An exit sign is pictured at the Frankfurt stock exchange, on Jan. 15, 2015, as global markets were thrown into turmoil by a shock move by Switzerland to abandon its three-year cap on the franc. (Reuters Photo/Kai Pfaffenbach)

Commentary: WEF Meets at Potential Historical Crossroads

BY :ANDREW HAMMOND

JANUARY 19, 2015

The 2015 World Economic Forum (WEF) begins on Wednesday in Davos, Switzerland. The event has become a premier annual global forum for political and business leaders with scores of presidents, prime ministers and senior executives this year in attendance from Chinese Premier Li Keqiang to executive chairman of Google Eric Schmidt.

The key theme of this year’s summit is what WEF calls a “new global context” for decision-making. Participants will debate whether the complexity, fragility and uncertainty of the contemporary world mean that, in effect, we live in a new era of profound and disruptive “political, economic, social and technological transformations.”

On the political and economic fronts, the last few years have certainly witnessed a remarkable period of fragility and uncertainty driven, in part, by the impact of the post-2008 international financial crisis. Perhaps most eye-catching has been the political revolutions, popular uprisings and protests in emerging markets.

This spans last year’s change of power in Ukraine, and the demonstrations in Brazil — the largest in the country for two decades. And, of course, the remarkable developments since 2010 in North Africa and the Middle East, often called the ‘Arab Spring,’ including the civil war in Syria; revolutionary changes of power in Egypt, Tunisia, and Libya; transfer of power in Yemen; plus demonstrations and uprisings in Turkey, Iran, Algeria, Bahrain, Jordan, Morocco and Oman.

However, political instability has not been restricted to emerging markets. Many governments in the developed world have been voted out of office, in part, because of economic downturn and/or austerity measures.

In Europe alone, millions have taken to the streets and administrations in more than half of the 27 EU states fell or were voted out of office from Spring 2010 to 2012 alone. Within the core euro zone, 11 of 14 governments collapsed or lost elections during that same two years.

This disparate range of disruption, from Rio to Athens to Cairo, has reportedly been described as “a revolutionary wave, like 1848” by Sir Nigel Inkster, former director of operations for the UK Secret Intelligence Service. Others have compared the situation to 1914, 1968 and 1989.

Whatever the validity of these historical analogies, it is clear that there are some genuinely new factors to the post-2008 period, including the role of social media and other technologies. Moreover, this so-called “wave” of political instability has diverse origins with economic issues not the only driver.

Thus, unrest in the Middle East has often stemmed from deep-seated political and socio-economic discontent that pre-dates the financial crisis. Post-2008, however, factors including liquidity crunches, increased food prices, and unemployment spikes, have exacerbated these longer-standing grievances.

In the EU, the role of economic downturn and austerity has been central to unrest in numerous countries, especially those most impacted by the euro-zone crisis like Greece and Spain. Even here though, unrest has tapped into pre-existing disquiet with established political parties and systems.

Going forward, a key question is whether political instability will now tail off, especially if economic recovery takes firmer hold in much of the world in coming years. While this is possible, there are at least two sets of factors that will continue to fuel protest and uprising in some countries.

Firstly, there are drivers, unrelated to the financial crisis, that have been common to much of the political unrest, that will endure. This includes the disruptive role of social media.

There remains debate about how instrumental social media has been in fomenting political instability. However, whether one sees it as an essential component that translated discontent into concrete action, or accentuated what was already-inevitable, indisputably it has played an enabling, mobilizing role that may only grow as technology advances and proliferates.

Secondly, even if the worst of the financial crisis has now passed, its consequences endure, especially for the young. People aged 15-24 constitute less than 20 percent of the global population, but approximately double the percentage of the unemployed. This puts many at risk of long-term damage to their earnings potential and job prospects, fueling discontent.

Youth unemployment in numerous Middle Eastern and North African countries is above 50 percent. In the Middle East, the problem is acute because it has the world’s biggest youth bulge comprised of educated people. Moreover, around five and a half million people in the EU aged 15-24 are unable to find work (around 20 percent) as career opportunity structures have been swept away for too many. This has given rise to concern, including from German Chancellor Angela Merkel about a “lost generation,” especially in Greece and Spain where youth unemployment is well over 50 percent.

Taken as a whole, it is premature to claim, as some have done, that we have entered a new era of global revolution that is here to stay. Indeed, overall political instability may decline if the world economy enters a sustained phase of stronger recovery in coming years.

However, there remains significant prospect of unrest. While circumstances will vary from country to country, instability will potentially be fueled not just by legacies of the financial crisis such as higher youth unemployment, but also longer-standing political and socio-economic discontent which social media is giving fresh impetus to.

Andrew Hammond is an associate at LSE IDEAS at the London School of Economics, and a former UK government special adviser.

SHARE