The global financial crisis has "drained the world's capacity" to deal with further shocks, according to the World Economic Forum's new Global Risks Report. The Forum says 20th century systems are failing to manage 21st century risks.
In this year’s Global Risks Report, the World Economic Forum says two broad issues are aggravating risks all over the world.
Zurich Financial Services Group Chief Economist Daniel Hoffman said one of those issues is economic disparity. "Particularly within countries, economic growth has created many, many losers and fewer and fewer winners."
He said the sharp divide between rich and poor may lead to social upheaval. The report warns of resurgent nationalism, populism and social fragmentation.
The second broad issue, Hoffman said, is that global governance is failing. He said, for example, at the start of the financial crisis countries started working together to solve the problems, but that resolve appears to have faded.
"Now two years later we see that this energy has sort of fizzled and petered out," Hoffman said. "And there does not seem to be a globally coordinated will anymore to address the causes of the financial crisis that impacted us so strongly two years ago."
The report focuses on a few clusters of risks: macroeconomics imbalances, including sovereign debt and currency instability; the illegal economy, organized crime, corruption, and illegal trade; and pressure on resources, especially water, food, and energy.
The consulting firm Oliver Wyman Group contributed to the report. Its president, John Drzik, says climate change is creating major volatility and the world has to work together to overcome its effects. He gave an example.
"Last summer when Russia put an export ban on wheat in order to protect its own food supply, that type of action replicated on a global scale across many countries, and could lead to instability and more geo-political tensions," said Drzik.
Drzik said there is a way forward, but global coordination will be key. "I think you can definitely read into the report that there are a series of things that are unfolding and that these risks could escalate if left unaddressed."
The 50-page analysis of global dangers is published by the World Economic Forum, an independent international organization based in Geneva. The report was released two weeks before its annual meeting in Davos, Switzerland.