Rich-poor income gap top risks: WEF

Economy January 18, 2014 00:00

By The Nation

3,861 Viewed

The chronic income gap between the richest and the poorest is seen as the risk that is most likely to cause serious damage globally in the coming decade, according to more than 700 experts who contributed to the World Economic Forum's "Global Risks 2014"

Taking a 10-year outlook, the report assesses 31 risks that are global in nature and have the potential to cause significant negative impact across entire countries and industries. The risks are grouped under five classifications – economic, environmental, geopolitical, societal and technological – and measured in terms of their likelihood and potential impact. 
Most likely global risks: After income disparity, experts see extreme weather events as the global risk next most likely to cause systemic shock on a global scale. This is followed by unemployment and underemployment, climate change and cyberattacks.
Most potentially damaging global risks: Fiscal crises feature as the global risk that experts believe has the potential to have the biggest impact on systems and countries over the course of the next 10 years. This economic risk is followed by two environmental risks – climate change and water crises – then unemployment and underemployment, and then critical information infrastructure breakdown, a technological risk.
Potential for failure 
“Each risk considered in this report holds the potential for failure on a global scale; however, it is their interconnected nature that makes their negative implications so pronounced as together they can have an augmented effect,” said Jennifer Blanke, chief economist at the WEF. “It is vital that stakeholders work together to address and adapt to the presence of global risks in our world today.”
In addition to measuring the seriousness, likelihood and potential impact of these 31 global risks, Global Risks 2014 includes special investigations into three specific cases: the increasing risk of “cybergeddon” in the online world; the increasing complexity of geopolitical risk as the world moves to a multipolar distribution of power and influence; and youth unemployment and underemployment.
In particular, the report considers the twin challenges facing those coming of age in the current decade of reduced employment opportunity and the rising cost of education, and considers the impact on political and social stability as well as economic development. With more than 50 per cent of young people in some developed markets currently looking for work and rising informal employment in developing regions where 90 per cent of the world’s youth live, the report offers insight into how technological and other measures can be deployed to mitigate some of this risk.
The deepening reliance on the Internet to carry out essential tasks and the massive expansion of devices that are connected to it make the risk of systemic failure – on a scale capable of breaking systems or even societies – greater than ever in 2014. 
Recent revelations on government surveillance have reduced the international community’s willingness to work together to build governance models to address this weakness. The effect could be a balkanisation of the Internet, or so-called “cybergeddon”, where hackers enjoy superiority and massive disruption is commonplace.