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It’s the time of year when the global elite—politicians, financiers, big business, academia and an assortment of others—congregate in the beautiful Swiss ski resort of Davos for the World Economic Forum. It is unquestionably a great place to network, arrange private meetings with important people, and listen to debates and panel discussions, as I myself did on several occasions in a previous incarnation. It is a sort of globalisation off-site for the world’s movers and shakers.
Yet there is something discordant about Davos nowadays. It started after the Lehman Brothers crisis in late 2008, when many attendees were embarrassed that the carefully constructed world they represented had been shaken to its foundations. After a few years of tentative and disappointing global economic recovery, the events of 2016 have conspired to make Davos seem even more unworldly. One wonders how many people might have made other plans had they known that Donald Trump would be inaugurated as president on Friday 20th January, the last day of the Davos fest.
There is also something incongruous about a forum in which leading members of the elite opine with seriousness and self-importance about the populist backlash against globalisation. If Davos really wants to confront the populist backlash, it should invite and listen to the “left behinds,” or just ordinary people for whom aspects of globalisation have become too difficult to swallow.
In its defence, Klaus Schwab, the forum’s 78-year-old German founder, has come to the aid of globalisation yet again. He acknowledges that it has to become fairer and work better. He also argues that we shouldn’t look it at purely from a western point of view, but from the standpoint of the emerging and developing countries that are now the main cheerleaders for the status quo. It is a good point, though it doesn’t cut much ice in Sunderland, Cardiff, Detroit or Philadelphia.
He also emphasises that the key challenge for the world isn’t so much globalisation as technology, or what is being called the “fourth industrial revolution.” This, he says, has ubiquitous implications, in particular for global and economic security. Looking back, globalisation and the export of capital and investment from advanced to emerging countries may have cost jobs and compromised communities. But the key factor in the last decade and decades to come is automation, robotics and artificial intelligence.
Davos should indeed make this—and how we come to terms with this—a central issue for at least two reasons. First, even if populist thinking on trade and globalisation wants the repatriation of jobs, the chances are that a lot of business could be repatriated to be run by machines, rather than people. Second, manufacturing has been the key to economic development as we have known it, but it is losing its mojo, giving rise to what some economists call “premature de-industrialisation.” According to a recent report by the Australian bank Macquarie, it took 50 years for the world to instal its first million industrial robots, largely in car factories. But the next million will be installed between now and 2025 and in a far wider range of activities, including in service companies. If this route to development is cut off for emerging countries, then what else is there?
The other major issue for Davos participants is a focus on climate change and renewable energy, with 15 sessions on the former and nine on the latter. Needless to say, business leaders and financiers have their own reasons for wanting to look at the consequences of climate change, the gradual drop in fossil fuel dependency, and the dawn of a new era in the generation and uses of electricity. But be that as it may, stay tuned to whatever news emerges, and see what the Chinese have to say about it. China has quickly changed from the villain of climate change to one of its heroes, at a time when expectations of the Trump presidency are pretty low.
President Xi Jinping is in Davos this year, the first time a Chinese head of state has attended. Normally, it is the Premier who fills this role, but Li Keqiang has been sidelined for some time now and may be moved at the 19th Party Congress later this year. Xi, recently, elevated to the “core” leader of China—an official title that gives him increased power and status—has chosen an opportune moment to strut among the world’s elite.
At a time of turbulence in the west, Xi would like to present China as a beacon of stability and continuity. With President-elect Trump throwing Nato, Europe, free trade and much else into the crucible, including relations with China, Xi has an opportunity to point to his country as proof that there is an alternative. For example, the creation of the Asian Infrastructure Investment Bank, the One Belt, One Road strategy of commercial and economic engagement, the Regional Comprehensive Economic Partnership free trade pact in Asia, and the new proposal for an Asia Pacific free trade area can all be hailed as examples of China’s willingness to pick up the baton of global leadership from a retreating United States.
The truth is more complicated, for China is neither a beacon of stability (it has rampant credit creation and regular episodes of capital flight) nor a champion of the current world trade and investment system, which we are loth to lose if the US abandons it. In neither case, does China make a strong case for its governance reputation. But it is a formidable power and people are watching Xi closely for clues on how he will deal with a US president with very different ideas on currencies, the South China Sea islands and Taiwan.
As ever, there will be a lot going on in Davos this week and some things will be of enduring significance. But, not for the first time, the global elite face a hard question. Is their Alpine gathering seen as part of the solution to what ails us—or as part of the problem? The globalisation that Davos helped create and nurture has been cut adrift by poor governance and recent events. It is not coming back. Its attendees need to have the humility to recognise that, to practise as well as preach fairness, and develop the language and the policies to win back people’s trust.
On the 17th of January 2017, Prospect hosted a roundtable discussion with the contributors to: Brexit Britain: the trade challenge. This report is designed to act as a guide for parliamentarians, officials and businesses with a stake in the UK’s changing relationship with the world following Brexit. The discussion was chaired by Tom Clark, Editor of Prospect. Participants included Tasmina Ahmed-Sheikh MP, Miriam González and Vicky Pryce.
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