McKinsey Quarterly 2023 Number 1

Current economic and political turbulence could presage the start of a new era that’s structurally very different from the past, with a modern narrative of progress.

T he past two and a half years have been extraordinary. The unnerving combination of a global pandemic compounded by energy scarcity, rapid inflation, and geopolitical ten sions boiling over has people wondering what cer tainties are left. Today’s events might even feel like a cluster of earthquakes that is reshaping our world. - - Similar “earthquakes” have struck in the past: in the years surrounding the end of World War II (1944–46), during the period preceding the first oil crisis (1971–73), and at the time of the breakup of the Soviet Union (1989–92). Like a real earthquake, each changed the global landscape with the sudden release of power ful underlying forces that had been building up around a fault line over time. Each earthquake preceded a new era—a prolonged period during which the under lying global landscape or terrain remained rela tively consistent. The eras that played out in the post war period—the postwar boom (1945–71), the era of contention (1971–89), and the era of markets (1989–2019)—combined to make up one of the most transformative times in human history (Exhibit 1). - - - - Are we now on the cusp of a new era presaged by the recent earthquakes? To us, the current moment resonates most with the aftermath of the oil shocks in the early 1970s: an energy crisis, a negative supply shock, the return of inflation, a new monetary era, rising multipolar geopolitical assertion, resource competition, and slowing productivity in the West. The aftershocks of the era of contention came in many waves and took almost 20 years to resolve. Can people do better than in the past, writing a new nar rative of progress more quickly? - This moment is different from other “tremors,” such as the Asian financial crisis in 1997, the dot-com bust in 2000, and the global financial crisis in 2008. Most of those were on the demand side and were largely contained in a region or a sector. Today, how ever, the world faces a supply-side crisis, which is inherently physical rather than psychological, against a backdrop of a shifting geopolitical landscape. -

Illustration by Matt Chase

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