The 20th anniversary of the Asian financial crisis and 10th anniversary of the North Atlantic financial crisis brought back a sense of déjà vu – we have been here before.

Since last year’s Brexit and Trump election, unpredictable politics was the major disruptor. But the underlying cause was the insecurity of the working class – adjusted for inflation, American median weekly earnings are today no higher than they were in the 1980s. Meanwhile, the CEO in an Indian IT firm earns 400 times the wages of his average worker.

We can trace this severe job disruption to the convergence of several forces of demographics, climate change, technology and policy neglect.

Our current business model centres on the post-war creation of a global supply chain that tapped global resources to feed American and European consumption, paid for largely by US dollars. Technology enabled this supply chain to be built, first by “unbundling production from consumption”, an insight of Professor Richard Baldwin (The Great Convergence: Information Technology and the New Globalization, Belknap Press, 2016).

The arrival of IT and telecommunications in the 1990s created the second unbundling, distributing knowledge and technology around the world faster, causing convergence between the advanced countries and the emerging markets. China was smart enough to use this opportunity to create jobs in manufacturing and assembly during this period.

Baldwin thinks that the third convergence will be caused by cost reductions in moving people, using telepresence and telerobotics. But as advanced markets age and become saturated in terms of consumption, the emerging markets are facing rising populations through high birthrates, growing stresses from rapid urbanization, and inability of their governance model to adapt to new technology. The result is rising unemployment, especially amongst the youth. When you add climate stress and food shortages from drought, agricultural failure, corruption and civil unrest, the outcome is civil war and spreading terrorism.

Europe is a rich region with an unemployment level of 8 per cent, roughly double that in the US, but as high as 11 per cent in Italy and 23 per cent in Greece. Worse, youth unemployment averages 19 per cent across Europe, and is as high as 41per cent in Spain and 45 per cent in Greece. The situation is creaking at the seams, stabilized only with welfare subsidies.

Europe’s neighbours, however, are facing serious climate warming problems. The United Nations has already declared that large parts of Nigeria, Somalia, Yemen and Sudan are facing famine, partly man-made but largely from drought. Syria was previously a fairly rich country, but four years of drought, civil unrest and regional interference led to civil war. The migration at the rate of over 1 million a year into Europe comes at a time when Europe is struggling with its own internal debt and banking issues. It does not take much imagination to predict that if her neighbouring countries fall into disarray, there will be more migration into the cooler climates in Europe. With such social strains, European growth cannot recover as expected, and domestic politics will become more protectionist and inward looking.

Inward migration will keep wages low, whilst the rise of robotics and artificial intelligence will cut the need for existing workers. In 2016, an Obama Administration report estimated that just under half of existing jobs are at risk of being eliminated over the next two decades. This does not mean that jobs will not be created at the same time. The Gig economy means that more and more people are working independently and part time.

The arrival of Uber and AirBnB has rebundled consumption and income. Consumption goods (cars and housing) are becoming sources of new income. Excess capacity is being utilized in the new sharing economy. But we have not yet found a way to use the excess capacity of labour. We do not have as yet a Uberlike labour sharing platform, mainly because trust is what prevents us from hiring services of those we do not know.

Last month’s BIS Annual Report warned about the rekindling of inflation, even as the US unemployment level keeps dropping. The Fed is keen to “normalize” interest rates, and even the European Central Bank and Bank of England have signaled concerns about inflation. A lot of analysts wonder whether with increasing robotization, excess capacity and flat wages inflation will flare up. Lower oil prices suggest that there are worries that the US and Europe may perform worse than expected. But with unpredictable geo-politics and climate change, conditions can change rapidly. If the global food supply is shocked by drought or natural disasters, consumer prices may spike up fairly quickly.

Bottom line – the real fear is stagflation – growth stagnation with consumer inflation that worsens social inequality.

The job situation is perilous in many countries. McKinsey estimated that 45 per cent of the global working-age population is under-utilised, namely, unemployed, inactive or underemployed. Furthermore, more than 75 million youth are unemployed, many in the high population growth/low GDP income areas, vulnerable to social unrest.

There is a generational gap in understanding the issue of job creation. The old supply chain benefited the large multinationals and local champions, at the expense of small and medium enterprises (SMEs). The establishment is owned by aging baby-boomers, whereas the start-ups are mostly the young. There are only 45,000 companies listed on global stock exchanges, meaning that millions of smaller companies do not access public equity capital.

Yes many SMEs fail, but as Silicon Valley (and even Shenzhen) experience has shown, their failure gave rise to new creativity and success at the next round. SMEs contribute to nearly half of GDP and two-thirds of job creation. They are the real drivers of change.

We face three crucial imbalances. The regional imbalance occurs because the wealthy countries are aging, whereas the poorer countries are still young. Within countries, the social imbalance stems from growing disparities in income and wealth. The job imbalance is even more skewed – the existing labour force fears retrenchment, whereas the young face intense competition for scarce jobs. These combine to create the swing towards populist and radical views for change.

It is time for our policies to focus on the young and their job creation.

(The writer, a former Central banker, is Distinguished Fellow, Asia Global Institute, University of Hong Kong.)