Several days ago, we had the meeting of the World Economic Forum in Davos, Switzerland, which focused on the theme ‘The reshaping of the world: consequences for society, politics and business’.

This particular topic is exceedingly relevant given the shape the leading world economies are taking as they emerge from the very difficult international economic situation, which has been around since 2008.

It is becoming fairly evident that, although countries are gradually emerging from the recession (some of the top 10 economies are still deep in it), employment will not experience the same level of growth as the gross domestic product, the average person’s standard of living is likely not to improve, and the political class still has no inkling of what to do to counteract these developments.

The way to address unemployment is not through the public purse but through reforms

The debate in Davos also demonstrated this sense of helplessness, even if it was balanced by statements of good intentions.

The World Economic Forum also published earlier this month its 2014 report on global risks. And the areas that have been identified as risks have confirmed that we face a positive, albeit fragile, economic cycle that may not have a corresponding positive effect on society. In fact it is on these risks (mainly the economic ones) that I would like to focus on.

The risks that the WEF report considered to be high impact, high likelihood, are economic and environmental in nature.

However, the economic risks seem to be more critical than the environmental ones as they occupy the top two positions.

In order of priority they are fiscal crises in the key economies and structurally high unemployment/underemployment. Ano­ther key risk area in the top five is severe income disparity, which has been placed under the societal risks.

However, its origin and its solution are clearly economic.

Other economic risks are the failure of a major financial mechanism or institution, liquidity crises, oil price shock to the global economy, failure/shortfall of critical infrastructure and decline of importance of the US dollar as a major currency.

The risks of fiscal crises and structurally high unemployment are in fact interlinked. The space for manoeuvring in fiscal policy is very much reduced in those countries that need to address their public sector deficit. In previous recessions, governments could stimulate the economy through an expansionary fiscal policy. They can no longer use that tool in the same way as they have used it in the past.

Thus, the way to address unemployment is not through the public purse but through reforms, which will always take a long time to work through the system and generate the desired results. Moreover, such reforms are likely to attack certain privileges enjoyed by certain segments of society, which are no longer sustainable.

The high level of unemployment and possibly the reduction in incomes in real terms is then likely to produce further income disparity.

Again governments can do very little in this regard through fiscal policy and the discussion on whether the welfare systems as they are presently structured, are sustainable or not, is proof of this. Hence the helplessness I referred to earlier on.

In conclusion I would like to refer to the message sent by Pope Francis to the meeting in Davos.

He mentioned that modern business activities help to bring about improvements in people’s welfare in areas of healthcare, education and communications, even if the successes achieved have often led to widespread social exclusion.

He stressed the vital role that politicians and economists have in promoting an inclusive approach, which takes into consideration the dignity of every human person and the common good. This concern, Pope Francis wrote, ought to shape every political and economic decision but at times seems to be little more than an afterthought.

Given the current circumstances, mainly dominated by the need of governments around the world to put their finances in order and therefore their inability to pump money into the economy, the business sector must play a more crucial role to bring about greater well -being in society.

Pope Francis described business as a “noble vocation, provided that those engaged in it see themselves challenged by a greater meaning in life”.

The global risks identified by the WEF report are indeed very real. However, such risks will have a more severe negative impact if the business sector does not live up to this expectation to take into consideration the common good.

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