A backlash against severe income disparity is the biggest risk facing global economies in the next decade, according to a new report released by the World Economic Forum (WEF).
Concerns over chronic fiscal imbalances and the growing likelihood of a major systemic financial failure are also among the biggest threats to prosperity, the WEF said in its 2012 Global Risks report released yesterday. The release of the 60-page analysis of 50 global risks precedes the WEF’s annual meeting in the Swiss ski resort of Davos, which begins on January 25.
It also comes against the backdrop of a year that was dominated by headlines about the Arab Spring and the Occupy movement; both of which were characterised by political unrest and public uprisings over perceived corporate greed, low living standards and a lack of democratic rights. “For the first time in generations, many people no longer believe their children will grow up to enjoy a higher standard of living than theirs,” said Lee Howell, the WEF 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,” he added.
The WEF report says there is a sense of receding hope for future prospects on an unprecedented scale around the world, adding that discontent is being exacerbated by the starkness of income disparities. Gallup polling data in 2011 revealed the poorest half of the global population owns barely one per cent of the global wealth, while the world’s top one per cent owns close to half of the world’s assets. “Social unrest and the problem of income disparity has been an issue for several years. Unfortunately the income gap remains quite dramatic across the globe,” said Jahangir Aka, senior executive officer at SEI Middle East Investments.
“This part of the world will not be the cause of any major financial failure as regional banks are supported by a strong pool of sovereign assets. “However, we would see problems here if a banking system were to collapse in a developed market. That scenario would lead to issues around interbank liquidity due to a lack of trust between lenders, which in turn would have an impact on trade,” he added.
The report was based on a survey of 469 experts, including executives at insurance companies and policy institutions, and found a shift of concern from environmental risks to socioeconomic risks compared to a year ago.
“Individuals are increasingly being asked to bear risks previously assumed by governments and companies to obtain a secure retirement and access to quality health care,” 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,” he added. For the first time in generations, many people no longer believe their children will grow up to enjoy a higher standard of living than theirs” said Lee Howell, the WEF managing director responsible for the report.
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