Understanding the Davos dilemma
In its 48 years of existence, the World Economic Forum (WEF) – the apex grouping of the world's plutocrats, globalisers and top leaders – has never had such a gloomy inauguration. While it all seems beautifully festooned at Davos, the popular Swiss ski resort town, the economy of the larger world beyond the snowy Swiss Alps is once again melting in unforeseen fashion.
Not only the depressing growth forecasts but the much bigger problem for the Davos doctrine is the very idea of globalisation that is encountering a serious backlash right under its nose. While the buzz-coining machinery of the WEF has given a call for 'Globalisation 4.0' – inclusive globalisation – the concurrent versions of globalisation are under attack in the geographies long known as architects and beneficiaries of global economic openings.
The anti-globalisation movement is now simmering right in the middle of capitalist or right-wing economies, the way it did in left-wing economies, where it faced outrage in the 1990s.
In fact, a messed up Brexit and Donald Trump's protectionism have turned the same globalisation agenda upside down, which Davos was once the champion of.
While Davos was still trying to adjust with the absence of key market leaders (US, France, Canada, UK, India), right before the launch of the Davos Summit 2019, the International Monetary Fund (IMF) screamed, “World economy is at risk of a sharp downturn”.
In its latest economic outlook, the IMF has lowered world growth forecasts to 3.5 per cent in 2019 and 3.6 per cent in 2020 – that's down 0.2 and 0.1 percentage points respectively from last October’s outlook.
The reason for the IMF's gloomy outlook is the US economy, which may be running out of steam this year as support for a slew of tax cuts measures peaked in 2018. The US government is partially shut down and President Donald Trump is skipping the World Economic Forum in Davos.
Things are not much better in other continents either.
China, the world's second largest economy, is also slowing down faster than expected. China, which contributes to over 25 per cent of the global economy on average, has confirmed its slowest growth rate in nearly 30 years.
The biggest problem for the Davos squad is the destabilising metrics of economic growth and globalisation. As growth has started dwindling since the global meltdown of 2008, the rich and globalised leaders in north and west are turning protectionist in order to assuage political anxiety.
Davos cannot forget UK Prime Minister Theresa May's intervention at its forum after the Brexit vote where May had argued that talk of greater globalisation could make people fearful. For many, it means, she had stated, their jobs being outsourced and wages undercut.
Donald Trump won the US Presidential election with a protectionist narrative. He began renegotiating NAFTA and withdrew from the Trans-Pacific Partnership (TPP) soon after signing in at the White House – in the 12 months since Trump addressed Davos, he has triggered a trade war with China and slapped tariffs on Europe.
In order to balance with this growing disenchantment with globalisation, the WEF went with hosting economic inequality debates at its podium. While the intentions were noble, the timing was not on its side. Against a backdrop of sliding growth, rising trade barriers and exploding unemployment, the only credible annual headline Davos flashes is, in fact, the anti-globalisation rhetoric, i.e., ever-growing income inequality.
This year's second-biggest WEF headline (after the IMF forecast) came from a report by the global charity group Oxfam that suggested the world's 26 per cent richest people now own as much as the poorest 50 per cent.
No surprises if half of them would have been in Davos while the headline was in the making.
Beyond feisty winter-geared photo ops, the relevance of the WEF is entwined with the sustainability of multilateral globalisation. Davos is now crushed between an aspiring global east and south and a reluctant global north and west.
In 2016, YouGov, in a survey in 19 countries, found that people in France, the US and the UK were skeptical about the goodness of globalisation. In contrast, the survey found that over 70 per cent in East and Southeast Asian countries believed it has been a force for good.
While the approach of the architects of multilateralism is getting contradictory and confusing, the growth-famished south is looking for further trade openings to bring cheer to their poverty-ridden populace.
At Davos or beyond, the world needs new leadership to drive a new multilateral economic order. Unfortunately, the new global leadership that has emerged across the continents after 2008 has grossly disappointed us. If global leaders do not have courage to say that globalisation and growth are not alternative but auxiliary, then Davos will have to bear with the distinction of an annual jamboree of global economic contradictions.