Global capitalism needs urgent reform, says World Economic Forum
LONDON: Reforming the very nature of capitalism will be needed to combat the growing appeal of populist political movements across the world, the World Economic Forum said yesterday.
Getting higher growth levels, it added, is necessary but insufficient to heal the fractures in society that were evident in the election of Donald Trump as US president and Britain’s vote to leave the EU.
In a wide-ranging report from the organiser of the annual gathering of political and business leaders in the Swiss resort of Davos, the WEF identified “rising income and wealth disparity” as the biggest driver in global affairs over the next 10 years.
As an example of inequality, it highlighted the massive increases in chief executive pay at a time when many people in advanced economies have struggled to make ends meet following the global financial crisis.
“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: reforming market capitalism must also be added to the agenda,” it said in its latest Global Risks Report.
“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.”
That’s some conclusion from an organisation that’s sought to play a central role in the globalisation process of the past couple of decades and that is closely identified with some of the world’s richest people.
As well as getting growth higher, it identified four areas that need to be addressed urgently: long-term thinking in capitalism; recognition of the importance of identity and inclusiveness in political communities; mitigating risks and exploiting opportunities of new technologies such as driverless cars; and strengthening global co-operation.
It added that a failure to address the underlying sources of the populist tide poses a threat to mainstream politicians and raises the risk that the globalisation trend will reverse.
“Some people question whether the West has reached a tipping point and might now embark on a period of de-globalisation,” 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 impact. “It is no coincidence that challenges to social cohesion and policymakers’ legitimacy are coinciding with a highly disruptive phase of technological change,” it said.
Other key drivers identified in the survey of global risks related to climate change, rising cyber dependency and an ageing population.
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 NGOs.