Outlook on the Global Agenda 2011

8/8/2019 Outlook on the Global Agenda 2011

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From Riskto Opportunity:

Building a Responseto the New RealityOutlook on the Global Agenda 2011

An initiative of the Risk Response Network

World Economic Forum

January 2011


January 2011


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An enhanced virtual version of this report provides additional

background information and insights.

Go to http://outlook.weforum.org


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3/36Outlook on the Global Agenda 2011 | 3

Roadmap to the New Reality

The third Summit on the Global Agenda brought together

over 600 thought leaders rom 60 countries and a myriad o

disciplines to discuss the most relevant issues on the global,

regional and industry agendas. The goal o the Summit was

to convene multistakeholder groups o relevant experts to

stimulate bold thinking and catalyse innovative discussions.

Council Members also developed concrete action plans to

address key risks and oster valuable opportunities.

This Outlook on the Global Agenda 2011, a new publication

o the Network o Global Agenda Councils, provides an

overview o the prevailing issues on the minds o our Global

Agenda Council Members or the next 12-18 months as

identifed by the Global Agenda Survey and discussed

during the Summit. The fndings o the report emphasize

the importance o rebalancing risks and opportunities anddeveloping new thinking or a new era, a time characterized

by highly complex and interconnected issues and challenges,

yet also providing unique opportunities to develop

collaborative solutions on a large scale.

To better understand and respond to these global risks and

related opportunities, the World Economic Forum announced

a new initiative during the Summit on the Global Agenda,

the Risk Response Network (RRN), to which Global Agenda

Council Members will contribute and thus help advance

this global rebalancing. While the Risk Response Network

oers one way in which the Global Agenda Councils and the

broader global community will come together to respond

to the new risk landscape, the World Economic Forum

Annual Meeting 2011 in Davos-Klosters aims to catalyse

this process on an even greater scale. The Meetings theme

Shared Norms or the New Reality promises to address

crucial questions to rebalance risks and opportunities and

ashion a better uture collaboratively.

Following the Annual Meeting 2011, the Global Agenda

Councils will continue their collaboration and urther

elaborate their analysis and recommendations to address

key challenges, publishing their main fndings in Spring 2011

while continuing to integrate them in Forum activities on an

ongoing basis.

I hope this publication will stimulate new thinking or the new

reality.

Klaus Schwab

Founder and Executive Chairman



4/364 | Outlook on the Global Agenda 2011

Network of Global Agenda Councils

4 | Outlook on the Global Agenda 2011



Worlds Largest Brainstorm

Outlook on the Global Agenda 2011 | 5


6/366 | Outlook on the Global Agenda 2011O lo k e l l e a 0

Network of Global

Agenda Councils

In 2008, the World Economic Forum created the

Network of Global Agenda Councils, comprising

groups on the foremost topics in the global arena.

Each of these Councils convenes 15 to 20 relevant

thought leaders from academia, government,

business and other fields to capture the best

knowledge on each key issue and integrate it intoglobal collaboration and decision-making processes.

Specifically, the Councils monitor key trends, identify

global risks, map interrelationships and address

knowledge gaps. Equally important, they also put

forward ideas and recommendations to address

global challenges.

Council Members meet virtually and at the Summit

on the Global Agenda in the United Arab Emirates.

Moreover, they are fully integrated into the broader

Forum community, contributing to initiatives,

projects and events throughout the year. In a global

environment marked by short-term orientation and

silo-thinking, Councils foster interdisciplinary and long-

range thinking to address the prevailing challenges on

the global, regional and industry agendas.


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The 21st century has seen a undamental reshaping

o the way business, civil society and governments

operate. The economic crisis and its repercussions haveaccelerated the shit o economic and political power rom

the developed to the emerging nations and exposed a

ragile world with limited capacity to respond to systemic

risks. Technology and networks have tied individuals,

states and non-state actors into an increasingly complex

interdependence.

Todays decision-makers and thought leaders must

conront the new reality. They must dene new ways

o relating to each other, new orms o communication

and contact, new operating rameworks and business

models, newnorms, while coping with the challengeso the everyday, dealing with new sets o unknown

unknowns, and navigating an unamiliar landscape with

a set o institutions and structures built or a dierent era.

How does the new reality shape the global agenda and

how does it aect the critical issues that infuence the

state o the world?

These core questions ramed the World Economic

Forums Summit on the Global Agenda 2010, held in

Dubai rom 29 November to 1 December. The Summit

brought together over 600 experts rom around the

world, organized into 72 Global Agenda Councils, ranging

rom ood security to ageing to systemic nancial risk

(see pages 6-7). This Outlook on the Global Agenda

2011 provides an overview o the thematic discussions

that took place at the Summit and incorporates the key

ndings o 570 Council Members rom the Global Agenda

Survey (see pages 14-15) conducted earlier this year.

The worlds largest ormal brainstorm, the Summit drove

Councils through a structured series o meetings, outlined

to the let.

The route through the Summit on the Global Agenda 2010

Council Members set the framework for discussion

through a pre-meeting survey (see page 14)

Councils met individually to discuss, determine agendas

and capture knowledge for progressing their issues

Councils formally met with others to discuss cooperation

Participants split into six groups to discuss

different themes:

Councils met to design workstreams to progress

The challenge of a shifting balance of power

The challenge of natural resource scarcity

The challenge of inclusive growth and equality

The challenge of economic uncertainty

The challenge of fragile states and new conflicts

The challenge of global risk management

their issues through the next 12 months

Roadmap



Mandate for the New Reality

The Summit on the Global Agenda 2010 outlined amandate or the global agenda: institutions and decision-

makers must nd new orms o cooperation to actively

rebalance risks and opportunities to secure a more stable

and sustainable long-term uture.

This new reality is maniest by:

Global power shifts: economic and politicalpower is no longer concentrated in the hands o

the developed economies. Emerging markets have

become centres o both economic growth and geo-

political decision-making.

Economic uncertainty: There is a high degree ovolatility and ambiguity across many markets in

the short to medium term, which is likely to lead to

irrational behaviour on the part o investors.

Resource scarcity: The strain o providing or aworld with a population heading rapidly towards 7

billion and beyond threatens to undercut growth,

create environmental problems, and cause social

and political confict.

Institutional weakness: Governments and globalinstitutions that were ragile beore the crisis have,

by and large, become even more so in the ace o

global instability. The world is in no state to withstand

urther shocks.

Todays global interconnectedness means that it

is impossible or any stakeholder to address these

challenges in isolation. The web o actors aecting

global institutions and local communities has expanded,

and its complexity multiplied. Negligence by a supplier

in a oreign market can damage the reputation o

a multinational headquartered on the other side othe globe. One nations regulatory changes could

aect a cascade o businesses in many dierent

sectors. Leadership today means navigating a larger,

more complex set o issues and more complicated

relationships.

While this new mandate provides context or the

World Economic Forums Annual Meeting 2011

in Davos-Klosters, it does not clariy the end towhich this rebalancing should be directed. What

principles should guide the rebalancing? What does

a more stable, sustainable assessment o risks and

opportunities look like? The international community

must address these questions to nd solutions to

the most challenging issues on the global agenda, to

respond to new distributions o economic and political

power, and to alter institutional relationships to eect

the necessary changes.

This process requires recognizing that globalization,

technological innovation and other drivers o the new

reality have impacted communities around the world

unevenly. On rst glance, it is tempting to conclude

that emerging economies are supplanting overspent

developed nations. But this conclusion fattens

dierences among emerging markets and the variable

impact o globalization and economic growth on

countries, business sectors, communities and even

amilies.

A more thoughtul analysis reveals that global

rebalancing needs to be a long-term, collaborativeprocess. It must enranchise those excluded rom

global growth and encourage those who have

prospered to continue doing so in a sustainable

manner. The recent economic crisis demonstrated

that systemic risks can no longer be tidily contained

and addressed in a single ecosystem but require a

multidisciplinary, multistakeholder eort to improve the

global systems overall resilience.



There are commonalities between all sorts of

disparate risks: the BP Gulf disaster, the terrorism

incident in Germany, Wikileaks, the euro zone crisis.The interconnectedness is that they are all out of the

low of day-to-day events. They are low probability

but high consequence events.

Axel P. Lehmann, Member, Group ExecutiveCommittee and Group Chie Risk Ocer, Zurich

Financial Services, Switzerland; Member o the Global

Agenda Council on Systemic Financial Risk

Political risk is certainly not conined any longer to

the developing world.

Tina Fordham, Managing Director and Senior PoliticalStrategist, Citi Global Markets, United Kingdom;

Member o the Global Agenda Council on Fragile States

There is a scarcity in natural resources, but the

bigger problem is management. Another one is

human responsibility. It doesnt matter how muchwe have if we are irresponsible.

Armen Sarkissian, President and Founder,Eurasia House International, United Kingdom;

Member o the Global Agenda Council on Energy

Security

Inclusive growth is distinctly different from pro-

poor growth. Its achievement requires that we take

advantage of all bona ide opportunities to promoteincome growth ranging from opportunities that

primarily help the poor to those that mainly beneit

people at the upper end of the income distribution.

David Bloom, Clarence James Gamble Proessor oEconomics and Demography, Harvard School o Public

Health, USA; Member o the Global Agenda Council

on Population Growth and Chair o the Global Agenda

Council on Ageing

There are two extremely lofty ideals worth

pursuing that are meant to address the prevention

of conlict in fragile states, but in many cases have

exactly the opposite effect democracy and the

pursuit of justice.

Louise Arbour, President and Chie Executive Ocer,International Crisis Group (ICG), Belgium; Vice-Chair o

the Global Agenda Council on Confict Prevention



We see a lot of change that is discomiting, change

to which we dont know how to react.

Ian Bremmer, President, Eurasia Group, USA;Chair o the Global Agenda Council on Geopolitical Risk

Can we see the hazard? Can we igure out what to

do? Can we get mobilized to do something about it?

Herman Dutch Leonard,Proessor o Public Management,

Harvard Kennedy School, Harvard University,

USA; Vice-Chair o the Global Agenda Council onCatastrophic Risks

Knowledge based infrastructure has to be a

high priority for investments. You will only have

entrepreneurs if you create opportunities for people to

gain the knowledge on how to become entrepreneurs.

Tim Brown, Chie Executive Ofcer, IDEO, USA;

Vice-Chair o the Global Agenda Council on Design

This is a dificult transition period. But how do

we create real cooperative behaviour between

developing and developed economies?

Zhang Yunling, Director, International Studies,Chinese Academy o Social Sciences (CASS),

Peoples Republic o China; Member o the Regional

Agenda Council on South-East Asia

Complacency is not an option anymore. The

international aid system has failed to deliver

change; smarter systems which would allow the useof scarce resources for development in fragile states

are needed.

Clare Lockhart, Director,Institute or State Eectiveness (ISE), USA;

Member o the Global Agenda Council on Fragile States



The Global Agenda Survey:A New Landscape of Fragility and Fragmentation

Global power shits is the single most signicant issue

acing the world into the near uture, according to the

worlds largest brains trust.

We asked the Members o the Network o Global Agenda

Councils what trends would drive global aairs in the next

12-18 months. The survey paints a picture o an unsettled

world driven by signicant shits in geopolitical realities,

struggling with the need to provide quality o lie or close

to 6.8 billion people and rising.

The rst annual Global Agenda Survey eatures responses

rom 570 Members o the Network o Global Agenda

Councils. The top ve issues they identied were:

Global power shifts: As economic powermoves rom the developed world to the emerging

economies, political power will inevitably ollow.

How this dynamic plays out will be at the crux o

geopolitical events as we head urther into the 21st

century. Asia and other emerging markets will

outstrip the economic perormance o Europe and

North America, where stubborn unemployment andpolitical gridlock will make policy reorms harder,

said one Member o the Regional Agenda Council on

the Middle East & North Arica.

Population growth: Global population growthand humanitys decision to be silent on the issue

or political/cultural/religious reasons is the most

important issue, responded a Member o the

Global Agenda Council on Population Growth. The

population o the world is exploding, with 6.8 billion

people (and rising) struggling or resources. The

inevitable strain this trend puts on all areas o socio-political relations infuences all the issues identied

by our experts.

Uncertain economic recovery: This issue isaggravated by the atermath o the global nancial

crisis, global imbalances, the spectre o nancial

collapse across Europe, scal crises across the

world and currency volatility.

The Major Challenges

Inequality: While global growth has continued,inequality between and within countries haswidened. How can income distribution be improved

on a air, equitable and gender-sensitive basis or

more harmonic societies? asked one Council

Member.

Shortage of resources: A crucial underlying trendthat will drive much confict and realignment o the

global landscape in the near uture is access to

limited resources. Shortages across commodities

rom water and ood to iron ore and rare earth will

be a key point o negotiation: How do we decouple

economic growth rom resource consumption?questioned a respondent.


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Five Most Important Trends for 2011




Weak Signals

Other results rom the survey include the identifcation o weak signals, issues or trends only identifed by a small

number o respondents, but which may emerge as signifcant challenges.



Over- and Underestimated Trends

We also asked the experts which issues they perceived as over- and underestimated as drivers o global aairs. Notably,

climate change, corporate social responsibility and sustainable energy were considered overestimated trends, while

inequality, population growth and resource scarcity were considered signifcantly underestimated.

See full results of the survey under www.weforum.org/globalagendasurvey



The worlds most fragile and least developedcountries continue to have high fertility rates that

are undermining their prospects for breaking the

cycle of poverty. Further declines in fertility are

achievable and can pay handsome demographic

dividends.

Global Agenda Council on Population Growth

Rapid population growth will outstrip economic

growth and the growth of the food supply in the

poorest and most fragile countries.Judith Banister,Senior Demographer, Javelin Investments, USA; Member

o the Global Agenda Council on Population Growth

Fragile states have by definition a weak capacity to

deal with social change, and rapid population growth

is obviously a very powerful form of social change.

Nicholas Eberstadt, Henry Wendt Chair in PoliticalEconomy, American Enterprise Institute or Public Policy

Research, USA; Member o the Global Agenda Council

on Population Growth

Produced by

PwC

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1950 1960 1970 1980 1990 2000 2010 2020 2030

Forecast

2040 20 50

2050population:9.1 billion

2009population:6.9 billion

Globalpopulation(billions)*

* Forecasts are medium variant

Population is forecast to rise by2.2 billion people by 2050Global population growth

Source: United Nations (2008)



Discussion at this third Summit on the Global

Agenda was ormally structured around the major

challenges acing the world over the next 12-18

months, identied in the rst Global Agenda Survey

as:

Population growth

A shiting balance o power

Natural resource scarcity

Inclusive growth and equality

Economic uncertainty

Fragile states and new conficts

In addition, the Summit structured a discussion

around the challenge o global risk management,

to gauge support or and buttress the intellectual

coherence around the concept o a ormal Risk

Response Network.



Towards 9 Billion

The topic of population growth ran like a red threadthrough many of the discussions at this Summit

on the Global Agenda, emerging as one of the key

global challenges identified by the experts. Due to

mortality decline and to the phenomenon of population

momentum, national populations will continue to grow

even as fertility remains on its downward trajectory and

drops below the long-run replacement level of roughly 2.1

children per woman. Youth bulges are evident in some

countries, especially in the Middle East, Sub-Saharan

Africa, and parts of South-East, South and Central Asia,

while elder shares are growing rapidly throughout North

America and much of Europe and East Asia. Thesepopulation shifts are critical determinants of income,

consumption, social and political stability, environmental

quality and the stock of natural resources. Population

shifts are also seen as a major contributor to economic

uncertainty, with education viewed as the most natural

antidote to rapid population growth and its adverse

repercussions.

Experts at the Summit on the Global Agenda reaffirmed

the importance of high rates of population growth as a

risk to the well-being of families and countries. Rapid

population growth impacts a host of development

indicators, such as health, physical and financial

security, environmental sustainability, gender equity

and educational progress, and is an especially great

concern in politically fragile states and ecologically fragile

geographies.

For the past several decades, the challenge of population

growth has been insufficiently highlighted on the global

agenda. This is due, in part, to political sensitivities

surrounding the notion of fertility control and instruments

for achieving such control. It is also due to the diversity of

experience, with an increasing number of countries facing

a future of negative population growth.

Global experience offers many lessons on ways to

mitigate and manage rapid population growth. The most

laudable successes have been achieved by programmes

that reflect a judicious combination of government

commitment and community-level engagement, and

that respect the rights of individuals to decide freely

and without coercion the number and spacing of their

children.

Risks: Population Growth

Slower economic growth due to fewer

workers, jobs and savers

The erosion of trust and social capital

Intergenerational inequities

Inadequate food, water supply, healthcare,

education and other services in the poorest

and most fragile countries

Poor infrastructure linked to migration from

rural to urban areas

Increased pressure on all resources (water,

food, minerals, energy)

Inability of pension systems to cope with

ageing populations

High rates of population growth challenge someof the poorest and most fragile states. Their growth

puts added pressure on the ability of these countries

to educate all their children and youth and meet

other Millennium Development Goals. Better access

to good education and health services especially by

young mothers can also help to mitigate population

growth.

Emmanuel Jimenez, Director, Human Development,East Asia and Pacific Region and Editor, World Bank

Research Observer, World Bank, Washington DC; Chairof the Global Agenda Council on Population Growth



Why are global challenges so risky now? Because

there is a multiplicity of these challenges. They dont

come in isolation; they come together at the same

He Yafei, Ambassador and Permanent Representativeof the Peoples Republic of China to the United Nations,

Geneva, and other international organizations in

Switzerland; Vice-Chair of the Regional Agenda Council

on China

Shifting Balance of Power

Risks: Shifting Balance of Power

The fragility of the G20

Weak global governance

Greater protectionism and increasing trade

conflicts

Currency wars

Economic uncertainty in Europe affecting its

legitimacy as a leading power

Development of nuclear capacity

Military conflict



Moving Eastward

In the atermath o the global economic crisis, manydeveloping economies have roared back to robust

health, while Europe, America and Japan continue to

stall. Lingering unemployment in the United States and

the debt crisis in Europe have urther uelled perceptions

that a weakened West is losing its vitality, just as China,

India, Brazil and other emerging powers stride onto the

international stage.

Pervading the Summit was a sense that a transition is

under way, one that shits the global balance o political

and economic power away rom the G7 countries

towards a new class o developing world heavyweights.This shit will alter the culture and decision-making

calculus in national capitals around the world and in

corporate boardrooms large and small. It will change the

lives o individuals, advantaging the mobile and globally

minded at the expense o the sedentary and parochial.

The longer-term implications o this shit remain unclear,

but discussion within the Summit moved beyond this

broad view towards a ner understanding o this trend

and o its limits. There was a general sense that the

complexities implied by this notion o decoupling a

deliberate move by developing countries, particularly

China, to limit dependence or growth on access toWestern economies are underappreciated. China and

other export-centric emerging states will try to rebalance

their economies towards increased reliance or growth on

domestic demand, but this is the work o a generation,

not o a single ve-year plan.

In addition, the current prevailing wisdom appears to

be that leading emerging powers are moving orward

at a common pace as developed world states remaincollectively stagnant. These groups are seen respectively

as the winners and losers rom globalizations progress.

Summit participants challenged this simplication on two

counts. First, the demise o developed states is greatly

exaggerated. The nancial crisis sharply accelerated the

inevitable transition rom a G7 international order to a

G20 model, one that provides major emerging markets

with seats at the worlds most important international

bargaining table. Yet, leaders o the G7 countries still

wield considerable infuence within the G20 and will

continue to do so or the oreseeable uture. In sectors

rom nance to ood production and rom innovation topublic health, developed states remain at the oreront o

unding, technology and expertise.

Second, there is tremendous diversity and a wide

range o relative strengths and weaknesses within the

emerging market class i indeed emerging markets can

be consider a single coherent asset class at all. There

are enormous structural dierences even within the

so-called BRIC countries. There are winners and losers

rom globalization within each o these states. Nor is

any grouping o emerging market states likely to orm a

coherent political bloc. The interests o these countries

are no more likely to converge than those o developed

states.

The challenge or the international community in 2011

and beyond is to look beyond articial classications o

states towards a set o shared standards and values

that are meaningul and robust enough to withstand the

volatility and uncertainty that lie ahead during an era o

transition.



Natural Resource Scarcity

People in Africa want to start consuming as much

as people in Europe or the US now do. But if we

continue to consume as we are today, we will need

Kandeh Yumkella, Director-General, United NationsIndustrial Development Organization (UNIDO), Vienna;

Member of the Global Agenda Council on Climate

Change

Risks: Natural Resource Scarcity

Unpredictable commodity prices

Lack of access to resources, energy security

and social licenses to operate

The collapse of global fish stocks

Irreplaceable biodiversity loss and ecosystemdegradation

The struggle to balance water demand with

supply

The rapid escalation in humanitys

environmental footprint

Increased piracy and illicit trade



The Limits to Growth

The discussion around the theme o natural resourcescarcity ocused on the interrelated nature o consumerhabits, population growth and sustainability. Thehighly interlinked nature o these issues is particularlychallenging, requiring coordinated eorts among diversestakeholders, yet there is a clear lack o eective incentivestructures and sustained political will or successulsolutions to be put in place.

Participants discussed a number o signicant globaltrends that will intensiy the demand or ood, water andenergy resources. These include:

Consumption and consumer behaviour: Inorming,educating and empowering consumers are keyapproaches to changing behaviour. People must beconvinced that conservation is important. A value shitis needed rom more to better consumption. But toooten consumers are not aware o how much water orenergy they are using or what impact their behaviour hason the environment. New metrics and standards are alsoincreasingly needed so consumers across the world canmeasure their usage comparably and consistently.

Product labels that carry inormation about water and

carbon ootprints, or measuring tools that providereal-time eedback about household energy and waterconsumption are practical ways to help consumersmake better choices in their day-to-day lives. These arechallenges or product developers and manuacturers,and or utility companies.

Issues o consumption inequality also need to beresolved; while some consume too much, others still havetoo little. This issue requires global action to determineootprints and consumption in dierent areas o the worldand recalibrate consumer behaviour.

Loss of biodiversity: A comprehensive ecosystemassessment is urgently needed so ecosystemservices can be properly accounted or and valued.One promising initiative is the International IntegratedReporting Committee, which is developing a globallyaccepted ramework or accounting or sustainability.

The ramework brings together nancial, environmental,social and governance inormation in a clear, concise,consistent and comparable ormat. Better calculations othe lie cycle and costs o alternative sources o energyshould also be developed.

Land challenges: A global or regional system is needed tobetter manage land and all other resources. Land usagemust be matched to the appropriate type o land. Forexample, land suitable or agriculture development should

be used to increase ood security and not or otherpurposes, such as real estate development. Segmenting

land by usage will help governments and industry betterunderstand the land challenge.

The system could be patterned ater the UNESCO WorldHeritage Sites or something similar. However, makingsuch a system viable will require the right incentivesand the ability to reach commonly accepted metrics ormeasuring land usage.

Misaligned subsidies: Participants also pointed out thatsubsidies too oten distort natural resource depletion.For example, subsidies still exist today or resourcesthat are already depleted. These subsidies promote the

wrong behaviour and must be eliminated. Targeted andrebalanced subsidies to support growing sustainablealternatives such as wind power or solar energy tomarket scale should be introduced. Innovation in energyeciency can be spurred and a better investment climatecreated through well-designed subsidies or renewablesuptake.

Resource wars: Natural resource scarcity is not onlyan issue o sustainability it is also a potential sourceo confict. The overuse o water, the contaminationo the air and soil, the depletion o minerals and other

problematic shortages can lead to diplomatic incidents oreven disputes. Risks emerging rom the lack o ood andclimate change or natural disasters are increasingly on thehorizon, such that this angle o natural resource scarcityshould also be made a priority in the months ahead.

Despite a number o critical challenges in this area, thereis tremendous potential to create a wholly transormedgreen economy which could develop opportunities orsustainable growth. However, business leadership iscritical to ensure the long-term sustainability o naturalresources; participants agreed that business leadersshould not wait or government to orce regulations upon

their industries, but should instead be taking the initiativeto enable and oster opportunities to develop sustainablesolutions. Large companies have a vested interest inbeing environmentally responsible all along the supplychain to ensure that the resources they need in theuture will be available to them. Resource managementas a sound business principle in the private sectorneeds to be impressed. Government- and private-runutility companies should be rewarded or responsiblebehaviour, including or conserving energy. Businessleaders can also play an important and constructive roleby demonstrating leadership commitment to develop

market-based solutions and orming partnershipsand collaborations with other relevant stakeholders toimplement them.



There has been amazing growth in the last couple

of decades, but 40% of it was not in the real economy

and has not been distributed. According to OECD

reports, the world is growing more unequal. That is

Sharan Burrow, General Secretary, International TradeUnion Confederation (ITUC), Belgium; Chair of the Global

Agenda Council on Employment & Social Protection

Inclusive Growth and Equality

Risk: Inclusive Growth and Equality

Rising economic disparity within and between

countries

Social and political instability

The lack of a sustainable social safety net in

many countries Unequal access to education affecting

womens empowerment and social

development

Reduced productivity as a result of epidemics

and chronic diseases

Disaffected youth becoming a disruptive force



Growing Together

Among specialists in economic development, rommultilateral bankers to academics and civil society

activists, the term inclusive growth has a specic

meaning: income growth that accrues to every segment

o society, rom poor to rich, at roughly the same pace. It

stands in contrast to pro-poor growth, which reers to

income gains that occur disproportionately at the lower

end o the income distribution.

The dominant ocus o inclusive growth is on income

gains that occur through employment and productivity

improvements, not through redistributive tax and

transer policies. As such, the main instruments oinclusive growth are strengthening human capital via

training, education, and the promotion and protection

o good health; improving the competitiveness o capital

and labour markets; and prudent macroeconomic

management, openness to trade, and good governance.

Inclusive growth is built on the premise that the pace

and sustainability o income growth will be enhanced i

it is broad-based in nature. Alternatively, income growth

that derives rom inherently unequal opportunities will

tend to undermine long-run growth prospects by stifing

incentives or broad swaths o the population, potentially

sowing seeds o counterproductive confict and instability.

So is inclusive growth the best lens through which

to view and address the challenge o sustainable

development? The consensus at the Summit seemed to

avour taking a broader view o development than just

the growth rate o income per capita and the distribution

o that growth. There are myriad other indicators o

the quality o lie such as physical security, access to

education and health services, income protection or

the disabled, unemployed and elderly, access to clean

energy, enjoyment o a clean environment and gender

equity. The metrics exist, but there is a clear need toocus more attention on them.

Even during the current economic crisis, many countries,

rom Paraguay to India, have chalked up impressive rates

o growth. However, the benets to the lower echelons

o society oten seem inconsequential or at least slow to

emerge. Participants agreed that inequality, i let to ester,

could threaten national, regional and even global political

and economic stability. Words like revolution, chaos

and destruction o capitalism were mentioned during

the discussions, which pointed to Somalia, Aghanistan

and Haiti as states currently in the space between ragilityand ailure. Even in the case o robust democracies, it

was stressed that politicians who ail to heed the call or

improved living standards run the risk o being dumped at

the polls.

Disparities both within and between countries must be

considered, and national and global leaders will need

to do more than just tweak the current system. Theywill have to make deep structural changes that would

amount to a kind o revolution. Since the problem

maniests itsel on so many levels, in so many ways, it

needs to be tackled with a multiplicity o strategies. This

interlinked portolio approach would attend to the special

needs o the poor, children, women, the elderly, migrants,

tribal and ethnic groups, members o certain castes and

others. Early childhood and pre-natal care would come

into play. It would touch on the areas o health, education,

governance, population growth, micronance and

more. At the same time, the benets o good economic

opportunities must not be renounced just because theymainly benet those at the upper end o the income

distribution.

Environmental sustainability can no longer be traded o

against economic development; the two must go hand-

in-hand. Rather than look at the obligation to protect the

environment as something negative, it was suggested

that developing countries can leaprog rich countries in

terms o quality o lie by avoiding some o the excesses

and missteps o the latter. A clean and sae environment

cannot be a luxury available only to the privileged.

Finally, refecting a theme that recurred throughout the

Summit, as with most other pressing challenges acing

humankind, this is everybodys problem. No set o

stakeholders can solve it single-handedly. Government

must take the lead, but our political leaders can only

be successul i they can count on the ingenuity and

energetic cooperation o the business community, civil

society, academia and concerned people at large.



Economic Uncertainty

of a broader regional and global imbalances

Victor Halberstadt,Professor of Public Economics,

Leiden University, Netherlands;

Member of the Global Agenda Council on Fiscal

Crises

Risks: Economic Uncertainty

High debt levels and continued high deficits

Sovereign debt crises

Competitive quantitative easing by developed

nations

Currency realignment

Manipulated exchange rates

Rising protectionism

A permanent increase in economic volatility



A Volatile World

In the atermath o the global nancial and economiccrisis, key emerging economic risks include the

heightened threat o currency wars, scal crisis and

persistent global imbalances, as well as the resulting

economic uncertainty, in itsel one o the most pressing

challenges on the global agenda.

It was recognized that many governments are taking

active steps to strengthen particular sectors o their

economy, but such policies risk stoking protectionism.

Protectionism compromises growth, and many decision-

makers in the international community have recognized

that a trade war will ultimately disadvantage nearly

all stakeholders. This recognition has, by and large,

prevented the emergence o widespread, aggressive

protectionism; however, poorly designed capital controls

could pose an even greater long-term threat to economic

recovery.

Doubts also persist about the mitigation o systemic risks

in the global economy. Governments, which intervened

to save banks and other private sector entities, oten

transerred private-sector toxic assets to their own

balance sheets. Markets have resumed relatively normal

activity, but whether the undamental problems have been

addressed is another question. Imbalances in sovereigndebt and the ragility o investors aith in governments

contribute to economic uncertainty. The debt crisis in

Greece and Ireland raises the spectre o a new systemic

nancial collapse.

Capital allocation decisions must continue and,

increasingly, investments rom developed economies

have fowed into emerging markets. These markets

typically oer more dramatic growth and have, thus ar,

generated strong returns or many investors. However,

this trend contributes to economic uncertainty, as these

markets are associated with volatility and potentially newsystemic risks. In addition, growing demand in emerging

markets could drive up commodity prices, and sudden

price spikes o crude oil or other raw materials would

dramatically complicate economic recovery.

A number o global institutions have the power to

intervene, should these uncertainties threaten the

world economy. Two such institutions the G20 and

the International Monetary Fund (IMF) proved their

relevance in responding to the nancial crisis and, in

recent months, they have been restructured to be more

inclusive and refective o new sources o economic and

political power. However, Summit participants agreed it

remains unclear whether these reorms will be sucient

to retain legitimacy to manage a new crisis. Furthermore,

given high sovereign debts in many parts o the world,

traditional monetary and scal policy options are likely to

be unavailable.

These uncertainties paint a rather gloomy picture o

economic recovery, at least in the short to medium term.

One o the biggest determinants o global growth will

be political will. I individual nations and the international

community as a whole can muscle the political will to

reorm government spending, deleverage and adjust to

doing more with less, then many o these uncertainties

can be tamed. Fortunately, many policy-makers

around the world have shown their understanding o

the magnitude o these risks. In the EU, or example,

interventions that would have been unthinkable one yearago have already taken place, with nations recognizing

the collective need to stabilize the euro zone.



Fragile States and New Conflicts

If we are going to act, the earlier the better, because

theres more we can do when working with existing

already happened. Remember that inaction is also a

Sir John Holmes, Director,The Ditchley Foundation,

United Kingdom; Chair of the Global Agenda Council on

Humanitarian Assistance

Risks: Fragile States and New Conflicts

Further corruption and the abuse of power for

private gain

Greater capital flight

Large-scale disease pandemics

Food insecurity

Poor global support for weakened states

Increased havens for criminal and terrorist

activity

Greater nexus between population growth,

urbanization and unemployment

Rapid social change in areas of high

population growth

The political, economic and social

destabilization of fragile states leading to

conflict



Failing Governance

The increasing scarcity o natural resources, oodinsecurity, the nexus between population growth,

urbanization and unemployment, coupled with decreasing

development aid inows rom donors and illicit capital

outows rom ragile states, can urther destabilize

a number o nations in the medium and long term.

Economic and social disparities within and among ragile

states can also become powerul drivers o conict and

state ragility.

The international communitys traditional engagement in

ragile states, based on development aid and security

responses, has ailed in many respects. New models andnorms o engagement must be developed. Each state

is dierent, posing dierent challenges. Therein lies the

complexity no one-size-fts-all solution exists.

A revised concept o national sovereignty: The ability

o the international community to respond to situations

o state ragility has been limited by state sovereignty.

This is a complex dynamic paralleled by the doctrine o

promoting national interest typically in ragile states

there is no pursuit o genuine national public interest. The

Responsibility to Protect concept, based on the principle

that sovereignty is a responsibility rather than a right, is

just beginning to challenge the notion o state sovereignty,even when not much o a state to speak o exists. In

view o new global trends, it is necessary to re-examine

the concept o state sovereignty in the 21st century and

explore new models o shared responsibility.

Prevention and early action: An early and coordinated

response that considers the underlying causes is

crucial. Inaction is usually not an option because

untreated underlying issues will come back to haunt the

international community sooner rather than later.

The considered application o existing tools: The pursuito democracy through elections can trigger violence and

conict, particularly in nations where there are no loyal

oppositions, severely poor governance and institutional

defcits. Similarly, the pursuit o justice, or example

through International Criminal Tribunals, can be a short-

term irritant to peace, although it is critical to eradicate

the violence associated with ragile states.

Principles o engagement in ragile states: An important

principle o engagement in ragile states is do no harm.

Others include: intervene in an integrated way; ocus on

strengthening the government and civil society; intervene

and try to support the security sector i this sector

cannot be reormed, interventions typically ail; take

consistent, long-term approaches over time; and work

with the consensus o the international community and

neighbouring nations. With the increasing engagement

o new powers in ragile states, it is necessary to developnew norms o engagement between them and external

actors to ensure investment has positive impact on these

states.

The redesign o aid systems and new fnancing

mechanisms: Participants suggested that todays new

politics o austerity create opportunities to rethink the

modalities o aid, which need a radical overhaul. It is time

to look at new designs or aid and investment ows. As a

major tipping point or potentially ragile states, corruption

must also be tackled, along with the outow o capital

rom such states. This would allow the retention o home-grown capital or development.

The management o natural resources: Unless managed

in an efcient and accountable way, the proceeds

rom natural resources can uel conict and undermine

governance structures. The dual-key approach (shared

responsibility between the international and local

communities) can be applied to the management o

natural resource revenues in ragile states.

The enhancement o regional and local capacities:

Regional organizations and powers need to take more

responsibility to mitigate the risks o instability andeconomic disparity in ragile states. In considering the

challenges, participants also noted that cross-border

cooperation on issues such as water could create a

oundation or peace and economic growth.



Global Risk Management

Klaus Schwab,Founder and Executive Chairman,


Other Risks (identified weak signals)

The illicit economy: worth US$ 1.3 trillion in2009 and growing

A weakening free market system

Conflict contagion

Cyber warfare

The fragmentation of the Internet



Finding Opportunity

It was clear rom the discussion at the Summit on theGlobal Agenda that the 21st century is an age o risk.

It is a time when the interconnectedness o all things is

maniest in the tide o human aairs, and volatility the

expected change in state rom one day, or one minute,

to another has amplifed beyond control, leaving

organizations and individuals searching or new ways to

understand, manage, mitigate and respond to a variety o

global risks. This session provided a common platorm or

the discussion o relevant risk areas and catalysing new

opportunities or a coherent risk response.

Participants proposed a number o ideas that couldimprove the state o the world through a Global Risk

Management Leading Practices Exchange. The ideas

sought were real initiatives that, by pulling techniques

rom one practice area and applying them to another,

could have a noticeable impact on the identifcation

and management o a range o global risks. Examples

included applying fre-fghting techniques to the

management o fnancial risk or humanitarian disasters,

drawing rom logistics to improve disaster preparedness,

and applying catastrophe bond structures to other types

o fnancial risk. One participant suggested that the

best innovation in risk management would be or risk

managers to address risk without resorting to ormal

risk quantifcation using numbers. The ormalization o

quantitative risk management and ensuing responses

have, in some cases, resulted in an overall weakening o

systems by solving or one specifc risk area as opposed

to understanding the interconnected nature o systemic

risk areas.

The concept o mutual risk was discussed as applied

in Internet security where websites mirror each other

so that, i one is attacked, it is supported by the very

web o mutual dependence that makes much o our

modern inrastructure very vulnerable. Under a mutualrisk programme, countries would take responsibility or

deending a web o others, logistics providers would

support those that had lost distribution nodes or suered

other losses, companies would provide a network o

support or competitors in the sure knowledge that the

same would be provided or them were circumstances

dierent.

The ormalization o a model o social loss was also put

orward: a risk can be valued by the dierence between

the wealth o society had the risk not materialized, and the

post-risk world what would have happened versus whatactually happened. Under this model, risk management

can be categorized into advance mitigation, the

preparation o response and the preparation o recovery.

Other ideas included a single open inormation source,

a wikidata, ood stockpiling, a neutral risk assessment

that minimizes hype and complacency, a global riskmanagement commons, cross country real-time

surveillance o emerging and re-emerging inectious

diseases, and changing behaviour through the creative

application o fnancial incentives.

Participants agreed that resilient solutions need to be

based on the power o interdisciplinary thinking the

ability to apply ideas and techniques rom one area o

human endeavour to another. Based on the importance

o a comprehensive, global, multistakeholder approach,

participants elt the World Economic Forum, with its

ability to help apply private sector principles to socialgoals, could acilitate the real and pragmatic prospect o

providing better understanding and concrete responses

to the chaotic world o global risk. The frst step in this tall

order, which will also help advance the global rebalancing,

is the creation o the Risk Response Network,announced at the Summit on the Global Agenda in Dubai.



The World Economic Forum

Risk Response NetworkDuring the Summit, the World Economic Forum

introduced the Risk Response Network, a new initiativedesigned to bring the worlds foremost thought leaders

together with top policy and decision-makers to better

understand, mitigate and respond to global risks.

The Network of Global Agenda Councils will be an

integral part of the new Risk Response Network,

serving as an intellectual backbone and providing

strategic insights to strengthen risk resilience in a worldcharacterized by much higher volatility and much greater

interdependence.

The Risk Response Network

The Risk Response Network (RRN) brings a rigorous

approach to addressing the complexity of risk leaders are

facing and enables them to capture the upside of those

risks. It offers:

The most compelling insightsDrawn from the World Economic Forums own

knowledge generation and insight, including theGlobal Agenda Councils and a network of the

worlds top universities and private sector content

providers

The most relevant global decision-makersThrough a new and unique community of Risk

Officers from top corporations, governments and

global risk regulating bodies

The most suitable tools and servicesBy developing proprietary, custom-designed risk

analytics and risk management processes, to enabledecision-makers not only to better understand key

risks in depth and in context, but also to respond to

them proactively and to mobilize quickly in times of

crisis

The discussions at the Summit on the Global Agenda

2010 highlighted the need for a preparatory, analytical

and highly practical function for the global community

to improve global risk management and, with it, the

state of the world. Global Agenda Council Members will

contribute to the RRN on an ongoing basis.

The RRN aims to build on these insights over thecoming months and launch a series of initiatives and

workstreams focused on a variety of global risks.

We hope many of you will join the World Economic

Forums initiative to collectively better understand and

respond to the new world of risk.


33/36Outlook on the Global Agenda 2011 | 33u e

Combiningthe mostcompellinginsights

with themost relevantglobaldecision-makers

using themost suitabletools andknowledge

Risk

Response

Network

Building upon

the Forums

key pillars

Communities

Engagement

Insight

Impact

and develop risk-related

tools and knowledge

Risk Analysis

Risk Alerts

Rapid Response

Platorm

Risk Mitigation

Task Forces

we will orm

a new Community

o Risk Ofcers

Governments

International

Organizations

Business

1

2

3



Acknowledgements

This Outlook on the Global Agenda 2011 provides an

overview o the thematic discussions that took place

at the Summit on the Global Agenda and includes

a synthesis o Global Agenda Council Member

contributions and ideas rom the Global Agenda Survey

conducted this term.

The World Economic Forum thanks everyone who played

an important part in developing this report, particularly

the Chairs and Members of the Network of GlobalAgenda Councils.

The Forum is also very grateul or the generous supportprovided by the Federal Government of the United

Arab Emirates and the Government of Dubai orhosting the Summit on the Global Agenda 2010.

Last but not least, the Forum expresses sincere thanks

to the World Economic Forum colleagues who provided

their time, insights and continued guidance:

Founder and Executive Chairman

Klaus Schwab

Managing Directors

Robert Greenhill

Lee Howell

Adrian Monck

Gilbert Probst

Jean-Pierre Rosso (ex ofcio)

Richard Samans

Kevin Steinberg (ex ofcio)

Alois Zwinggi

Global Agenda Council Team

Martina Gmr, Head o the Network o Global Agenda

Councils

Guillaume Amigues, Research Analyst

Olivia Bessat, Knowledge Manager

Lina Boren, Research Analyst

Tareq Bouchuiguir, Research Analyst

Kieran Gopaul, Research Analyst

Ethan Huntington, Research Analyst

Sverine Kaeser, Team Coordinator

Patrick McGee, Senior Research Analyst

Liana Melchenko, Associate Director

Tiany Misrahi, Research Analyst

Oksana Myshlovska, Associate Director

Martin Ngele, Associate Director

Miguel Perez, Nominations & Member Engagement

Manager

Florian Reber, Research Analyst

Aida Rehouma, Senior Community Associate

Editor

Fabienne Stassen, Head o Knowledge Capture

Publication, design and layout

Kamal Kimaoui,

Associate Director, Production and Design

Yoren Geromin, Designer, Kissing Kourami

Visualization and digital content

Michael Hanley,

Editorial Director, Communications

Scott David, Inormation Design Consultant

Moritz Steaner, Freelance Inormation Visualizer


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state o the world by engaging leaders in partnerships

to shape global, regional and industry agendas.

Incorporated as a oundation in 1971, and

based in Geneva, Switzerland, the World

Economic Forum is impartial and not-or-proft; it

is tied to no political, partisan or national interests.

www.weorum.org

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Outlook on the Global Agenda 2011