I wouldn’t want to be Mr. Trump. Not for all the tea in China (although from Friday, I hear he will be mandating that ‘all that tea must be made in the US from now on’).
I wouldn’t want to be Mr. Trump, because I’ve just read the 2017 Global Risks Report, released last week by the World Economic Forum. Managing the multitude and magnitude of risks in the report will need thought, care, attention, leadership and policy responses from him as head of the most powerful nation on earth. As an aside, I use the reports to provide strategic background to crisis and resilience scenarios that I develop for exercises and workshops for clients. In the past, they’ve also provided excellent context for Enterprise Risk Management (ERM) work.
So what are the risks that may be keeping POTUS Donald Trump up at night?
The top four strongest risk trends in the 2017 report are ‘rising inequality of income and wealth’, ‘polarisation of society, especially among older generations’, ‘climate’ and ‘cyber dependency’. Risk trends pull together a basket of specific risks and the higher the number and importance of those contributory risks, the stronger the trend.
Looking at the impact of specific risks (and there’s certainly reference to a ‘water crisis’, but that’s only risk number three, in terms of impact). Top and second place go to ‘weapons of mass destruction’ and ‘extreme weather events’, fourth is ‘major natural disasters’ and finally, ‘failure of climate change and mitigation’.
In terms of likelihood, the top risk is ‘extreme weather’, second is ‘large-scale involuntary migration’, then ‘major natural disasters’ followed by ‘large-scale terrorist attacks’ and finally ‘massive incident of data fraud or theft’.
It seems to me that many of the environmental and social risks, could be rooted in, affected by or the result of climate change. Extreme weather, water scarcity and some major natural disasters and some triggers for migration are all connected with climate change, so it is concerning that the new POTUS intends to roll back on the Paris Climate agreement.
When combining most likely/biggest impact risks, then ‘interstate conflict’ and ‘unemployment or underemployment’ are consistent features in BOTH the 2016 report and 2017 report. These are both big enough issues to sit firmly on Mr. Trump’s desk, where a predecessor displayed a plaque stating ‘The buck stops here’.
Interstate conflicts and proxy wars are already flaring in the Middle East and are drawing in US and other western (NATO) forces, whether Mr. Trump thinks NATO is up to the job or not.
‘Making America Great Again’ is the theme of this presidency and there seems to be a risk is that the ‘greatness’ could be made at the expense of relations with other countries like China and Mexico.
25 million jobs a year
A previous Chinese president in the 2000’s said what kept him up at night was the ability of the economy to grow at a sufficient rate that it created 25 million jobs a year. Economic growth and the ability to create those jobs affects the government’s ability to maintain order and close inequality gaps in the country. But as China moves from a so-called ‘cheap labour arbitrage country’ to a high-tech, high automation exporter, they will need to cut a win/win deal with the US that saves face for both parties and doesn’t precipitate a mutually damaging trade war.
86% of all US jobs lost in the decade from 1997 were lost to productivity, not trade
And it’s a war that really needn’t be fought. According to the economists Michael Hicks and Srikant Devaraj, 86% of manufacturing job losses in the United States between 1997 and 2007 were the result of rising productivity [a part of which was achieved through automation], compared to less than 14% lost because of trade (see page 20 of the 2017 Risk Report). Making America Great Again need not to be a regressive step into Luddite protectionism, even if AI, robotics and biotech will require regulation.
If it is to remain competitive, the US will also need to actively manage the inevitable disruptive effects of automation that the Fourth Industrial Revolution brings. The promise of on-shoring or re-on-shoring jobs to the US, allegedly at the expense of lower cost economies is a delicate juggling act – if not purely smoke and mirrors. Create too many blue- and white collar jobs in the US that can be done by automation and robotics and the economy risks being uncompetitive.
A partial response to this challenge could be regular retraining of older workers in industry and commerce – so they continue to contribute to taxes, rather than become a drain on the social security system – should become the standard operating practice for all companies and could be supported by tax breaks. High value-added work will always be needed and will be well-paid, but people will need to be trained on an ongoing basis to do it.
Win, win, win…
Part of the solution should include investment in low carbon technologies, including solar, wind, hydro and electric mobility, all of which are getting huge attention and investment in China. The US could also improve its energy resilience by making additional investment in alternative sources of power, aside from fossil fuels, and retraining older workers to install, service and run new energy projects. Low carbon tech could create a ‘win, win, win’ for the economy, jobs and the climate and in doing so positively mitigate some of the key risks highlighted by WEF.
Regardless of whether the future is low carbon or high carbon, you just have to look outside the top 10 headline risks to find some consequences of getting the response to these key risks wrong or too late or weak. The ‘failure of a financial mechanism or institution/fiscal crisis’, ‘failure of national governance’ and ‘profound social instability’ all vie for a position in the top 10 risks and could jump to the top spot.
But who knows what will happen, when and how? After all – in 2016, few pundits or risk reports predicted that Brexit would become a reality, or that Donald Trump would be elected President, or that 5,000-1 outsiders Leicester City (a UK football club, round balls) would win the Premier League title.