Global risks perceptions

The World Economic Forum has published a report on their annual global risks perception survey.

Included: “reforming market capitalism must also be added to the agenda”. This is on New Zealand’s agenda after the change of Government late last year, with indications from Prime Minister Jacinda Ardern that we will move towards responsible capitalism with more social considerations.

From the preface:

The year 2016 has seen profound shifts in the way we view global risks. Societal polarization, income inequality and the inward orientation of countries are spilling over into real-world politics. Through recent electoral results in G7 countries, these trends are set to have a lasting impact on the way economies act and relate to each other. They are also likely to affect global risks and the interconnections between them.

Against the background of these developments, this year’s Global Risks Report explores five gravity centres that will shape global risks. First, continued slow growth combined with high debt and demographic change creates an environment that favours financial crises and growing inequality.

At the same time, pervasive corruption, short-termism and unequal distribution of the benefits of growth suggest that the capitalist economic model may not be delivering for people. The transition towards a more multipolar world order is putting global cooperation under strain.

At the same time, the Fourth Industrial Revolution is fundamentally transforming societies, economies, and ways of doing business.

Last but not least, as people seek to reassert identities that have been blurred by globalization, decision-making is increasingly influenced by emotions. In addition to these gravity centres, this year’s Global Risks Report presents deep-dive discussions of risks posed by ongoing political and societal transformations, including challenges to democracy, closing space for civil society, and outmoded social protection systems.

Summary:

For over a decade, The Global Risks Report has focused attention on the evolution of global risks and the deep
interconnections between them. The Report has also highlighted the potential of persistent, long-term trends
such as inequality and deepening social and political polarization to exacerbate risks associated with, for example, the weakness of the economic recovery and the speed of technological change.

These trends came into sharp focus during 2016, with rising political discontent and disaffection evident in countries across the world. The highest-profile signs of disruption may have come in Western countries – with the United Kingdom’s vote to leave the European Union and President-elect Donald Trump’s victory in the US presidential election – but across the globe there is evidence of a growing backlash against elements of the domestic and international status quo.

The Global Risks Landscape

One of the key inputs to the analysis of The Global Risks Report is the Global Risks Perception Survey (GRPS), which
brings together diverse perspectives from various age groups, countries and sectors: business, academia, civil society and government.

This year’s findings are testament to five key challenges that the world now faces. The first two are in the economic
category, in line with the fact that rising income and wealth disparity is rated by GRPS respondents as the most important trend in determining global developments over the next 10 years.

This points to the need for reviving economic growth, but the growing mood of anti-establishment populism suggests we may have passed the stage where this alone would remedy fractures in society: reforming market capitalism must also be added to the agenda.

With the electoral surprises of 2016 and the rise of once-fringe parties stressing national sovereignty and traditional
values across Europe and beyond, the societal trends of increasing polarization and intensifying national sentiment are ranked among the top five.

Hence the next challenge: facing up to the importance of identity and community. Rapid changes of attitudes in areas such as gender, sexual orientation, race, multiculturalism, environmental protection and international cooperation have led many voters – particularly the older and less-educated ones – to feel left behind in their own countries.

The resulting cultural schisms are testing social and political cohesion and may amplify many other risks if not resolved.

Although anti-establishment politics tends to blame globalization for deteriorating domestic job prospects, evidence suggests that managing technological change is a more important challenge for labour markets.

While innovation has historically created new kinds of jobs as well as destroying old kinds, this process may be slowing. It is no coincidence that challenges to social cohesion and policy-makers’ legitimacy are coinciding with a highly disruptive phase of technological change.

The fifth key challenge is to protect and strengthen our systems of global cooperation. Examples are mounting of states seeking to withdraw from various international cooperation mechanisms.

A lasting shift in the global system from an outward-looking to a more inward-looking stance would be a highly disruptive development. In numerous areas – not least the ongoing crisis in Syria and the migration flows it has created – it is ever clearer how important global cooperation is on the interconnections that shape the risk landscape.

Further challenges requiring global cooperation are found in the environmental category, which this year stands out in the GRPS. Over the course of the past decade, a cluster of environment-related risks – notably extreme weather events and failure of climate change mitigation and adaptation as well as water crises – has emerged as a consistently central feature of the GRPS risk landscape, strongly interconnected with many other risks, such as conflict and
migration.

This year, environmental concerns are more prominent than ever, with all five risks in this category assessed as being above average for both impact and likelihood.

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