World economic forum warns growing gap between rich and poor a key economic risk

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THE gap between rich and poor which helped propel the Brexit vote and Donald Trump’s presidential victory is likely to be the biggest driver in global affairs over the next 10 years, according to the World Economic Forum (WEF).

In its 12th annual Global Risks Report published ahead of its annual summit in the Swiss ski resort of Davis next week, the WEF surveyed 750 risk experts and found that rising income and wealth disparity would play a major part in world developments.

As an example of this growing inequality, the WEF highlighted the massive increases in CEO pay at a time when many people in advanced economies have struggled to make ends meet following the global financial crisis.

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This points to the need for reviving economic growth, the report stated.

But the growing mood of anti-establishment populism suggests we may have passed the stage where this alone would remedy fractures in society: reforming market capitalism must also be added to the agenda.

The combination of economic inequality and political polarisation threatens to amplify global risks, fraying the social solidarity on which the legitimacy of our economic and political systems rests, it added.

Other key drivers identified in the survey of the global risk landscape related to climate change, rising cyber dependency and an aging population.

WEF experts viewed with particular concern the weak recovery from the global economic crisis a decade ago that has left more people unemployed or underemployed.

Noting the electoral surprises of 2016 and emergence into the mainstream of parties stressing national sovereignty and traditional values across Europe and beyond, survey respondents also ranked increasing polarisation and intensifying national sentiment among the top five risks to the global economy.

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As well as getting growth higher, the WEF identified several areas that need to be addressed urgently: the need for long-term thinking in capitalism; a recognition of the importance of identity and inclusiveness in political communities; mitigating the risks and exploiting the opportunities of new technologies such as driverless cars; and strengthening global co-operation.

The report also pointed to rapid changes in social attitudes that meant many voters were feeling left behind in their own countries, undermining social and political cohesion.

Years of building pressure in many parts of the world, at least since the global financial crisis, crystallised into dramatic political results during 2016 as public disaffection with the status quo gained traction, the report said, pointing to Britains vote to leave the European Union and the election of political outsider Donald Trump as US president.

It added that a failure to address the underlying causes of the populist tide poses a threat to mainstream politicians and raises the risk that the globalisation trend will go into reverse.

Some people question whether the West has reached a tipping point and might now embark on a period of deglobalisation, it said.

Although anti-establishment politics have tended to blame globalisation for the loss of traditional jobs, the WEF said rapidly changing technologies have had more of an impact on labour markets.

It is no coincidence that challenges to social cohesion and policymakers legitimacy are coinciding with a highly disruptive phase of technological change, the WEF said.

WEF founder and executive chairman Klaus Schwab told AFP earlier this week he hoped this years gathering could brainstorm about how to address the root causes of the widespread anxiety seen in the world today and answer the question why the people are angry, and why they are not satisfied.

The 2017 report, the 12th annual report, is based on an assessment of 30 global risks by 750 experts from a variety of backgrounds, including business, academia and non-governmental organizations.