DAVOS, Switzerland — The world has not escaped the risk of a collapse in the global economy despite some renewed confidence, the founder of the World Economic Forum said Monday.
Swiss economist Klaus Schwab, speaking on the eve of the elite annual gathering in the Swiss resort of Davos, called for business and government leaders heading there to focus on “cautious realism” and recovering public trust to avoid another major financial crisis.
“The problems and the risks have not gone away,” he said in an interview. “The world economy may still confront a collapse if very negative constellations occur.”
Markets started strongly this year, with many stock indexes near multi-year highs, and the euro currency union no longer seems in danger of breaking apart.
However, unemployment remains high in many developed economies and the public’s faith in business and government leaders is falling. The euro alliance and Japan are in recessions, and politicians in the United States are struggling to finalize a budget deal to avoid a potential default that would cause havoc in financial markets.
Schwab’s forum this week is expected to draw more than 2,500 of the world’s financial and political elite.
Schwab said economic growth is based on optimism, among both consumers and investors, so the challenge is for leaders “to give people the confidence again to look with more optimism into the future.”
However, he said a fundamental problem is that the latest recovery is a “jobless growth,” where any early improvement in the economy
is yet to be felt in the broader job market.
More socially minded entrepreneurship will be needed, he said, and young workers entering the job market will need to focus on gaining talents and skills that are most in demand, such as new technology and science.
“We need new ways of thinking. It’s not the traditional employment which will solve the issue,” he said. “I think we have too many sociologists, psychiatrists around, and not enough engineers and scientific people.”
Schwab said he hopes the U.S. will become more assertive on the world stage.
“What the world expects is that someone, if there’s a major crisis, takes the lead, and I’m really hopeful that the United States … will assume its responsibility as the strongest power,” he said.