Which global risks most threaten the world’s overall well-being? Just consult this handy – and terrifying – map from the World Economic Forum’s Global Risk 2014 report, which names the big (and small) economic, environmental, geopolitical, societal and technological menaces, and shows how they interlock.
Fiscal crises is at the top of the risk list. Not a shock: the worst of the global financial implosion may be over but its effects are increasingly present. In Europe many are jumping to celebrate the end of the euro crisis yet countries still have much to do in order to control their deficit and debt levels: despite austerity new prominence as a policy armature, governments are generally still spending more than they raise in taxes.
On the other side of the Atlantic Ocean, in October the United States may have avoided a debt crisis – though it partially shut down the federal government for two weeks. But what came out of it is more evidence (as if it were needed) of what a debt default would have supposed for the economic and financial world: a new global catastrophe. In the new year the U.S’s political class has been able to reach some consensus and moved away from the shenanigans they were accustomed to. U.S. public debt rose about $5.5 trillion between 2007 and 2013; today it’s more than 100% of its GDP and could easily grow more.
Making fiscal frameworks more resilient should be the path international governments should follow. It’s also necessary to establish a legal and political procedure for restructuring the debt of bankrupt sovereigns, in the case a country were to go in to default. (We have some ideas).
Structural unemployment/underemployment is the second-greatest global concern, according to the WEF. This problem is connected to the fiscal crisis risk, especially in Europe since unsustainable debt levels have forced governments to undertake nasty fiscal adjustments by cutting expenditures or raising taxes which can cause a strong increase in unemployment, as has been the case in many advanced economies since the financial crisis of 2007-2008 (vide Spain, Greece and Italy, countries where unemployment remains at records high). “The youth and minorities are especially vulnerable as youth unemployment rates hover around 50% and underemployment (with low-quality jobs) remains prevalent, especially in emerging and developing markets,” warns the WEF.
The truth, though, is that the potential spill-over effect in today’s interconnected world from even one of the more “minor” threats mapped out has never been greater. International systems of finance, supply chains, health, energy, the internet and the environment are becoming more complexly interdependent than ever. Global solutions are necessary but with global governance failure being the first geopolitical risk, expect these issues to be part of the 2015 global risk report as well.
And while we’re on the subject of risk: Read Blouin News’ 2014 Red Zones!