The Global Risks Report 2024

Stalled living standards As the livelihoods and well-being of individuals come under threat, fiscal space and political appetite will interact to shape the response of governments in both advanced and developing economies. If these economic transformations are not managed carefully, related economic hardship could mean that metrics of human development – from poverty to access to education and healthcare – recede for large swathes of the global population. And if standards of living are not preserved for the current and next generation, societal and political dynamics could radically shift in many economies. As outlined in last year’s Global Risks Report (Chapter 2.6: Economic stability), competing demands for investment mean that few countries are likely to have the fiscal headroom to invest in human capital for the longer term – in education and healthcare systems, components that are fundamental to the realization of economic opportunities. This will be felt most acutely in the most vulnerable markets, which as previously noted, could face a potential investment crisis with corrosive long-term impacts. As fiscal space is squeezed and private finance remains constrained, these markets will be increasingly forced to choose between, for instance, paying external debt, providing a strong and immediate safety net for struggling individuals, investing in the future growth dividends offered by climate action and technological development, managing and adapting to climate change, or shoring up the longer-term adaptive capacities of human capital through health and education systems.In this environment, public demands for more interventionist governments may recalibrate fiscal policies, with governments facing increasing pressure to implement policies that prioritize generous safety nets and employment stability. Support for technological (automation or AI) taxes and wealth redistribution could grow. 101 Generally, however, given debt sustainability concerns, the ability of governments to afford to mitigate the risks of climate- and AI-related job displacement on individuals – through higher unemployment benefits, more generous minimum wages or subsidies for retraining for example – will be driven partially by related productivity enhancements, leading to growth in GDP and tax revenue. As labour markets bifurcate, the ability of governments to support their workforces through these radical transformations, and maintain developmental progress and standards of living, could diverge in turn. In economies where government efforts are – or are seen to be – inadequate, populist movements will capitalize on the disillusionment of the lower- and middle-classes, who see very little opportunity in their own and their children’s future. Although it may equally encourage innovation and entrepreneurship, an aspiration gap will fuel frustration. Digitally connected people in developing and advanced economies alike will see a better life elsewhere, but limited economic opportunities in their own environment will prevent them from accessing this level of living standards. Even small shifts in access to income and opportunity – perceived or actual – may spark protests and civil unrest and deepen anti-immigration sentiment and hate crimes against migrant populations. In the most extreme scenarios, discontent with the status quo could even push societies towards more open rebellion and calls for regime change. Nick Van Den Berg, Unsplash Global Risks Report 2024 66