A Systemic Approach to Dealing with Covid-19 and Future Shocks

Our partners at the OECD view the corona crisis as a reason to systematically strengthen the resilience of our economic and social system.




23. MARCH 2020



This is an excerpt from a new paper from our partner institution NAEC at the OECD. The full version is to be found at the bottom of this page.

Dealing with the Covid-19 shock and other epidemics through Resilience Strategies and Policies

So, how should we deal with the considerable shock that Covid-19 places upon international markets, public health, social activity, and governance? How can we address the cognitive effects of fear that trigger substantial slowdowns in economic activity, as well as the systemic effects that strain various sectors of international trade and governance?

Two overarching philosophies and methodologies are available for stakeholders to draw upon. Until recently, the consensus would have insisted upon preventing a threat from happening in the first place or substantially mitigating its consequences after the event if absolute prevention or avoidance is impossible. As the basis of conventional risk management (i.e., to prepare for and absorb threats), this option is politically appealing at the onset, as it offers the illusion that unacceptable risks may be bought down before they cause serious problems. In a world of rapid feedback loops and increasingly nested systems where cascading failures are inevitable, however, such options might be ineffective at protecting economic and social systems and calming perturbations, or would be ruinously expensive to implement to the extent needed to assure policymakers and other stakeholders of adequate protection.

The second approach is one that accepts the inherently uncertain, unpredictable, and even stochastic nature of systemic threats and addresses them through building system resilience. Rather than rely solely upon the ability of system operators to prevent, avoid, withstand, and absorb any and all threats, resilience emphasises the importance of recovery and adaptation in the aftermath of disruption. Such a mindset acknowledges that the infinite universe of future threats cannot be adequately predicted and measured, nor can their effects be fully understood. Resilience acknowledges that massive disruptions can and will happen, and it is essential that core systems have the capacity for recovery and adaptation to ensure their survival into the future, and even take advantage of new or revealed opportunities following the crises to improve the system through broader systemic changes. This is sometimes characterised as not just bouncing back, but “bouncing forward”.


Covid-19 is simply the latest, albeit concerning, manifestation of an unpredictable shock to various interconnected systems, where international recovery will have vast implications for future economic, social, and governmental activity. Resilience must become a core philosophy within system management and operation to ensure we are able to continue to function despite disruptions like Covid-19, and are able not only to adapt and improve in its aftermath, but to seize upon new or revealed opportunities.

Interconnectivity between systems is one of the structuring and determining features of our modern world, which is becoming ever more complex and dynamic. This is a product of economic opportunity as well as global political interconnectedness, and has brought considerable benefits to much of the global population. An instinctive reaction to the Covid-19 outbreak would be to limit or reduce such interconnectedness, yet such sweeping policy changes would not better protect countries or international markets against future systemic threats. Instead, an emphasis upon developing resilience within the international economic system is a necessary evolution for a post-Covid-19 world, where systems are designed to facilitate recovery and adaptation in the aftermath of disruption.



The Corona pandemic poses new kinds of challenges for global economic and social policy making and has further intensified an already existing need for action. Economists are working hard on mitigating the economic effects.