by Piet Coetzer

World Economic Forum report ahead of Davos 2013

Wealth gap, government debt and climate change a dangerous mix

World Economic Forum report ahead of Davos 2013
World Economic Forum.jpg

The globe is under increasing risk from the confluence of a growing worldwide income gap between rich and poor, persistent government deficits, climate change, water shortages and aging populations. This is the core of the latest annual Global Risk Report just released by the World Economic Forum (WEF) based in Switzerland. 

Based on a survey among 1000-plus experts from industry, government and academia, the report warns that risk factors could combine to produce unique problems. These risk combinations include climate change putting a heavy burden on a global economy beset by weaknesses which, in turn, is hurting efforts to fight global warming.

“These global risks are essentially a health warning regarding our most critical systems,” says Lee Howell, the WEF managing director responsible for the report. 

The 80 page analysis of 50 risks for the next 10 years comes ahead of the WEF annual meeting in the Swiss ski resort of Davos from 23 to 27 January, when the rich and powerful will ponder the planet’s future.

“Resilience to global risks needs to be a priority so that critical systems continue to function despite a major disturbance,” Howell adds.

The report identifies 'wealth gaps' or severe income disparities, followed by unsustainable government debt or chronic fiscal imbalances as the two most prevalent global risks.

After a year marked by extreme weather events, including Hurricane Sandy in the United States and flooding in China, respondents rated rising greenhouse gas emissions as the third most likely global risk overall.

Despite Europe’s avoidance of a euro breakup in 2012, and the US stepping back from its fiscal cliff, business leaders and academics fear politicians are failing to address fundamental problems.

“It reflects a loss of confidence in leadership from governments,” says Howell.

Eurozone instability will continue to shape global prospects in the coming years and the “associated risk of systemic financial failure, although limited, cannot be completely discarded”, the report states.

The report’s authors note that more and more people are living in disaster-prone areas such as coastal regions, increasing the economic costs of storms, with flooding blamed on global warming.

The report this year introduces three risk cases or scenarios, representing constellations of global risks and the impact they may have at global and national levels.

These are:

•Economic and environmental resilience: While continued stress on the global economic system is positioned to absorb the attention of leaders for the foreseeable future, Earth’s environmental system is simultaneously coming under increasing stress. “Future simultaneous shocks to both systems could trigger the ‘perfect global storm’, with potentially insurmountable consequences,” the report warns;

•Digital wildfires in a hyper-connected world: Wrong or controversial information going viral across online communities, such as outrage last year in the Muslim world over an anti-Islamic film. “Imagine a real-world example of shouting ‘fire’ in a crowded theatre. In a virtual equivalent, damage can be done by rapid spread of misinformation even when correct information follows quickly”; and

•The dangers of hubris on human health: “Until now, new antibiotics have been developed to replace older, increasingly ineffective ones. However, human innovation may no longer be outpacing bacterial mutation. None of the new drugs currently in the development pipeline may be effective against certain new mutations of killer bacteria that could turn into a pandemic,” the report warns. It then poses the question: “Are there ways to stimulate the development of new antibiotics as well as align incentives to prevent their overuse, or are we in danger of returning to a pre-antibiotics era, in which a scratch would be potentially fatal?” 

The report highlights so-called emerging concerns that warrant more attention and research. Describing these as “serious issues, grounded in the latest scientific findings, but somewhat remote from what are generally seen as more immediate concerns”, five such factors are identified:

•       Runaway climate change: “Is it possible that we have already passed the point of no return and that the Earth’s atmosphere is tipping rapidly into an inhospitable state?”

•       Significant cognitive enhancement: “Ethical dilemmas akin to doping in sport could start to extend into daily working life; an arms race in the neural ‘enhancement’ of combat troops could also ensue.”

•       Rogue deployment of geo-engineering: “Technology is now being developed to manipulate the climate; a state or private individual could use it unilaterally.”

•       Cost of living longer: “Medical advances are prolonging life, but long-term palliative care is expensive. Covering the cost associated with old age could be a struggle.”

•       Discovery of alien life: “Proof of life’s existence elsewhere in the universe could have profound psychological implications for human belief systems.”

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