be overcome — not by “taking back control,” as populist political leaders promise, but by learning to control what is not yet controlled.

Our political, financial, and international institutions tend to be wired for the cyclical-crisis management of the past, making them ill-suited to respond to the current polycrisis, which demands both robustness and flexibility. Europe faces an added challenge here: its institutions, which depend on consensus, consistency, and compromise, struggle to cope with narrow, complex, and diverse interests.

But just as Europe is the most in need of institutional transformation to meet today’s existential challenges, it is also particularly well equipped to achieve it, thanks to its considerable experience evolving through crisis and balancing solidarity with freedom. The key will be to develop a clear vision of the future, deepen cooperation in key areas, and devise a new organisational framework.

Start with vision. Europe needs an explicit strategy for tackling the polycrisis that synchronises time horizons to improve short-term crisis management (essential to break self-reinforcing crisis mechanisms) and establish shared long-term objectives (essential to maintain momentum).

Smaller, more autonomous, and more flexible units should be responsible for implementing this vision, in collaboration with independent actors — often from civil society — that specialise in building consensus, developing long-term strategies, and monitoring their implementation and effects. A culture of decisiveness and accountability is essential.

Building new frameworks

The vision’s longer-term component should reflect generational ambition. India has a road map for becoming a developed economy by 2047, a century after independence. China plans to achieve “national rejuvenation” by 2049, the centennial of the People’s Republic.

Europe should anchor its own strategy in 2045, 100 years after it started anew following the horrors of WWII. In devising this new vision, Europe should learn from others’ strengths; for example, America’s capacity for strategic thinking, exemplified by the Defense Advanced Research Projects Agency’s work researching and developing emerging technologies.

The second imperative is to build robust new frameworks covering three critical elements of European security: finance, defence, and social welfare. The new financial architecture must aim to increase investment in Europe in order to boost productivity and support technological innovation in critical sectors.

Given its smaller investor base and structural fragmentation, this will require Europe to get better at efficiently allocating capital and mobilising savings. Completing the capital markets union should be the main task of the new European Commission.

The third key imperative for Europe as it faces the polycrisis is to devise a new organisational pattern, based on flexibility, adaptability, and subsidiarity. Issues need to be tackled at the level where they unfold. Global challenges — such as climate change, nuclear proliferation, artificial intelligence, and financial stability — demand more structured international cooperation and regulation.

Challenges that should be handled at the EU level include updating Europe’s economic model, boosting productivity and competitiveness, and handling trade policy. Nation-states, for their part, must foster solidarity and, together with local communities, handle concrete policy implementation.

Public-private cooperation is also essential, in order to leverage businesses’ experience, know-how, and institutional capacity for adaptation, risk management, and crisis response. The new organisational model should look more like a net than a chain, because a net’s strength is the sum of its knots, while a chain is only as strong as its weakest link.

Europe cannot afford to delay action until after the next shock. If we are to weather the polycrisis, we need strategic reflection, collective leadership, and out-of-the-box thinking today, guided by the shared ambition of “Refounding Europe” by 2045. — Project Syndicate

Thomas Buberl is CEO of AXA, French multinational insurance corporation