January 24, 2013
World business and government leaders are gathering here for this year's World Economic Forum meeting -- titled "resilient dynamism." But no one is fooled by the consciously upbeat title. These are sour times, with the global economy moving sideways at best, and flocks of black swans swimming on the horizon – from threats of social unrest to killer bacteria to deadly natural disasters that appear to be growing in frequency and cost.
It's a good the town's Promenade hums with well-lubed parties every night because nerves are frayed, with words like disruption and fragility dominating the conversation and research, making the usual concerns -- like Washington's political wars, government debt, rising tax burdens, even the prospect of a Eurozone breakup --look like mere nuisance costs.
PriceWaterhouseCoopers International Chair Dennis Nally started setting the dark mood Tuesday night with the release of his company's annual survey of 1,330 CEOs in 68 countries showing that only 36% are "very confident" of seeing strong revenue growth in 2013--compared to 40% last year and a (by comparison) positively giddy 48% in post-US recession 2011.
That's not too surprising given an economic environment where the Eurozone is stuck in recession, the US economy is predicted to grow at a paltry 2.2% (keeping American unemployment rates high) and the BRIC countries are facing a slow down, as the report notes. While CEOs aren't as pessimistic as last year – when nearly half of those surveyed feared a global contraction--most expect flat global growth in 2013.
The survey shows companies hunkering down, focusing on building growth in their own markets (especially US companies, where local market expansion is the primary 2013 growth driver), and building customer loyalty. The other strategy: "A shift to resilience" – code for preparing for nasty surprises.
CEOs are hyper-conscious that, as the study notes, there have been more financial crises in the past 30 years -- from today's sovereign debt crisis in Europe to yesterday's US-led recession to the Russia and Asia crises of the '90s -- than the preceding 350 years taken together.
The same holds for natural disasters, which are coming at an increasingly fast and furious rate. Japan's 2011 tsunami tops the cost and destruction list, followed by Hurricane Katrina in 2005, the 2008 China earthquake and last year's Hurricane Sandy, which devastated the coasts of New Jersey and New York.
For all the talk about China's economic slowdown producing a drag on the global economy, the CEOs surveyed were far more worried about social unrest in their own countries, the prospect of a US recession, crippling cyber attacks, natural disasters, a Eurozone breakup and health pandemics (in that order).
In the US, CEOs add to that equation their fears of higher taxes and the regulatory uncertainty caused by the 884-page Dodd Frank financial legislation (23 times as long as Glass-Steagall was, the report notes).
The World Economic Forum, in partnership with the Wharton School, Oxford and Zurich Insurance Co., among others, released its own take on global risks, starting with the fallout from severe income inequality.
That report goes on to catalog a set of nerve-wracking fears, including the possibility that hyper-fast, unfiltered Internet communication could set off a firestorm wave of panic--a modern day, and far more destructive, version of the 1948 radio adaption of H.G. Wells novel The War of the Worlds that convinced listeners the US had been invaded by Martians.
And topping that: Killer bacteria, outpacing medicine's ability to produce new generations of antibiotics, could fuel a deadly pandemic.
Against this grim backdrop is some hopeful news: The 2013 Edelman Trust Barometer, a survey of 31,000 respondents in 26 markets around the globe, shows that public trust in government and business is on the rise.
The bad news (and, of course, there must be bad news): Those levels of trust remain depressingly low.
This article was originally published in Fortune Magazine. Refer to original article for related links and important documentation.
Nina Easton is a regular panelist on Fox News Sunday and Special Report, and has appeared on NBC's Meet the Press, CBS's Face the Nation, and PBS's Washington Week in Review and Charlie Rose. Easton is the author of the critically acclaimed "Gang of Five: Leaders at the Center of the Conservative Ascendancy." Prior to joining Fortune, she won a number of national awards as a Los Angeles Times writer, and later served as the Boston Globe's deputy bureau chief in Washington.
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