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Fortune Work

January 30, 2012

A world in chaos? That may be good news.

Outrage and pain are the words for 2012. They may finally force us to confront mega-problems the world has been avoiding.

FORTUNE -- Too much is happening in the world. Politically, economically, and culturally momentous news is occurring on every continent seemingly every day, and it's overwhelming for the hapless citizen striving to stay on top of it all. If you want to impose order on the chaos, at least in your own mind, here's a suggestion: Just remember a, b, c, d. Four large, interrelated forces are driving the action globally, and they conveniently begin with those letters.

A is for anger. The whole world seems to be erupting in popular rage. In the U.S. the Occupiers are planning their spring comeback. Europeans from north to south are marching in the streets against austerity. Egyptians, Syrians, and Yemenis are dying as they rage against their rulers. The Wukan uprising is reshaping China's political landscape. Protests by tens of thousands of furious Russians have shaken Putin like nothing before in his long reign.
Each case is unique, yet a couple of factors underlie them. In the developing world, it's corruption. Authorities are violating the people's will to enrich themselves, stealing money or, in a bogus democracy like Russia, stealing votes. In the U.S. and Europe it isn't corruption but in large part the b factor.


B is for borrowing. Today's anger in the West is fundamentally economic, and while our economic problems may seem infinitely complex, they can be summarized in three words of one syllable: too much debt. America's federal government, state governments, financial corporations, and households all carry unsustainable debt. As they all try to deleverage simultaneously, our economy goes nowhere month after month, and citizens lash out. Southern Europeans simply cannot believe that their government-debt-fueled lifestyles were actually a Ponzi scheme that has finally reached its inevitable end; in Britain and Ireland, private debt is also impossibly high. Confronting the reality of too much debt is slow and excruciating. No wonder people are mad.
Why so much debt in the developed world? Consider the letter c.

C is for competitiveness. In the West, middle-class living standards stopped rising several years ago. After 200 years of fairly steady increases, that's an epochal change. Rather than accept it, many people borrowed money to pretend their living standards were still improving. A retail clerk recently told me she had $8 in the bank and wouldn't get paid for two weeks, but she had 18 credit cards and was paying off her last vacation, a $4,000 cruise.
A major element of the problem is the advent of a global labor market. Millions of workers now compete with one another, and in this market Westerners are the high-cost option. Many are no longer worth what they cost. They aren't competitive. Thus, wages roar upward in China and India while stagnating in the U.S. and in Europe.
To solve all these problems, people look to government. What they see is the letter d.

D is for deadlock. Like anger, another remarkably global phenomenon is paralysis at the top of governments. The euro crisis threatens financial Armageddon, yet European leaders can barely manage baby steps to contain it. America's Congress and President had to see their toes hanging over the brink of disaster before raising the debt limit; the Super Committee stayed deadlocked to the end. That's the way it is with the hardest problems: Solving them is so painful that it doesn't get done until the last, most desperate moment. Dithering by leaders makes ordinary citizens furious, of course, which takes us back to the letter a.

The a-b-c-d framework doesn't sound optimistic, but hope is in there if you look hard enough. All those trends are about solving giant problems that have needed fixing for decades, from repression in the developing world to debt mania in the West. They could have been addressed long ago but weren't because it was too painful. Now, at last, the pain has become unavoidable. That means these mega-challenges are much closer to finally getting resolved.
Meanwhile, during the lengthy pain phase of the process, the a-b-c-d framework can at least help us order a chaotic world.

This article is from the February 6, 2012 issue of Fortune.