A looming hard landing in China will bring the financial and economic crisis of the past five years to a climax in 2012, one of the City of London's leading analysts has warned.He added that despite the recent run of more upbeat economic news from the United States, the risk of another recession in the world's biggest economy was "very high". Growth had slowed to an annual rate of 1.5% in the second and third quarters of 2011, below the "stall speed" that historically led to recession. It was unlikely that the economy would muddle through, Edwards said.
The warning of fresh trouble ahead came as the World Economic Forum said rising youth unemployment, pressure on pensions and a growing gulf between rich and poor were sowing the "seeds of dystopia" that were putting at risk the gains from globalisation.
In its annual assessment of the outlook for the global economy before its meeting in Davos later this month, the WEF expressed concern at the possibility of economic and social upheaval caused by the inability of the young to find work and the dependency of elderly people on states deeply in debt."For the first time in generations, many people no longer believe that their children will grow up to enjoy a higher standard of living than theirs," said Lee Howell, the WEF managing director responsible for the report. "This new malaise is particularly acute in the industrialised countries that historically have been a source of great confidence and bold ideas."
The survey of 469 global experts identified chronic problems with government finances and severe income inequality as the most prevalent risks over the next decade.
"These risks in tandem threaten global growth as they are drivers of nationalism, populism and protectionism at a time when the world remains vulnerable to systemic financial shocks, as well as possible food and water crises," the report said.
The study said early hopes that closer global integration would inevitably lead to higher living standards for all were at risk of being dashed by trends that left large numbers of people fearful about the future.
"Individuals are increasingly being asked to bear risks previously assumed by governments and companies to obtain a secure retirement and access to quality healthcare. This report is a wake-up call to both the public and private sectors to come up with constructive ways to realign the expectations of an increasingly anxious global community," said John Drzik, chief executive of management consultants the Oliver Wyman Group .
The study said the policies and institutions of the 20th century no longer offered protection in a more complex and integrated global economy. "The weakness of existing safeguards is exposed by risks related to emerging technologies, financial interdependence, resource depletion and climate change, leaving society vulnerable."
It also warned that there was a "dark side of connectivity", with societies vulnerable to "malicious" and "devastating" cyber attacks.
"The Arab spring demonstrated the power of interconnected communications services to drive personal freedom, yet the same technology facilitated riots in London. Governments, societies and businesses need to better understand the interconnectivity of risk in today's technologies if we are truly to reap the benefits they offer," said Steve Wilson, chief risk officer for general insurance at Zurich.