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Unrest 'linked to inequalities worldwide'

THE World Economic Forum's chief economist has linked the Scottish independence debate to growing concern about inequality around the globe.

The forum, whose annual meeting in Davos takes place next week, warned that the chronic gap between the incomes of the richest and poorest citizens is seen as the risk that is most likely to cause serious damage globally in the coming decade.

It cautioned that this, and other factors, could feed through into political instability.

The survey of 700 global experts from business, government and non-governmental organisations, found that fiscal crises stemming from overly indebted governments were the risk that could potentially do the most harm.

Asked how the Scottish independence referendum sits within its assessment of global risk, World Economic Forum (WEF) chief economist Jennifer Blanke said: "It is something we are seeing in several countries."

She added: "It is not just the UK. It is also Spain.

"It is very much linked to social instability, inequality, unemployment.

"The world is so linked that people see that things are different elsewhere."

In its annual assessment of global risk, the WEF said that macroeconomic risks, such as fiscal crises and structural unemployment and underemployment, are strongly linked to other risks such as rising income inequality and political and social instability.

Ms Blanke said that until the last decade, there had been a "sense" that the gap between poorest and richest was being closed, at least between states. But she said that events such as the Arab Spring in the Middle East, and unrest in Brazil and South Africa showed rising unrest linked to inequalities within countries.

"People are not going to stand for it any more," she said.

The forum is particularly concerned about a "lost generation" of young people with limited opportunities.

David Cole, chief risk officer at reinsurer Swiss Re, said: "This generation we refer to as 'lost': they are not lost because they tuned out. They are highly tuned-in. This generation is being lost because they are being left out."

The World Bank estimates that around 300 million people, a quarter of the world's youth population, has no productive work.

Meanwhile, a demographic "youth bulge" is bringing more than 120 million young people into the jobs market each year, most of them in the developing world.

Problems are also emerging in the developed world, the forum found, where young people leave higher education encumbered with debt, only to find it hard to progress beyond low-paid, low- skilled work.

Mr Cole said: "As a result of the financial crisis and globalisation, the younger generation in the mature markets struggle with ever fewer job opportunities and the need to support an ageing population."

Changing demographics, growing middle classes and fiscal constraints will place increasing domestic demands on governments, deepening requirements for internal reform and shaping international relations, the WEF believes.

John Drzik, president of global risk and specialities at insurer Marsh & McLennan, said: "We see countries acting more and more in their local interest and prioritising short-term domestic issues over longer-term global ones.

"We see the risk of this amplifying further with the presence of fiscal weaknesses in advanced countries and social weaknesses in developing countries."

This could make it hard to deal with emerging problems through global institutions.

"Our capacity to solve problems more generally is weakening," he said.

The survey identified extreme weather as another likely factor to cause systemic shocks, reflecting a perceived increase in severe conditions.

This shows a change of emphasis over the past few years.

Environmental risks, such as climate change, extreme weather and water scarcity, have become more prominent since 2011, while health-related risks such as pandemics and chronic disease have become less so. Concern about geopolitical risks has given way to worries about socio-economic risks such as income disparity and unemployment.

Cyber attacks are another prominent risk highlighted by the Forum.

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