The worlds vulnerability to further economic shocks and social upheaval risk undermining the progress that globalisation has brought, according to a report from the World Economic Forum
The Global Risks 2012 report, published today, says that chronic fiscal imbalances and severe income disparity are the risks seen as most prevalent over the next 10 years.
These risks in tandem threaten global growth as they are drivers of nationalism, populism and protectionism at a time when the world remains vulnerable to systemic financial shocks, as well as possible food and water crises, the report says.
The survey of 469 experts and industry leaders shows a shift of concern from environmental risks to socio-economic risks compared to a year ago.
"For the first time in generations, many people no longer believe that their children will grow up to enjoy a higher standard of living than theirs," said Lee Howell, the World Economic Forum managing director responsible for the report.
"This new malaise is particularly acute in the industrialised countries that historically have been a source of great confidence and bold ideas."
The report analyses three major risk cases of concern globally:
1. Seeds of Dystopia
Bulging populations of young people with few prospects, growing numbers of retirees depending on debt-saddled states (stoking fiscal imbalances) and the expanding gap between rich and poor are all fuelling resentment worldwide. Collectively, these trends risk undoing the progress that globalisation has brought.
"Individuals are increasingly being asked to bear risks previously assumed by governments and companies to obtain a secure retirement and access to quality healthcare," said John Drzik, chief executive officer of Oliver Wyman Group.
"This report is a wake-up call to both the public and private sectors to come up with constructive ways to realign the expectations of an increasingly anxious global community.
2. Unsafe Safeguards
Policies, norms and institutions from the 20th century may no longer protect us in a more complex and interdependent world. The weakness of existing safeguards is exposed by risks related to emerging technologies, financial interdependence, resource depletion and climate change, leaving society vulnerable.
David Cole, chief risk officer at Swiss Re, added, "We've seen examples of over-regulation, like the response to the Icelandic volcanic eruptions, or under-regulation, such as the subprime or Eurozone crises. We need to get the balance right with regulations and, to that end, our safeguards must be anticipatory rather than reactive. It's equally important that regulations be made more flexible to effectively respond to change."
3. The Dark Side of Connectivity
Our daily lives are almost entirely dependent on connected online systems, making us susceptible to malicious individuals, institutions and nations that increasingly have the ability to unleash devastating cyberattacks remotely and anonymously.
"The Arab Spring demonstrated the power of interconnected communications services to drive personal freedom, yet the same technology facilitated riots in London. Governments, societies and businesses need to better understand the interconnectivity of risk in today's technologies if we are truly to reap the benefits they offer," said Steve Wilson, chief risk officer for general insurance at Zurich.
The full report can be downloaded at http://bit.ly/zTe0ht.