World Economic Forum’s unequal world warning

Rising inequality and social polarisation are set to shape world developments for the next decade after contributing to Britain’s decision to leave the EU and the US ballot-box success of Donald Trump, the World Economic Forum said.

Climate change was underlined as the third major global trend in the WEF’s annual assessment of global risks, published yesterday.

It said world leaders must work together to avoid “further hardship and volatility in the coming decade.”

The report will be discussed at the WEF’s annual gathering of political and business leaders in Davos, Switzerland, beginning next Tuesday, on January 17.

“There’s a wide array of potential threats; growing social and political turmoil, potential business interruptions which could stem from inter-state conflict, from social instability, terrorist attacks,” John Drzik, president of global risk at Marsh USA, which contributed to the study, said.

“This whole social and political context creates the potential for disruption,” he said.

A weak economic recovery following the global financial crisis has widened the gap between rich and poor, fuelling a sense of “economic malaise” that’s led to the rise of populist parties, according to the report.

While Brexit and Mr Trump were the highest-profile signs of an anti-establishment backlash in western democracies, the evidence extends far wider, with support growing for far-right parties in Germany, France, Italy and the Netherlands among others.

“Continued slow growth combined with high debt and demographic change creates an environment that favours financial crises and growing inequality,” WEF founder Klaus Schwab wrote in the report’s preface.

“Pervasive corruption, short-termism and unequal distribution of the benefits of growth suggest that the capitalist economic model may not be delivering for people,” he said.

The survey involved 750 experts assessing 30 global risks ranging from deflation and asset bubbles to extreme weather events, terrorist attacks, food crises and cyber attacks.

They identified trends including an aging population, climate change, social polarisation and income inequality that could amplify those risks.

The forum ranked risks by impact and by likelihood. While weapons of mass destruction were deemed the most impactful risk, they were also judged unlikely.

Bloomberg