Reflecting on Davos

Once a year, the most powerful individuals from the public and private sector make their way to Davos, Switzerland for the annual World Economic Forum conference to outline their vision for the state of our world today, and where it ought to go. The meeting was held under the cloud of a world going through considerable political changes, not least in the form of the dual rising sentiments of nationalism and protectionism, both a response to the previously-unchecked expansion of globalisation.

The four-day meeting, held between 23-26th January was as interesting as the event’s name was ominous – “Creating a Shared Future in a Fractured World”. The title perfectly balances a hopeful sense of optimism with an acknowledgement of a world which is becoming increasingly fractured.

India’s Prime Minister Narendra Modi offered an apt summary of the three main issues which are facing the world today:

The problems caused by climate change, where many countries have been slow to implement agreed-upon measures, or simply ignoring the problem all together.

Terrorism, which has led to countries and companies investing billions of euros in security measures, in particular since 9/11, and has led to people feeling less safe and becoming accustomed to more security measures.

The third item mentioned by Modi was the backlash against globalisation. The election of Donald Trump and the Brexit referendum have been the harbingers of resentment and anger amongst the lower and middle classes, who felt as though globalisation has taken away their livelihoods and eroded their quality of life by shipping jobs to emerging markets. This has led to a backlash against governing elites, and in turn, the election of populists in both Europe and the United States, which threatens the very fabric of the global system of cooperation by pursuing nationalist agendas.

Nationalism in and of itself is not necessarily a negative – every country seeks to promote its national interest, and one should not expect otherwise. Problems arise when countries then use nationalism as the very backbone of their foreign policy to promote their interests, even if it comes at a cost for its friends and allies. Once you begin to tear apart agreements and close an eye to cooperating with others, allies will be less willing to meet your demands, and foes will be emboldened by newfound weakness in your traditional relationships.

Donald Trump’s intervention on the last day of the meeting was interesting, and took quite a few observers by surprise. Rather than the more belligerent version of Trump which emerged during the UN General Assembly meeting late last year, the Trump who spoke at Davos appeared more nuanced and measured. In his words, “America first does not mean America alone”. This is an interesting shift from his previous speeches, and sought to help bridge the gulf with America’s allies, particularly in Europe. He highlighted the $7 trillion of value created on the US stock markets since his Presidential victory as one of his key accomplishments, although he would be wise to reconsider pointing to that as his crowning achievement – stock markets have their ups and downs, and in taking credit for its stratospheric growth (some 30%), he will inevitably be blamed when the stock market takes a dip. That is the last thing he needs in a year in which he needs to shore up his domestic support amidst the Russian interference allegations which have dogged his Presidency, particularly with the midterm elections due in November.

Germany’s Angela Merkel also attended the conference in a European show of force along with France’s President Emmanuel Macron. Merkel’s view of the current state of affairs is considerably glum, and her remarks, whilst diplomatic, provide a clear perspective of her strong distaste for the protectionist stance taken by her British and American partners. In one of her more direct remarks, Merkel reminded the meeting’s delegates that 2018 marked a century after the end of World War I, and sounded rather ominous, asking “Have we learned the lessons of history? Not really.” She urged leaders to work together in an open fashion and to collaborate on shared problems. She emphasised that a protectionist approach does not solve problems, but creates new ones. In that, the Chancellor is right.

The world faces a number of challenges that cannot be faced by one nation on its own. The rise of automation, also referred to as the Fourth Industrial Revolution, will soon change some jobs forever. In 2016, the Bank of England’s Chief Economist estimated that 80m US and 15m UK jobs may be taken over by robots. That is nearly half of the labour force in both countries, meaning that these people may well be out of a job in the years to come. Barring some very innovative policy measures at home, countries will need to work together to come up with solutions for their working population, before unemployment rates reach alarming levels.

Climate change is also a critical problem which was touched upon at Davos, and something which the US has shown an aversion to adjusting its policies towards mitigating. With global temperatures on the rise, food and water scarcity will lead to increased migration and conflict in third world countries, along with increasingly challenging conditions for farmers all around the world.

Davos may be a gathering of the global elites, but it appears as though for the first time in a number of years, the world is coming to realise just how important it is for global cooperation to continue and grow. The problem is that the current occupant of the White House refuses to cooperate on the basis of a stagnated mindset that has not evolved since the 1990s. Creating a shared future in a fractured world will require a redoubled effort from global powers to fill the void left by the US. It will not be easy, but it is not beyond their reach.