Disruptive shocks to the global economy are likely to become more frequent and cause greater economic and societal hardship, says a new report by the Organization for Economic Co-operation and Development (OECD).
According to the report issued 27 June, 2011, the economic spill-over effect of events like the financial crisis or a potential pandemic will grow due to the increasing interconnectivity of the global economy and speed with which people, goods and data travel.
“Future Global Shocks” analyses five potential major risks in the years ahead: a pandemic, a cyber attack disrupting critical infrastructure, a financial crisis, socio-economic unrest and a geomagnetic storm.
The growing threat of a pandemic was highlighted by the SARS outbreak in 2002, which spread quickly from Hong Kong around the world as travellers caught the virus and then flew home. The increasing number of heavily populated megacities, notably in Asia, exacerbates the risk, particularly in business travel, tourism and migration hubs like Dhaka, Manila and New Delhi.
New antibiotics are desperately needed to keep pace with the rising development of bacteria that are drug-resistant, according to the report.
The OECD says that tax incentives and fast-tracking patents may encourage firms to invest, given the very high costs of antibiotic drug development.
The report also details how wildfires that destroyed a fifth of Russia’s wheat crop in 2010 led to price spikes in global food markets, which eventually triggered social unrest in the Middle East. It shows how Russia’s internal policy response to fears of domestic food shortages – a controversial export ban – combined with floods in Australia and Canada to generate price hikes worldwide. Experts today recognize that high food prices provided a tipping point for the protest movements that have raged across the Middle East and North Africa.
While large-scale disasters provide a point of reference for government planning, observes the report, global shocks would have far more dramatic consequences. They will require new approaches that improve international co-operation and co-ordination, the OECD says. Policy makers should:
· Step-up efforts to acquire and share data and a variety of simulation models to better anticipate and assess potential shocks;
· Increase resources allocated to surveillance and monitoring of threats and early warning systems;
· Take an internationally co-ordinated approach that reduces or stops threats before they proliferate worldwide;
· Improve international co-operation and incentives to promote diversity in critical systems;
· Enhance multi-stakeholder partnerships, information sharing, consultations, capacity building stress tests, and drills.