Asked to indicate the major economic risks facing the world, World Economic Forum survey participants were given 10 concerns. Before reading their priorities, you might like to form your own economic risk list. Just reorder the following challenges in terms of what you believe our national leaders should consider their top policy priorities.
- government debt
- high and sustained unemployment
- extremely volatile energy and agriculture prices
- a sudden decline of a leading emerging economy
- major systemic financial or currency failure that ripples across national borders
- prolonged infrastructure neglect
- liquidity crises caused by financial institutions with inadequate resources
- widening income disparity
- unforeseen negative impact of regulation
- unmanageable inflation or deflation
The actual survey had 5 categories (economic, environmental, geopolitical, societal, technological), each with 10 components and 4 questions. These were the 2 basic questions:
- In your opinion, how likely is each of the following global risks to occur over the next 10 years? (scale of 1/very unlikely to 5/almost certain)
- If they were to occur in the next 10 years, please provide your best estimate of the total global impact that each of these risks would have. (scale of 1/low to 5/high)
The Economic Lesson
In the 2012 report, respondents indicated that income disparity and government debt were most likely but that systemic financial failure and government debt would have the greatest impact. Looking back, although the questionnaires asked for long-term concerns, the lists changed each year. For example, concern with the decline of a developing economy, China, was close to the top of 2008’s priorities and an oil price shock was high for 2007.
Discussed by economist Timothy Taylor, perhaps the changing priorities reflect the absence of pro-activity. Instead these “leaders” are responding to existing crises.
An Economic Question: How would you hope that fiscal and monetary policy would respond to one of the top economic risks you cite?