Letter IEDI n. 1064—Global Risks in the Aftermath of the Pandemic, according to the World Economic Forum
Today's Letter IEDI addresses the main points of the recently published Global Risks Report of the World Economic Forum (WEF). In its 16th edition, the report focuses on the risks and consequences of the COVID-19 pandemic for increasing inequalities in terms of access to health, technology and employment opportunities, and societal fragmentation.
The study is based on the Global Risk Perception Survey (GRPS) carried out annually with 650 WEF world leaders. From a list of thirty five high-impact risks worldwide, grouped into the categories of economic, environmental, geopolitical, social and technological risk, the participants indicated the time horizon in which these dangers could become critical threats to the world .
Among the most immediate threats—those that are most likely in the next two years—social risks (such as disease, unemployment, erosion of social cohesion, etc.) stand out, but there are also risks of cybersecurity failures, digital inequality, prolonged economic stagnation, terrorist attacks and man-made environmental damage.
In a 3-5 years horizon, economic risks appear prominently. They include asset bubbles, price instability, commodity shocks and debt crises. Geopolitical dangers are mentioned too, including natural resources issues.
In a 5-10 years period, environmental risks predominate, such as loss of biodiversity, natural resource crises and failure of climate action, associated with geopolitical risks. Completing the picture, there may be possible adverse effects of technology, reactions against science, etc.
Although the failure of climate action is considered by GRPS participants to be the most worrying long-term risk and the second most likely and most impactful one, the WEF also emphasizes the negative effects of greater digital disparity and its links to unemployment.
In the WEF assessment, the effects of the COVID-19 pandemic, as well as some aspects of the political response to the health crisis, although necessary, increased several types of disparities that already existed within and among countries, disproportionately harmed certain sectors and social groups, and made it more difficult for the world to achieve the United Nations Sustainable Development Goals by 2030 and the Paris Agreement objectives.
For example, it is estimated that 18% of micro and small companies in China, which account for about 80% of the country's jobs, closed down between Feb/20 and May/20 only. In the United States, 20% of firms with less than 500 employees shut down permanently between Mar/20 and Aug/20, according to the WEF. With the global recession, the WEF estimates that more than 150 million people may have been driven into extreme poverty, increasing the total to 9.4% of the world population.
In the COVID-19 economic crisis, young people between 15 and 24 years old were the first to lose their jobs during confinement and to have their income compromised. At the same time, in many countries access to education and learning has been interrupted by the lack of digital connectivity, adult support or adequate space to study at home.
The report highlights that 80% of students were out of school worldwide with the suspension of traditional classroom teaching. Despite the adaptation to remote teaching via television, radio and the internet, it is estimated that at least 30% of the world student population did not have access to technology to participate in distance learning.
Among the effects of the COVID-19 pandemic there is also the acceleration of the Fourth Industrial Revolution, expanding the digitalization of human interaction, e-commerce, online education and remote work. These transformative changes promise enormous benefits, but the WEF points out that they can also exacerbate digital inequalities, undermining the prospects for an inclusive recovery.
The WEF report warns that in the business world, the economic, technological and reputational pressures of the present moment carry the risk of a disorderly shakeout. Threats include prolonged stagnation in advanced economies, loss of growth potential in emerging and developing markets, and the bankruptcy of small companies, widening the gaps in relation to large companies and reducing the dynamism of markets, as well as exacerbating inequality, making long-term sustainable development even more difficult.
The global business environment may become more costly and uncertain as a result of expanded protectionist trends and the weakening of multilateralism, as some States are increasingly turning inward in an attempt to strengthen self-reliance and protect domestic jobs.
Failure to tackle economic inequalities and the division of society can further paralyze actions on climate change, which constitute an existential threat to humanity. However, in the WEF assessment, if environmental risks are not addressed in the short term, environmental degradation will intersect with social fragmentation, with dramatic consequences.