By Georgi Kantchev
LONDON--The rising income gap and growing rifts in Western societies that led to the election of Donald Trump and the Brexit vote are the main global risks, according to a report by the World Economic Forum ahead of its annual forum in Davos next week.
Climate change and technological disruption were also listed as important risks in a survey of 750 law makers, business leaders and academics carried out by the WEF, the group that organizes the Davos meeting.
Those risks pose a threat to global economic growth, the report said.
"Urgent action is needed among leaders to identify ways to overcome political or ideological differences," said Margareta Drzeniek-Hanouz, an executive committee member at the WEF, at a press conference in London.
The report is meant to shape the agenda of the Davos meeting, in which global corporate and political leaders will descend on the Swiss ski resort.
The report, which analyzed global risks and trends over a 10-year horizon, cited Mr. Trump's election and Britain's June vote to leave the European Union as indications of rising political discontent and a broad backlash against globalization.
That endangers the world economy, the report concludes.
"The momentous political changes in 2016 raised worries about the health of liberal democracy that has underpinned global prosperity," Cecilia Reyes, chief risk officer at Zurich Insurance Group, said at Wednesday's conference. "Now most of the political establishment is looking at globalization as the problem."
In recent months, solid global economic data and hopes for higher growth under President-elect Donald Trump have powered a broad market rally. The S&P500 has risen by around 6.5% since the U.S. election in November and the dollar has hit 14-year highs.
Rising income inequality and growing antiestablishment populism mean "we may have passed the stage where (economic growth) alone would remedy fractures in society," the report said.
"Reforming market capitalism must also be added to the agenda," it said.
Globally, inequality between countries has been decreasing over the past 30 years, as the developing world catches up with advanced economies.
Since the 1980s, though, the share of income going to the wealthiest 1% has increased in a number of major advanced economies, including the U.S., Canada and Australia, the report said.
That process has been exacerbated by the slow pace of economic recovery since the financial crisis, which has also contributed to antiestablishment sentiment in advanced economies.
The report also highlighted so-called technological disruption as a major risk, arguing that fields such as artificial intelligence and robotics could threaten global stability if their development isn't properly governed.
Environmental challenges were also seen as a growing risk. Those polled cited extreme weather events, failure to mitigate climate change and water shortages as being strongly interconnected with other global risks such as conflict and migration.
Write to Georgi Kantchev at email@example.com
(END) Dow Jones Newswires
January 11, 2017 09:21 ET (14:21 GMT)
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