AmCham Slovakia

Complexity at its peak

In 1974, Hungarian sculptor and professor of architecture Ernő Rubik introduced his invention, which has become one of the most popular puzzles ever created. As the philosopher Steve Patterson puts it, the Rubik’s cube “is perceived as very simple – it only has six sides and six colors.” But, as he adds: ”It is the embodiment of paradoxes. In a very short time it becomes incredibly complex.”

3D complexity
A similar complexity has been introduced into the already complicated world of economy by the global events of the past two years. “One-dimensional” global trends from before March 2020 and the start of the pandemic were suddenly disrupted by complications seemingly coming from a different dimension. The Russian invasion of Ukraine has added another dimension and even more complexity. The result is a 3D puzzle, an imaginary cube where each side presents a unique problem, but only a holistic approach can achieve the desired results.

The first side of this cube represents the “rebirth” of material economy. The arrival of a dematerialized world where millions are spent on virtual land in the Metaverse is delayed indefinitely. The Western world is currently more concerned about replacing Russian energy sources and securing safe access to other strategic raw materials.

The second side represents global trade. After two decades of constant growth, it reached its peak before the global financial crisis of 2008. The slowdown of the growth in the previous decade was followed by a significant crash of international trade caused by the pandemic, which led to the first talks about “deglobalization”.

The third, “inflation” side, is also influenced by deglobalization – the growing debt, declining productivity and population growth, all contribute to growing prices. The current development shows no promise of reversing this trend, as inflation is breaking multi-decade highs.

The fourth, “supplier” side is also in tumult. The pandemic has changed the global supply chain paradigm from “just-in-time” to “just-in-case”, and the war in Europe shifts it even further to “just-in-worst-case”. Another decline in efficiency and additional pressure on increasing prices is to be expected.

The fifth side is a damaged, but still existing vision of “economism”, a philosophy which believed that money, trade, economic interest and mutual interconnectedness are the best guarantee against war and conflict. This approach is based on a belief in the rationality of all the involved actors under all circumstances, which has been brought to question already in the 1960s.

The last side is a sort of antipode to the previous one and can be labeled “militarism”.  It envisions changing priorities, with the defense sector gaining prominence and the media dedicating much more attention to army reserves, civil defense, and potential crisis scenarios.

Brace ourselves for more crises
The cube of the above-mentioned problems, unlike the Rubik’s cube, doesn’t offer even seemingly easy solutions. However, the business, governmental, and EU leaders, especially in NATO’s Eastern bloc, are forced to find these solutions. Otherwise, future crises will find us unprepared and taken aback. Just like the seamen towards the end of the 17th century upon encountering Australian black swans.
 


Ronald Blaško, Executive Director of AmCham Slovakia