In that world of peripheral vision, essential for business, social and political leaders, it is surprising that the World Economic Forum’s report, Global Risks 2012 has not received greater publicity or provoked greater public interest. It is a measured examination of 50 major risks, clustered in economic, environmental, geopolitical, social and technological risk categories, facing the world in the next 10 years. Its contributors number more than 469 of the world’s leading business and economic leaders as part of the Davos process and it paints a shocking and bleak picture.
Scoring each risk category for both likelihood and impact, the report highlights that all risk-categories contain elements that have a near certainty of occurrence within the next 10 years with an impact that will be devastating. Scoring most highly in terms of both likelihood and impact are the risks associated with water and food shortages. Next come the economic risk factors including chronic fiscal imbalance, severe income disparity, and extreme volatility in energy and agricultural prices. Then there is a cluster of environmental risks that include rising greenhouse gases, failure of climate change adaptation, and the failure to manage urbanization and land and water resources. Scoring slightly lower in terms of risk are the technology and geopolitical risk categories respectively, where cyber attacks, information systems failures, data fraud, terrorism, fragile states (produced by various combinations of the above), and pervasive entrenched corruption dominate.
Putting all elements of the risk categories together, water supply and food shortage crises, volatility in energy and agricultural prices, fiscal imbalances, income disparity, and greenhouse gas emissions control, dominate the high scores.
Perhaps more significant than their relative scores is the fact that these risks are highly interconnected. Unsustainable population growth, currently with age peaks both in the young and in the old, produce enormous consumer demands for basic living requirements, societal pressures for maintenance, and issues of fiscal instability and urban management. Greenhouse gas control and climate change have major impacts on agricultural prices. Fiscal imbalances have impacts on inflation, currency stability and market imbalances, which in turn impact on national and global governance. And in this globalised lean economy, with its “just in time ” supply chain manufacturing, we have the complicating factors of critical systems failure and cyberterrorism as additional risks.
The complexity of these interdependencies and the increasing velocity of change in these transformative processes are said by Klaus Schwab, Founder and Executive Chair of the WEC, to threaten to overwhelm countries, companies, cultures and communities. His view is that the world’s foremost challenge is to master this complexity.
A very short while ago, “globalisation” was the key to economic success for society. It predicted a world of increased wealth, consumer choice and confidence aided by globally distributed workforces, along with “just in time” manufacturing, hyper-connectivity of markets and stock exchanges, and the death of the command economy.
The linkages across a range of fiscal, demographic and societal risks lead the authors to describe the world of 2012 and beyond as “dystopian” (the opposite of “utopian”), a place full of hardship and devoid of hope. Moreover, since the start of the global financial crisis the risk profile has moved heavily in the direction away from geopolitics and economics towards a connected cluster of risks linking society, environment and economy focusing on issues such as economic equity, the availability of food, and unsustainable water withdrawals. It also uses the word “dystopian” for the first time to describe what happens when attempts to build a better world go unintentionally wrong – the norm of “unintended consequences”.
In this case, the unintended consequences include a new class of critically endangered states emerging, as formerly wealthy countries are unable to meet their social and fiscal obligations, and they descend into lawlessness and unrest. Clearly the prediction of unintended consequences must be part of all of our scenario planning.
The population projections alone are formidable. By 2023, the world’s rural population will decline in absolute terms. By 2050, the global urban population will have doubled to nearly 6.2 billion, 70% of the world’s population. This will require an unimagined increase in urban capacity in the next 40 years that is equivalent to all of that built in the past 4000 years, but somehow without the accompanying environmental destruction and failure.
The youth component of this may be largely unemployed, placing a requirement on society NOW to give consideration to the educational requirements of the imminent next generation, including potentially radically redesigning educational systems, including universities, and extensively fostering entrepreneurship to prevent the seeds of dystopia from taking root. Perhaps these entrepreneurial skills could be directed to solving the pressing environmental constraints that stem from progressive disengagement of urban communities from rural issues.
What is required now are new conceptual models to understand and interrogate these complex systems. In the face of real uncertainties about the future, we have to develop an understanding of what will confer resilience to potential solutions. We must get better at predicting the “ifs” in the “what if” scenarios, but accept that solutions must be robust to challenges we cannot imagine. There is real urgency here. We do not have time to lose political momentum to arguments over relative minutiae such as the carbon tax; such distractions hide the fact that we lack a coherent vision to address these interrelated and pressing issues in the coming decade. The need for a coherent vision is crucial if our education systems are to develop in the young the knowledge and skills needed to build a sustainable future for Australia – knowledge we can export to less fortunate countries that lack the means to similarly invest in their futures.
Australia already has a report on Food Security, but it was published in 2010 and much has happened in the world since then – it would be interesting to see an update on progress on the “suite of actions” recommended in the report: actions including lifting agricultural R&D as a matter of urgency, boosting PhD scholarships for agricultural and food processing studies, and setting up an Australian Food Security Agency.
More interestingly, it would be fascinating to see the outcomes of a World Economic Forum-type appraisal of Australia’s risk register. What cluster of hazards and challenges await our economy, society, environment, geopolitical space and, of course, technology, and what are we going to do about them?
John Crawford is a Professor at the University of Sydney. Emeritus Professor Bernard King CBE CCMI FBS, and Tony Coote AM also contributed to this article.