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Global Village People

We face extreme global risks that cannot be addressed by existing institutions or governments. An international, global plan of action is required.

By  Coletta Kemper

The recent economic crisis and the more recent civil unrest throughout the Middle East underscore the fragility of our world. We see what happens when people are disenfranchised, when they have to fight for scarce resources and when the young have no jobs or opportunities. How we solve these problems as a global community is a challenge, particularly when our own interests conflict with others.

Fortunately, some of the world’s smartest people from government, academia and industry get together at the annual meeting of the World Economic Forum in Davos, Switzerland. There they brainstorm about our global systems and explore solutions that can positively transform our world. Similarly, the recent Summit on the Global Agenda in Dubai, also sponsored by the World Economic Forum, brought together 600 thought leaders from 60 countries to discuss the most significant issues facing our nations and industries. From that meeting came a roadmap for a new reality for how our world must relate, communicate and connect to confront risks and opportunities in the 21st century.

The major challenges identified by the group in its report, Outlook on the Global Agenda 2011, are worth our attention. As the report explains, the financial crisis has exhausted our capacity for dealing with shocks: “The frequency and severity of risks to global stability have [been] amplified, while the ability of global governance systems to deal with them has not.”

These challenges are not only relevant for us as a society, but for our industry as it attempts to meet the risk needs of the future. Below are highlights from the report.

Global Power Shifts There is a fundamental economic and political shift of power underway. Power is no longer concentrated in the developed economies. As power moves to emerging economies, political power will follow. Emerging markets have become centers of both economic growth and geopolitical decision making. As one member of the group said, “Asia and other emerging markets will outstrip the economic performance of Europe and North America, where stubborn unemployment and political gridlock will make policy reforms harder.”

Population Growth The world’s population is exploding with 6.8 billion people (and rising). These people are competing for resources that are becoming increasingly scarce. “Global population growth and humanity’s decision to be silent on the issue for political/cultural/religious reasons is the most important issue,” a member of the population group said. The inevitable strain this trend puts on all areas of socio-political relations influences all the issues identified by the experts.

Uncertain Recovery There is a high degree of volatility and ambiguity across many markets in the short to medium term, which is likely to lead to irrational behavior on the part of investors. The issue is aggravated by the aftermath of the global financial crisis, global imbalances, the specter of financial collapse across Europe, fiscal crises across the world, and currency volatility. Governments and global institutions that were fragile before the crisis have, by and large, become even more so in the face of global instability. The world is in no state to withstand further shocks.

Inequality While global growth has continued, inequality between and within countries has widened.

Shortage of Resources The strain of providing for a world population of nearly seven billion threatens to undercut growth, create environmental problems and cause social and political conflict. Limited resources will drive much conflict and realignment of the global landscape in the near future. Shortages across commodities from water and food to iron ore and rare earth will be a key point of negotiation. How do we decouple economic growth from resource consumption?

The report notes trends that are overestimated and underestimated drivers of global affairs. Climate change, corporate responsibility and sustainable energy are overestimated. Significantly, underestimated trends include inequality, population growth and resource scarcity. Some trends are polarizing to society. The aging population and the spread and increased speed of connectivity are two. As we saw, the Internet and social media played a key role in helping protesters organize in Egypt, while the generation gap is clearly evident in debates over social security and pension reform.

So what did the brainiacs conclude? We must find new ways to cooperate to rebalance the risks and opportunities which will lead to a more stable and sustainable long-term future. Global rebalancing needs to be a “long-term, collaborative process” that includes the disenfranchised and encourages those who have benefited to continue to do so in a sustainable way.

Easier said than done. But as the report makes crystal clear, we can no longer contain and address systemic risks alone. It will take many disciplines and many stakeholders to improve the global system’s overall resilience.

In other words, it will take a global village to address the challenges. Fortunately, the world’s smartest people are not just talking to each other. The next step is to put together an action plan. Let’s hope Congress doesn’t have to vote on it.

Kemper is The Council’s vice president of Industry Affairs.


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