16 Dec, 2011

World Economic Forum Report Cites Danger of “Widespread Public Mistrust”

Imtiaz Muqbil

The rich man’s club known as the World Economic Forum has finally awoken to the unpredictable, unstable and insecure world its own elitist members have helped create. A report entitled “Outlook on the Global Agenda 2012” released on 12 December 2011 talks about the “rollback of globalisation,” the possibility of more civil and social unrest, “the worst economic crisis since the Great Depression,” “stresses on natural resources and accelerating climate extremes,” “widespread mistrust in public institutions,” “examples of political paralysis,” “decision-making gridlock in the world’s largest markets,” “a vacuum of leadership on global issues” and “significant health, economic, social, political and ecological challenges” posed by rapid population growth in many countries.

In an introduction to the report, Børge Brende, Managing Director of the Geneva-based WEF, says that  “Optimists are likely to see 2012 as an important historic juncture when the shape of the global frameworks that will help humanity through the 21st century started to become clear. It is a year when the world will begin to come to terms with a new political, economic and technological order that requires new approaches to problem solving, new models for the conduct of human affairs, and new ways of relating to each other and the world in which we live. If we are to thrive as a global community of almost 10 billion – the projected population by 2050 – these new models are not optional, they are an absolute necessity. Human ingenuity got us into this mess, and it will get us out.”

The Outlook on the Global Agenda 2012 is the annual publication of the Network of Global Agenda Councils, which the WEF says consists of “more than 1,200 influential leaders from government, business, civil society and academia.” Each of the 79 Councils includes 15-20 international experts who meet regularly to “propose innovative solutions to major global, industry and regional challenges.” It claims to “include ideas and models designed by international experts to help leaders deal with new, and still forming, political, economic and technological systems that require revised approaches to problem solving, new models for the conduct of human affairs and improved techniques for interpersonal and international relations.”

Some of the key comments admit to the deteriorated status of public trust. Says the report, “The world continues to suffer from economic disruptions and is at risk of a major slowdown. The Eurozone debt crisis, US debt downgrade, growing trade imbalances, rising unemployment and distorted financial markets paint a gloomy picture. The series of crises over the last few years, and governments’ response to them, have brought to a head the lack of trust in public and private sector leadership. This crisis in confidence has been building over decades as the post-World War II global order became increasingly obsolete and unable to cope with interconnected, complex global issues and trends. With the rise of income inequalities and social tensions across the globe, discontent with the current economic situation is obvious.”

According to the report, “2011 will go down in history as a year in which the economic and financial crisis parlayed into a serious crisis of global political leadership. After exhausting the monetary and fiscal remedies at hand, governments of advanced economies lost agility and capacity to deal with the crisis. Overwhelmed with domestic pressures, governments struggled to effectively coordinate their actions and forge cross- border solutions. As a result, there has been a wholesale loss of trust in political institutions. According to a recent global survey, respondents in half of 99 countries surveyed say they do not have confidence in their national governments.”

The report adds, “Public institutions have a widespread trust problem. They are perceived as serving their own needs rather than the public interest. They have been seen as incapable of dealing with the economic and environmental crises, delivering sustainable economic growth and jobs and levelling rising inequalities. Eroding trust in governments and markets further weakens the outlook for economic recovery. In the long term, this may result in greater civil unrest, political instability and extremism.”

In a section on “Restoring Confidence,” the report indicates how deep the trust-deficit goes. It says, “The concurrent economic and political crises have called into question not only the structure of modern capitalism as a way to organise society, but also the very nature of democracy and elections. Elected politicians are increasingly not trusted to act in the public interest. Checks and balances, accountability and transparency mechanisms seem to be broken to various degrees in countries around the world.

“Currently, the world’s largest economies tend to be structurally biased towards the short-term. Strong pressure for short-term earnings growth means many companies optimize quarterly results over meeting the long-term needs of customers and communities. Short-term electoral cycles mean governments prioritize the quick over the wise. One of the consequences of this short-termism is a chronic loss of trust in institutions, from governments to corporations.”

It adds, “Trust needs to be rebuilt among partners in the global economy. The integrity and resilience of a region or the global economy as a whole are only as strong as the trust between partners – directly proportional to the capacity of each to adhere to commitments, enforce rules and regulations, and implement the structural reforms necessary to align with the accepted framework. While national solutions must meet regional and global standards, commitments cannot go beyond what any nation that subscribes to the framework is capable of accomplishing.

“Against this backdrop, the lack of confidence in global, national and institutional leadership distorts markets and leads to the failure of coordinated decision-making. Uncoordinated policies affect many countries and worsen global imbalances. As such, new models are needed to meet these challenges.”

The report also warns of the impact of the changes in the global geopolitical sector. It says, “The new confidence of the South and emerging economies is an unpredictable force. Long gone are the G77 days when developing nations focused their coordination on developing country priorities. Today’s Southern confidence is far more nuanced and realpolitik – witness the calls to prudence and order from emerging economies to industrialized nations, or the BRICS insistence that Europeans approach the IMF for debt relief under the same conditions they faced in the past.

“South-South coordination will flare up in multilateral contexts such as WTO rounds, the G20 Mexican presidency and the upcoming Rio+20 Summit. As 2011 eroded Western powers’ moral authority, emerging economies may feel emboldened to refuse formulas or solutions once purported as sound, thereby shaking the foundations of certain international organizations and arrangements.

“Multilateral fora will grapple with the increasing pressure of Southern confidence and ambiguity, especially the G20, which will face festering doubts over its ability to seize the day. Meanwhile, pressing negotiations over new global governance schemes have lost momentum in the face of these new arrangements – regionalism and coalitions – which provide some results. In addition, budding democracies may be unable to help noticing the tarnished sheen of older democratic systems that have produced mixed results for equality, social welfare and education.”

A synopsis of the six key challenges identified by the World Economic Forum’s participants in the Summit on the Global Agenda, which convened October 2011 in Abu Dhabi:

1.           The Global Economic Outlook: Dominated by the crisis in the Eurozone, economic discussion is driven by the state of sovereign balance sheets. In 2008, when developed country governments stepped in to support their banking systems through the financial crisis, they brought the problem onto their own balance sheets. The world’s largest economies are now facing sovereign debt crises, and this at a time when many countries are facing slow or negative growth and significant levels of unemployment. As a result, 2012 is likely to see increasing instability due to the absence of a sound and globally accepted financial regulatory system, lack of confidence in market participants or facilitators, and speculation.

2.           Global Power Shifts and Emerging Markets: Economic and political power is continuing to move from North to South and West to East. The transition is weakening the multilateral system of global governance structured on international institutions, and encouraging the rise of regionalism across many domains of international relations, including security, trade and finance. 2012 will see accelerated transfer of influence from traditional state-centred institutions to coalitions of the willing and non-state actors, manifested in diplomacy and action by networks of actors and regional organizations. These trends reveal a shift from large, expensive, institutional power to small, low-cost, unpredictable and grass-roots sources of power, such as the Arab Spring or the Indignados and Occupy movements.

3.           Inclusive Growth and Employment Creation: Persistent and sticky unemployment has become the most significant economic and political issue faced by leaders across large swathes of the world. Unemployment is a manifestation of a number of structural faults: growth is too often achieved in boom/bust cycles; global population is rising; the divide between rich and poor continues to widen; and there is an increasing gap between education, skills and jobs.

4.           Political Entrenchment and Multistakeholder Governance: Faced with the worst economic crisis since the Great Depression, political systems in the United States and Europe have been found wanting. Decision-making gridlock in the world’s largest markets has pushed global systems to the brink. Meanwhile, as governments around the world have turned inward to focus on solving domestic economic and social issues, a vacuum of leadership on global issues has been growing. Political institutions are faced with a critical loss of public trust, which is amplifying the need for direct action on behalf of a disenchanted and often desperate public. With weakening of states, new mechanisms such as multistakeholder partnerships in various forms and at different levels are expected to play a bigger role in delivering public value.

5.           Natural Resource Scarcity and Climate Change: Stresses on natural resources and accelerating climate extremes will increasingly impact economic development and growth in many countries. Economic pressures will encourage innovation in sustainable growth technologies and models, but governments will come under pressure to set a visionary agenda for the 21st century at the UN Conference on Sustainable Development in Rio de Janeiro in June 2012.

6.           The Digital Revolution: The Internet has become a key pillar of global prosperity. Work, leisure, consumption and policy decisions, supply chains, safety systems and communications – every aspect of modern life is shaped by the continually evolving digital world. But the infiltration of digitalism into human affairs has brought peril as well as prosperity. Non-state actors are challenging the enforcement capacity and legitimacy of the state in this digital environment. Centralized groups and hierarchies are moving towards more distributed networks, representing a shift in the balance of power. Moves by governments worldwide to tighten control over cyberspace are exacerbating tensions tied to citizens’ privacy, freedom of expression and demands for more transparency. Social media and the need for security are generating a move towards a more compartmentalized and fragmented Internet.

Complete report available free here at http://reports.weforum.org/outlook-2012