BUSINESS

How Widening Economic Inequality Could Shake The Whole World

Rapid advances in technology have the power to bring the world closer together -- or tear it apart.

DAVOS, SWITZERLAND -- Is the era of globalization coming to an end?

Just a few years ago it looked like we were moving toward what Indian physicist and activist Vandana Shiva called a "monoculture of the mind," dominated by Western values and lifestyles.

But business leaders are now worried that the idea of a single global market made up of like-minded consumers is starting to disintegrate as a result of widening inequalities and differing fundamental beliefs.

Experts say that rapid advances in technology are pulling the world in opposite directions and that the way that policy makers, businesses and civil society handle the extraordinary pace of change will determine the direction of human society.

On one side we are seeing that technology is creating greater transparency and stronger global networks. The recent unprecedented global agreement in Paris to seek to limit runaway climate change is also being hailed as an example of the ability of the world to act with one voice.

But on the other side of the equation, there are increasing numbers of people who feel disenfranchised and angry at the widening inequality between rich and poor, exemplified this week by Oxfam’s report that the richest 62 people are as wealthy as half the world’s population.

Klaus Schwab, chairman of the World Economic Forum, speaks during a plenary session ahead of the World Economic Forum in Davo
Klaus Schwab, chairman of the World Economic Forum, speaks during a plenary session ahead of the World Economic Forum in Davos, Switzerland, on Tuesday, Jan. 19, 2016.

Peter Lacy, global managing director for sustainability services at professional services company Accenture, says it is a misconception to think the world was ever on a linear path toward globalization and that there have always been regional and local variations.

But he points out that technological advancements, such as robotics, threaten to derail globalization if increasing numbers of jobs are eliminated and the rich continue to grow even more powerful.

“We face a stark choice of how we are going to use these new technologies,” he told The Huffington Post at the World Economic Forum's annual meeting in Davos. “Globalization is not dead, and the pace of change in digital transformation, which is increasing the connectedness of our global society, shows that is not the case.”

“But," he continued, "there is no doubt that we see inequality persist and some of these digital transformations threatening to exacerbate this problem within countries and between the developing and developed world. As a result, we are seeing plenty of backlash.

“Those people being left out have no interest in the ongoing march of globalization, and we are likely to experience a bumpy ride in the years to come," Lacy added. "How we manage the next 10 years will determine whether we see a greater pace of fragmentation or the ongoing benefits of globalization.”

Experts say that rapid advances in technology are pulling the world in opposite directions.

Business leaders across the globe also worry that the world is once again in danger of fragmenting.

A new survey of 1,400 CEOs from 83 countries by professional services firm PricewaterhouseCoopers showed that three-quarters expect increasing regionalization in trade, 83 percent predict differing fundamental belief systems underpinning societies, 59 percent expect multiple economic models and 81 percent see increasingly divergent systems of laws and liberties.

PwC says that the complexity faced by business leaders “isn’t just being shaped by economic and geopolitical trends. We believe there is a more fundamental shift taking place, namely from a globalizing world to one with many dimensions of power, growth and threats -- a transition that we call multi-polar.”

It argues that this return to localization and a devolution of power is likely to bring both threats and opportunities.

“Different points of view, exacerbated by economic insecurities, are certainly leading to more conflict," the report concludes. “But regional trading blocs, for example, can lead
 to better quality trade agreements and policies. There’s evidence that most business leaders, for example, are optimistic about deeper economic integration as a result of the Asia-Pacific Economic Cooperation (APEC).”

How we manage the next 10 years will determine whether we see a greater pace of fragmentation or the ongoing benefits of globalization. Peter Lacy, Accenture

Klaus Schwab, founder and executive chairman of the World Economic Forum, also says that we live in a time of great promise and great peril.

The WEF, writing about Schwab's new book, The Fourth Industrial Revolution, points out that “[t]he world has the potential to connect billions more people to digital networks, dramatically improve the efficiency of organizations and even manage assets in ways that can help regenerate the natural environment, potentially undoing the damage of previous industrial revolutions.”

“However, Schwab also has grave concerns," the WEF goes on to write, "that organizations might be unable to adapt; governments could fail to employ and regulate new technologies to capture their benefits; shifting power will create important new security concerns; inequality may grow; and societies fragment.”

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