Davos has drawn record crowds, but its importance is fading


London
CNN

For decades, business leaders, billionaires and politicians have gathered in Davos, Switzerland under the banner of forging connections that can help solve global problems.

It’s a brilliant exercise that’s often criticized as being too far fetched. It also seems increasingly outdated as Europe’s biggest war since 1945 turbo-splits the global economy.

Hosted by the Alpine ski town since the early 1970s, this year’s World Economic Forum begins on Monday. It is expected to attract 2,700 participants, including German Chancellor Olaf Scholz, European Commission President Ursula von der Leyen, Chinese Vice Premier Liu He, South Korean President Yoon Sok-yol and US climate envoy John Kerry.

However, the first winter meeting of the World Economic Forum in Davos since 2020 It comes as economic heavyweights play different rules, companies move supply chains closer to home, strategic stockpiling picks up pace, and corporate executives who once hailed free trade seem increasingly wary of rising geopolitics. Risks.

“I think Davos is completely irrelevant,” said Rana Forouhar, a columnist for the Financial Times, whose book Homecoming argues that a new shift towards localization is replacing the forces of globalization that have been dominant for the past half century.

The World Economic Forum asserts that its conference allows decision-makers to minimize and collaborate, a challenge while facing simultaneous and exacerbating crises such as the pandemic, high cost of living, climate change, food insecurity and war.

“Only personal interaction creates the necessary level of trust, which we need so much in our fractured world,” said World Economic Forum President Klaus Schwab, the founder of the event, at a press conference last week. This year’s theme is Collaboration in a Fragmented World.

Schwab’s vision of a progressively interconnected global economy that spreads democracy around the world has come under threat at least since the 2008 financial crisis. World Bank data shows that global trade in goods and services as a percentage of total economic output peaked that year. Cross-border investment outflows reached their highest levels in 2007.

But the damage to the Davos mission has accelerated over the past 12 months.

Russia’s invasion of Ukraine crushed what columnist Thomas Friedman once called the “golden brackets theory of conflict prevention,” which argued that two countries with McDonald’s restaurants would not go to war. With some. Since the invasion, more than 1,000 Western companies have scaled back operations in Russia, and Europe has quickly severed ties with what was once its largest energy supplier despite high costs. The World Economic Forum itself had to freeze relations with Russia after it had hosted politicians and oligarchs for years.

Tensions between the world’s two largest economies, the United States and China, now loom larger, especially as Beijing ramps up military exercises aimed at threatening Taiwan. China’s strong-arm approach to containing the novel coronavirus (Covid-19) has also spooked companies and investors. Many remain wary even as restrictions are quickly lifted.

This is prompting companies and governments to rethink supply chains for key products, as reducing vulnerabilities and protecting national interests takes precedence over maximizing cost savings.

Where former US President Donald Trump used to advocate “America First” trade policies, US Treasury Secretary Janet Yellen would stress “making friends,” or strengthening trade ties, with countries like India, a fellow democracy. Apple (AAPL) is looking to move more of its production outside of China, whose labor market has been an engine of its success. The European Union is said to be drawing up plans to stockpile scarce medicines so that it can avoid future shortages.

At the same time, the United States is pushing ahead with an aggressive industrial strategy aimed at boosting its prowess in making everything from computer chips to electric car parts. That sparked a dispute with Europe, which feared new subsidies would put its companies at a disadvantage.

“This is really a paradigm shift in the moment,” said Jeffrey Sonnenfeld, a professor of management at Yale University who speaks regularly with many well-known CEOs. He said that they are increasingly talking about closing deals and making investments with this new game guide.

Meanwhile, nationalism and populism—which can encourage leaders to criticize principles of a globalized economy such as porous borders and lower barriers to trade—remain muscular forces. Just look at Italy’s new Prime Minister, Giorgia Meloni, who was installed in October. Her party’s agenda is rooted in skepticism about EU policies and anti-immigration.

The consequences of this shift are still ongoing. While the deglobalization trend is expected to have some negative consequences, such as increased inflation, Forouhar sees an opportunity to reinvigorate societies that lost jobs during the free trade recovery, reduce the carbon footprint of supply chains and mitigate crippling global inequality. .

Over the past two years, the richest 1% have raked in nearly twice as much wealth as the rest of the world, according to a report by Oxfam published ahead of the Davos conference.

“The economic pendulum shifts throughout history,” said Forohar, a CNN analyst. “Every time the pendulum shifts too far, which it obviously does, it starts to unwind a little bit.”

Some of the basic elements of globalization remain the same. The digital transformation of economies makes it easier for money and ideas to move across borders. The same, unfortunately, applies to viruses and other diseases. International cooperation is essential to solve food shortages and keep high-risk climate targets within reach.

“It is very easy to say that it is an era of globalization or an era of deglobalisation,” said Markus Kornprost, professor of international relations at the Vienna School of International Studies. “It’s a period in between.”

But even the Davos organizers seem aware of the changing tides. Seminars on the agenda include sessions entitled “Deglobalization or Re-globalisation?” and “keeping the lights on amid the geopolitical divide”.

The forum will still draw big names. Top executives such as JPMorgan Chase (JPM) Jamie Dimon, Microsoft (MSFT) Satya Nadella, Uber (UBER) Dara Khosrowshahi and BP’s Bernard Looney are also on the list of attendees. Schulze, von der Leyen and Spanish Prime Minister Pedro Sanchez will deliver speeches from the main stage.

However, there will also be notable absences. Among those absent from this year’s gathering were US President Joe Biden, China’s Xi Jinping, Indian Prime Minister Narendra Modi, French President Emmanuel Macron and British Prime Minister Rishi Sunak. That raises questions about whether Davos can hold on to its reputation as a staple event for the rich and powerful.

Hanna Ziadi contributed reporting.

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