“Black swans” and social institutions

The concept of sustainable development is focused on finding a balanced solution to economic, environmental and social issues within the scope of social development. At that, the very possibility of sustainable development is not brought into question, and technological development is perceived as one of the means of its implementation. In particular, the prospects that open up during the transition to digital technology arouse interest.

Due to the COVID-19 pandemic, there has been a surge of attention to unpredictable events, the so-called “black swans”, which have become more frequent [1]. For many, the situation regarding COVID-19 has become one of such events, although N. Taleb himself has a different opinion, believing that there was an opportunity to suppress the pandemic in the United States1.

The upward trend in various kinds of risks and corresponding losses is becoming more and more noticeable. The report “The human cost of disasters: an overview of the last 20 years (2000–2019)” prepared by the UN Office for Disaster Risk Reduction shows that there has been an increase in almost all types of disasters. Losses from natural disasters alone over 20 years are estimated at almost 3 trillion US dollars2. The Global Risks Report 2021, an initiative of the World Economic Forum, covers 35 global risks3. Their list was updated in 2020, adding 12 new risks that can have long-term consequences, in particular: digital power concentration, backlash against science, mental health deterioration, youth disillusionment.

As for the economic losses from the COVID-19 pandemic, their estimate has increased several times during 2020. In early March, based on the forecast by Oxford Economics, it was said that by the end of 2020, global GDP could lose 1.1 trillion US dollars4. In May 2020, the Asian Development Bank (ADB) said that the losses suffered by the global economy due to the COVID-19 pandemic could range from 5.8 trillion US dollars to 8.8 trillion US dollars. This estimate proved twice as high as the ADB’s previous April forecast5. In October 2020, the International Monetary Fund (IMF) estimated the loss of global GDP at 28 trillion US dollars. The damage to the U.S. economy from the coronavirus pandemic was forecast at 16 trillion US dollars6.

However, the experience of the pandemic has made it clear that economic damage is only one side of the losses. The disasters we are living through also have a human dimension: direct losses include the loss of life, and indirect losses – the negative impact on people’s health7. Psychological, political, and socio-cultural consequences of the pandemic are among urgent issues requiring attention.

Against this background, a theory, according to which “technological and social connections between people on a global scale are becoming more and more complex, and they almost inevitably increase the level of risks that can accumulate and, through a cumulative effect, put the entire stability of the global system in jeopardy”8, is gaining popularity. The effect is also traced in the fact that modern development is viewed as a “slow catastrophe” [2]. Indeed, unlike natural disasters such as earthquakes, typhoons, and tsunamis, many risks are cumulative. Their negative influence becomes considerable only after some time. It is what happens with climate change, the maturation of economic bubbles, and the concentration of digital power. With regard to the economy of such risks, we can talk about the economy of a slow catastrophe. In other words, we are talking about the accumulation of negative potential in the course of socio-economic development. We understand “slow” catastrophes as the processes and regularities of the emergence of negative trends in the functioning of an object, their subsequent accumulation, development and modification that is difficult to predict, which eventually lead to a violation of the normal functioning of the object, disorganization of its internal structure, destruction of connections with the environment and other negative consequences” [2, p. 32]. A slow catastrophe can occur as a gradual deterioration in the functioning of the system, as, for example, is the case regarding the residual principle of financing science. An explosive realization of the accumulated negative potential is also possible, which is observed in the collapse of financial bubbles.

Certain types of slow disasters have significant distinctive features that should be taken into account in development strategies. Preparing for possible challenges is one of the most important strategic tasks for different levels of management. It is justified that the agenda of science and practice should include the transition from the concept of “sustainable development” to the concept of development in conditions of permanent risks. Accordingly, it is necessary to talk about the problem of adaptation of systems to such conditions at different levels. The experience of the COVID-19 pandemic provides extensive information for studying this problem. We mean an analysis of the circumstances under which individual countries are able to adapt to this disaster more effectively. At the end of 2020, significant differences between nations are observed in terms of COVID-19 mortality9 and GDP dynamics10.

It is a fairly common view that adaptation aimed at maintaining GDP growth is achieved amid aggravating mortality rates, and vice versa, a decrease in mortality from COVID-19 occurs when GDP is falling. Ya. Mirkin writes: “There is a new emerging reality – the economy of catastrophes. It shows the features of a military economy, mobilization economy with restrictions on basic freedoms, with prohibitions from the state that go far beyond everyday life, with supervision of everyone and, finally, with punishments… Something new is emerging in the world – economic sacrifices. As during a war, the authorities sacrifice some of the population in order to “make everything work”11. As for preventive actions to respond to black swan events, an important role in this case belongs to the formation of reserves [3]. However, as N. Taleb pointed out, it is possible to be late in responding to new challenges even if you have an extensive resource potential at your disposal12. Successful development in the context of permanent risks involves, first of all, building an effective decisionmaking system. In fact, we are talking about institutional factors that increase the adaptability of socio-economic systems.

We use the example of COVID-19 to analyze whether it is justified to interpret adaptation to risk as a choice between the preservation of either the population or production. We consider a sample covering a significant group of countries to assess the relationship between the dynamics of GDP and the structure of the economy (the share of services in GDP), and the death rate from coronavirus. But our main focus is on institutional circumstances.