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1. Introduction

After the general discussion of global risks, including their ranking based on probability, potential impact, and a combination of these two factors, the Global Risk Report 2014 discussed how the most interconnected of all 31 global risks is that of Global Governance Failure.

It then went into a discussion of how this “central risk” of Global Governance Failure is related to the following three sets of risks:
•Geopolitical and Societal Risks (Instability in a Multipolar World)
•Economic Risks (Generation Lost?)
•Technological Risks (Digital Disintegration)

This particular post goes into the second nexus listed above, the link between Global Governance Failure and Economic Risks.

2.  Economic Risks

The economic risks related to Global Governance Failure are fiscal crises and unemployment/underemployment, which in turn can lead to the societal risks of income disparity and political and social instability.

In the United States, in the run-up to the election in November 2013, there was a failure of governance in terms of maintaining measures that would decrease structural unemployment/underemployment.  According to Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities in Washington wrote in the New York Times on 11/01/2013, “the initial government response, both in terms of stimulus and credit market interventions, was actually strong and effective, though I well know and appreciate all the arguments about their shortcomings.  But though Keynesian stimulus was the most important antidote to the vast demand contraction in terms of helping innocent victims, government, by accepting the austerity doctrine, failed to keep it going long enough.”

3.  The Digital Natives …

Although the structural unemployment/underemployment issue effects all ages, the Global Risk Report talks about its effect on young people who came of are coming of age in the 2010s.   Rather than labeling them with the generic label of Generation fill-in-the-blank, I like the term “digital natives”, because it shows the relationship of the generation not to the generations before it, but to technology, particularly communication technology.

The digital natives have the positive qualities of being realistic, adaptive, and versatile, qualities they have developed by the virtue of necessity by having grown up in the shadow of the Great Recession after the financial crisis of 2008-2009.    The starkest reality they are facing is that of structural unemployment/underemployment, which is about twice as high in the developed economies as it is in emerging economies.    For those that are fortunate enough to find work, they often find the only opportunities open to them are unstable, low-paid and low-productivity jobs.

The best way to mitigate this structural unemployment/underemployment depends on the demographic you are focusing on:   for young people, education has traditionally considered the best way to ensure that you get a job.

4.  … are Restless

However, public financing for education has been cut back severely as a result of the fiscal crises affecting national, state and local governments.   This leaves two main routes for financing one’s education:   reliance on family, or reliance on credit.    Reliance on family has the consequence that economic inequality will perpetuate into the next generation.    Reliance on credit has the consequence that an entire generation will enter a condition of indentured servitude, and their depressed savings rate will have an adverse affect on future social safety net programs.

5.  How to Redirect the Coming Insurrection

One of the things I like about the Global Risk Report 2014 is it discussion of possible solutions or risk responses to the various risks that it reports about.   In response to the problem of structural unemployment/underemployment for the digital natives, the young people coming of age in the 2010s, here are some suggestions discussed in the report:

• High-speed Internet is opening up access to free or inexpensive quality online courses, allowing young people to update their skills
• Educational institutions and businesses need to work together to ease the school-to-work transition, preferably along the lines of the dual education system in Germany and Switzerland, which offers professional and vocational education in parallel, with internships and apprentice programs to place young people in potential jobs.
• Have those in positions of traditional governance engage young people through mechanisms opened up through the digital revolution.   The price of this engagement will be putting priority on the needs of young people in the current political agenda.

One example of the latter is Sen. Elizabeth Warren of Massachusetts, who is trying to devise solutions to the problem of the debt crisis among young people in the United States who cannot afford to repay their college loans due to no fault of their own, but their inability to obtain employment combined with the predatory nature of these loans.

For those who feel we cannot afford to pay for programs which reduce unemployment/underemployment, ask yourself the cost of social inequality in the form of riots and extremist movements that are populated largely by those that consider themselves as a “lost generation”.

The next post will discuss the technological risks related to the lack of global governance.

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