Income Inequality Most Likely Threat to World Economy, WEF Says
The widening divide in incomes between the poor and rich poses the most likely threat to the global economy over the next decade, according to the World Economic Forum.
Having surveyed 700 people including academics and executives ahead of its annual meeting in Davos, Switzerland, next week, the forum assessed 31 risks to global prosperity. Inequality in the wake of the international financial crisis and recession is proving a headache for governments worldwide as hiring and wage growth stay weak.
“There was a closing gap for a long time and now it’s been opening up,” Jennifer Blanke, chief economist at the Geneva-based forum, told reporters in London. “People are just not going to stand for it and so it’s eroding the social fabric.”
The risk of greatest concern in the next 12 months was of fiscal turmoil in key economies, followed by high unemployment and water crises, the forum said. Weather, unemployment and climate change were viewed as the most probable risks to emerge in the coming 10 years.
On the threat of inequality, David Cole, chief risk officer of Swiss Re Ltd., identified the balkanizing of finance, aversion to migration and reduced willingness of companies to invest as potential sources of the problem as such trends left the world lacking enough jobs.
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