Rich-poor gap seen most likely threat to global economy
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The gap between the rich and the poor is the most likely threat to the global economy in coming years, the World Economic Forum said yesterday in its annual risk assessment ahead of the gathering of political and business leaders in the Swiss ski resort of Davos.
The forum, which hosts the yearly gathering that officially begins next Wednesday, said income disparity in the wake of the global financial crisis is the “most likely risk to cause an impact on a global scale in the next decade.” A “lost generation” of young people could hinder the recovery and stoke tensions in society, it said.
“The generation coming of age in the 2010s faces high unemployment and precarious job situations, hampering their efforts to build a future and raising the risk of social unrest,” the forum said in Global Risks 2014, which was compiled with contributions by 700 global experts.
The warning from the forum comes amid signs that the global economy has finally gotten over the worst that the financial crisis has thrown at it over the past few years. The US has begun to slowly rein in some of the extraordinary monetary policies it put in place to get the economy out of recession and avoid a repeat of the 1930s. The countries that use the euro show signs of having put their debt crisis behind them. The World Bank, in a report earlier this week, even said the global economy has “turned a corner.”
However, the costs of the global financial crisis, which has left its mark on all corners of the world, are not expected to disappear overnight.
In large parts of the developed world, the imbalance between government spending and tax-based revenue will likely mean budget restraint for years to come at a time when economies are trying to gain traction and the world is getting more interconnected.
“Many young people today face an uphill battle,” said David Cole, chief risk officer at Swiss Re, a reinsurance firm that contributed to the forum’s risk assessment. “As a result of the financial crisis and globalization, the younger generation in the mature markets struggle with even fewer job opportunities and the need to support an aging population.”
In some countries, particularly in those at the forefront of Europe’s debt crisis, youth unemployment has risen to extremes. Greece and Spain have nearly 60 percent of their under-25s out of work.
Other risks identified in the report include extreme weather events, cyber-attacks and a sharp fall in the quality and quantity of fresh water.
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