Davos World Economic Forum confronts globalisation revolt
18th Jan 2017
In the almost half-century it has been running, the select economic confab in the Swiss alpine retreat of Davos has never had such a challenge to its central dogma that globalism benefits the wealth and wellbeing of the planet and its inhabitants.
Since the last gathering at Davos — or more correctly, the World Economic Forum — the forces against globalisation have moved from the political fringes to controlling the world’s most powerful economy.
Brewing tensions about inequality, jobs, wages and migration — often seen as by-products of freer global trade — boiled over, delivering stunning defeats to the political establishment in the US presidential election and the UK’s Brexit referendum.
The political upheaval may roll on, with a spring of important elections throughout Europe — Germany, the Netherlands and France — in coming months.
Trust and confidence is crashing
A blizzard of surveys and research released at Davos shows even the unerring faith of its supporters is weakening.
A survey of almost 1,400 chief executives across 79 countries by global accounting powerhouse PwC found 44 per cent believed globalisation had not helped narrow the gap between rich and poor nations.
The public survey of non-CEOs had an even darker view.
A separate survey by another big Davos backer, communications and marketing giant Edelman, found trust in governments, companies and the media has plunged in the past 12 months with a majority now believing the economic and political system was failing them.
Edelman, in its survey across 28 nations, found “a yawning trust gap emerging between elite and mass populations”.
However, even in Edelman’s so-called “elite” pool of respondents, trust is crashing.
Edelman boss Richard Edelman told Reuters he was stunned by the lack of confidence amongst the elite.
“The most shocking statistic of this whole study is that half the people who are high-income, college-educated and well-informed also believe the system doesn’t work,” he revealed.
Despite globalism being on the nose, around 3,000 invitees have still trekked up the mountain to have another crack at solving the world’s economic problems — or maybe just indulge in a bit of networking.
China’s Xi to defend globalisation while Trump stays away
The headline act will be Chinese President Xi Jinping, the first appearance by a Chinese leader at Davos, who will keep the faith on globalisation.
Speaking in the Swiss capital Bern before heading up the mountain, President Xi noted — without firing a direct salvo at President-elect Donald Trump — the need to support cooperation in global trade.
“Protectionism, populism and de-globalisation are on the rise. It’s not good for closer economic cooperation globally,” President Xi warned.
Mr Trump is not attending, preferring instead to dispatch one of his transition team, hedge fund boss Anthony Scaramacci.
The President-elect’s views of the impact of globalisation are well known and endorsed by, among others, the downcast workers of the US rustbelt states.
Factory workers in the US, and across most developing economies, have seen their jobs disappear and wages flat-line, while prospects have picked up in emerging economics.
As global economic strategist Gerard Minack points out, China’s entry into the World Trade Organisation in 2001 sharply increased the global supply of low-cost labour.
“That entry coincided with a trend decline in manufacturing capacity and output growth in most developed economies,” Mr Minack said.
“The result was a boon for workers in globalising emerging economies, but income stagnation for those affected in developed economies.”
Technology to have a bigger impact than globalisation
However, Mr Minack said while it may be possible — not to mention also nonsensical and painful — to reverse globalisation, it is also most likely pointless as well, given an even bigger threat to jobs and wages is coming down the tracks.
Technology and the developments in automation, robotics and artificial intelligence will simply eliminate the need for many unskilled workers in both developed and developing economies.
“I think that globalisation has had a bigger effect than technology on incomes of unskilled and semi-skilled workers over the past 15 years,” Mr Minack said.
“But the next 15 years will see a reversal: technology, not globalisation, will likely become a major adverse influence on less-skilled workers’ incomes.”
In other words, the globalisation debate heating up the chilly climes of Davos may well be already out of date.
Sure, the threat of trade wars and insular politics still abound, but it could all be about battles that have already be lost and won, not ones to come.
The dynamics that have led to disgruntlement and alienation are only likely to intensify from here.