Rising inequality biggest threat to global economy, says WEF
Annual risk report claims failure to address causes of populism will undermine globalisation
Rising income inequality poses the biggest threat to the global economy over the next few years, the World Economic Forum (WEF) has warned.
Ahead of its annual meeting of world leaders and business people in Davos next week, the non-profit organisation claims globalisation could go into reverse unless urgent action is taken.
Its annual global risk report, compiled by 700 experts, ranks rising wealth disparity and increasingly polarised societies in the first and third spot of trends that will determine the shape of the world in the next decade.
"This points to the need for reviving economic growth, but the growing mood of anti-establishment populism suggests we may have passed the stage where this alone would remedy fractures in society," it says. "Reforming market capitalism must also be added to the agenda."
WEF cites the Brexit vote, the election of Donald Trump and Italy's recent referendum as evidence of growing populist protest against the effects of globalisation.
It added that a failure to address the underlying causes of populism threatens the authority of mainstream politicians and raises the risk that governments will retreat from globalisation altogether, says the New York Times.
Climate change was considered the second most important underlying trend, the first time it has featured so high on the report.
WEF set business leaders four challenges: adopt long-term thinking in capitalism; recognise the importance of identity in communities; mitigate the risks and exploit opportunities of new technologies such as driverless cars, and strengthen global cooperation.
Critics, however, are not convinced.
"As ever," says Tim Worstall in Forbes, "they're right in tune with the zeitgeist and also entirely wrong factually."
Contrary to the prevailing narrative, he says, "global inequality is falling" and the past decades "have seen the greatest reduction in absolute poverty in the history of our entire species", especially in the poorest part of the world, where incomes have risen by 60-80 per cent.
"This free-market globalisation thing has performed very well at the major task it was set. To reduce global poverty," he adds.
The World Bank's latest Global Economic Prospects report, released yesterday, estimates that global growth slowed to a post-crisis low of 2.3 per cent in 2016 "as trade stalled, investment decelerated and policy uncertainty increased", says The Independent.