WEF 2023. Polycrisis? What Polycrisis?
There are always challenges interpreting the World Economic Forum’s (WEF) winter meeting at Davos in Switzerland. The presence of 2 700 invited speakers in the Swiss ski-resort of Davos means that reporters can pick and choose almost any theme they like. Nevertheless, the event remains an important means for gauging the outlook of some of the world’s key economic decision makers and assessing the shape of the global stage.
The WEF sets up discussion through a range of pre-event publications, of which the most prominent is the Global Risks Report. This was a gloomy document for 2023, suggesting that the appropriate theme for the conference was ‘cooperation is a fragmented world’. It commented on the re-emergence of ‘older risks’ – meaning inflation, cost-of-living crises, trade wars, capital outflows from emerging markets, widespread social unrest, geopolitical confrontation and the spectre of nuclear warfare – and suggested these are being amplified by new risks, including de-globalisation and climate change.
These constitute, in the opinion of the Global Risks Report, a ‘polycrisis’, where the convergence of various global risks have a compounding effect. In his opening address, WEF executive chairman Klaus Schwab, argued that the global economy was ‘confronted with unprecedented and multiple challenges‘ which are ‘fragmenting societal fragmentation’ and ‘creating a messy patchwork of powers’. The trend was towards ‘increasing confrontation’, he argued.
Yet the views expressed in 2023 were almost universally more optimistic than both the Global Risks Report and Schwab’s opening remarks suggested. While no one was hugely positive, the prospects for a long and deep global recession were almost universally dismissed. IMF boss Kristalina Georgieva said the IMF’s outlook (global growth of 2.7 percent) was ‘less bad’ than it looked ‘a couple of months ago’. The biggest positive factor was the re-opening of the Chinese economy even though this increased inflation risks. It is necessary to ‘stay in the middle of realism’ suggested Georgieva.
JP Morgan’s Chief Operating Officer, Daniel Pinto, summed up the general mood when he argued that ‘things are not great but they are much better than they could have been’. Not only is China opening up, but Europe has managed its energy crisis and recent figures from developed economies suggest that inflation shows signs of easing. EU president Ursula von der Leyen pointed out that Europe had replaced 80 percent of Russian pipeline gas from other sources. But after praising European unity in the face of Russian aggression, she warned that there was a danger of energy being increasingly ‘weaponised’.
One of the predominant themes, emphasised by many European speakers, was unity in the face of international aggression. Europe’s moves to ensure its own energy security over the past 12 months was referred to by interview after interviewee. ‘I’ve never seen the EU more united’ said former Finnish prime minister Alexander Stubb.
In fact, the idea of greater ‘fragmentation’ was talked down by many participants. China’s vice President Liu He delivered a speech which Richard Wainwright of South Africa’s Investec described as being ‘very much about free markets and China not being a planned economy’. He delivered a now standard Chinese praise for internationalism, pioneered by Premier Xi Jinping in his 2017 keynote address at Davos. According to SA journalist Tim Cohen, He mentioned ‘international cooperation’ 11 times and even called for World peace’.
The idea that the world is fragmenting into two distinct trading systems centred on China and the US was emphasised only by left-wing observers like Oxfam’s head of inequality policy, Max Lawson. His organisation, alongside many others (including all the main international management consultancies) chose to launch research and policy documents at the event, presumably taking advantage of the prevailing global media coverage. The argument that ‘parallel systems’ are developing is related to the observation that the US, China and Europe are trying to reduce the influence of potentially hostile parties in their supply chains.
Nevertheless, there was considerable comment about the potential tension between the US and Europe over green economy subsidies. US speakers, including Senator Joe Manchin and former US treasury secretary Larry Summers made a point of arguing that the US$369 billion Inflation Reduction Act (IRA), passed by congress last year, was not intended to be hostile to the superpower’s friends. But the IRA does heavily subsidise the mining of ‘future facing’ minerals in the US and countries with which the country has a Free Trade Agreement as well as the development on an on-shore lithium-ion battery value chain.
Some commentators have suggested that the IRA is highly problematic. University of Colorado economist, Mark R. Kennedy, in a paper for the Wilson Centre last year, argued that it is ‘a further step away from global fairness’ and ‘undermines the rule based (international) order’, breaking World Trade Organisation Rule in the process.
Ursula von der Leyen raised the issue directly in Davos. Although she used the language of cooperation (‘we are working with the US’), conforming to the WEF style, her announcement suggests a potential conflict between Europe and the US over green technology, especially in the battery/Electric Vehicle space. Von der Leyen spoke about the NextGenerationEU, an €800 billion investment programme, to subsidise and accelerate development of clean technologies.
Speakers on the green tech issue, from both Europe and the US were careful to suggest that their programmes offered what Senator Manchin described as a ‘win-win’. ‘If you really want a cleaner environment, you better be able to do it quicker and better than any (other) place in the world and then share it with your friends’, he said. These sorts of comments – and Manchin was far from the only person making them in Davos – sound rather like green cover for protectionist policies.
Africa appears to be nowhere in this debate. It was left to the IMF’s Georgieva to argue that EU and US clean technology subsidies ‘may not serve emerging markets and the developing world’. In fact, Africa was very much pushed to the margins of the WEF despite a breakfast to discuss the African Continental Free Trade Agreement (AfCFTA) and the launch of a forecast report identifying potential growth sectors. For all its potential, it seems that Africa is not, currently, a concern among global decision-makers. But then Davos is probably not the right place to look.
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