Last week, I discussed five long-term drivers of the world economy — demography, climate change, technological advance, the global spread of knowhow and economic growth itself. This week I will look at shocks, risks and fragilities. Together, I suggest, all these shape the economy in which we live.
A “shock” is a realised risk. Risks, in turn, are almost all conceivable. In Donald Rumsfeld’s helpful phraseology they are “known unknowns”. But their likelihood and severity are unknown. We are surrounded by such risks — further pandemics, social instability, revolutions, wars (including civil wars), mega-terrorism, financial crises, collapses in economic growth, reversals in global economic integration, cyber-disruptions, extreme weather events, ecological collapses, huge earthquakes or eruptions by super-volcanoes. All of these are imaginable. The realisation of one raises…
