Avian flu has the potential to develop into a global pandemic that would be as devastating as the Black Death of the 14th century, the World Economic Forum warned on Thursday in its assessment of the risks threatening stability and prosperity.
In a worst-case outcome, experts charged with weighing up systemic dangers said there might be riots to gain access to supplies of vaccines, a collapse of public order, a partial flight from the cities and large-scale migration. The report published at the WEF’s annual meeting in Davos said there was only a small risk of a return to the economic and social chaos caused by the Black Death, and it would only occur if bird flu conflated with other risks to the global community.
”An outbreak of H5NI [avian flu] human to human transmission could have devastating impacts globally across all social and economic sectors, disrupting efficient processes, severely degrading response capabilities and exacerbating the effects of known weaknesses in different systems,” said the report.
The assessment, undertaken by risk experts at the insurance companies Swiss Re and Marsh and McLennan (MMC), and Merrill Lynch, identified terrorism, an oil-price spike, natural disasters and a bird-flu pandemic as the big threats in 2006. It added that the speed at which global risks travelled thanks to globalisation could lead to ”rapid and unexpected contagion of global risks across industries and geographical areas. The interplay of multiple global risks and their combined ripple effects can create potentially disastrous ”perfect storms” — cumulative events which cause damage far in excess of the sum of each individual risk event.”
Avian flu has spread from China as far west as Eastern Europe and the number of deaths caused has been relatively small. The WEF report said nevertheless that there was a remote chance that bird flu could have far more dramatic effects. ”These impacts might include the disruption of supply chains and trade flows; an exacerbation of financial imbalances and the transformation of intellectual property regimes for pharmaceutical products; rioting to gain access to scarce supplies of antivirals and vaccines; a collapse of public order; partial de-urbanisation as people flee population centres; the extinction of trust in governments; decimation of specific human skill sets; and forced, large-scale migration, associated with the further collapse of already weak states.”
It added: ”In such a scenario, the impact on society might be as profound as that which followed the Black Death in Europe in 1348. That plague caused a fundamental transformation of socio-economic relations in Europe.”
Kevan Watts, chairperson of Merrill Lynch International, and one of the authors of the report, said he doubted whether financial markets were prepared for a situation in which all risks conflated. ”Markets are not assuming pain in the near term at the severe end of the spectrum.”
Drawing a comparison with August 1914, Watts added the markets had been taken completely by surprise by the outbreak of World War I, failing to spot that hostilities were about to start even on the last day of peace. The report called for international collaboration, with governments, the private sector, inter-governmental organisations and parts of civil society joining together to mitigate risks. Christian Mumenthaler, chief risk officer at Swiss Re, said there was a tendency to spend too little on a problem when it was only a threat and then spending billions solving the problem once it had become fully developed.
Although the WEF report said bird flu was the risk most preoccupying global business and political leaders in early 2006, it stressed that the geo-political landscape was still dominated by the risk (real and perceived) of terrorism. ”The capacity of terrorist organisations to act globally in a coordinated way has diminished, but the risks of localised terror remain high. Should an attack incorporate chemical, biological or nuclear weapons, or target critical infrastructure, the human and economic costs will bring new pressures to bear on public policy.”
The report said there was a ”high risk” (above 20%) of the oil price rising above $80 a barrel this year, and that this could cost the global economy between $250-billion and $1-trillion. There was a less than 1% risk of the price reaching $100. – Guardian Unlimited Â