Every year, business leaders, billionaires and politicians gather in Davos, Switzerland under the banner of forging bonds that can help solve global problems.
It’s a glitzy exercise often criticized as disconnected. It also looks increasingly stale as Europe’s biggest war since 1945 turbocharges its way into the global economy.
This year’s World Economic Forum, held in the alpine ski town since the early 1970s, kicks off on Monday. It is expected to draw a record 2,700 attendees, including German Chancellor Olaf Scholz, European Commission President Ursula von der Leyen, Chinese Vice Premier Liu He, South Korean President Yoon Suk-yeol and the US climate envoy John Kerry.
Yet the first WEF winter meeting in Davos since 2020 comes as economic heavyweights play by different rules, with companies bringing supply chains closer to home, strategic stockpiling accelerating and corporate executives who once advocated free trade appear increasingly wary facing the geopolitical rise risks.
“I think Davos is totally irrelevant,” said Financial Times columnist Rana Foroohar, whose book “Homecoming” argues that a new shift to localization is displacing the forces of globalization that have dominated over the last half century.
The WEF argues that its conference allows decision-makers to zoom out and collaborate, a challenge as they combat simultaneous and compounding crises such as the pandemic, the soaring cost of living, climate change, the food insecurity and war.
“Only personal interaction creates the necessary level of trust, which we so desperately need in our fractured world,” WEF President Klaus Schwab, founder of the event, said at a press conference last week. This year’s theme is “Cooperation in a Fragmented World”.
Schwab’s vision of a progressively interconnected global economy that also spreads democracy around the world has been 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 peaked 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 called the “golden arch theory of conflict avoidance,” which asserted that no country with McDonald’s restaurants would go to war. with each other. Since the invasion, more than 1,000 Western companies have reduced their activities in Russia and Europe has quickly severed its ties with what was once its main energy supplier despite the high costs. The WEF itself had to freeze relations with Russia after hosting its politicians and oligarchs for years.
Tensions between the world’s two largest economies, the United States and China, now loom even higher, especially as Beijing steps up military exercises aimed at threatening Taiwan. China’s heavy-handed approach to containing Covid-19 has also spooked businesses and investors. Many remain wary even as restrictions are quickly lifted.
This is pushing businesses and governments to rethink supply chains for key products, as reducing vulnerabilities and protecting national interests take precedence over maximizing cost savings.
While former US President Donald Trump championed “America First” trade policies, US Treasury Secretary Janet Yellen emphasized “friendshoring” or strengthening trade ties with countries like the United States. India, another democracy. Apple (AAPL) is looking to move more of its production out of China, whose labor market once drove its success. The European Union is reportedly drawing up plans to hoard rare drugs to avoid future shortages.
At the same time, the United States is pursuing a robust industrial strategy aimed at bolstering its prowess in manufacturing everything from computer chips to parts for electric vehicles. This has sparked a dispute with Europe, which fears further subsidies will disadvantage its businesses.
“It’s really a paradigm shift right now,” said Jeffrey Sonnenfeld, a Yale management professor who speaks regularly with many well-known executives. He said they are talking more and more about making deals and making investments using this new playbook.
Meanwhile, nationalism and populism – which can encourage leaders to criticize tenets of a globalized economy such as porous borders and lower trade barriers – remain strong forces. Just look at the new Italian Prime Minister, Giorgia Meloni, who was appointed in October. His party’s agenda is rooted in skepticism of the European Union and anti-immigration policies.
The consequences of this transition are still being felt. While the trend towards de-globalization is expected to have negative consequences, such as rising inflation, Foroohar sees an opportunity to reinvigorate communities that lost jobs during the windfall of free trade, reduce the carbon footprint of supply chains and reduce crippling global inequalities. .
Over the past two years, the top 1% have accumulated nearly twice as much new wealth as the rest of the world, according to an Oxfam report released ahead of Davos.
“Economic pendulums are changing throughout history,” said Foroohar, who is also a CNN analyst. “Every time the pendulum moves too far, which it clearly does, it starts to move back a bit.”
Some fundamental elements of globalization remain intact. The digital transformation of economies facilitates the flow of money and ideas across borders. Unfortunately, the same applies to viruses and other diseases. International cooperation is key to solving food shortages and keeping high-stakes climate goals within reach.
“It is fundamentally too simple to say that this is an era of globalization or an era of de-globalization,” said Markus Kornprobst, professor of international relations at the Vienna School of International Studies. “It’s an in-between era.”
But even the Davos organizers seem aware of the changing tides. Panels on the agenda include sessions titled “De-Globalization or Re-Globalization? and “Keeping the Lights On Amid a Geopolitical Divide”.
The forum will still attract big names. Renowned CEOs such as Jamie Dimon of JPMorgan Chase (JPM), Satya Nadella of Microsoft (MSFT), Dara Khosrowshahi of Uber (UBER) and Bernard Looney of BP (BP) are on the list of attendees; Scholz, von der Leyen and Spanish Prime Minister Pedro Sánchez will deliver speeches from the main stage.
Yet there will also be notable absences. Among those who skipped the rally this year are US President Joe Biden, Chinese Xi Jinping, Indian Prime Minister Narendra Modi, French President Emmanuel Macron and British Prime Minister Rishi Sunak. It raises questions about whether Davos can maintain its reputation as an essential event for the rich and powerful.
— Hanna Ziady contributed reporting.