Davos elite reassess globalization amid pandemic and war turmoil
Verdict: It’s complicated. But signs of a changing world order and fear about exactly where things would fall permeated the five-day conference and its many champagne-filled evenings.
“There is a real concern about globalization this year,” said Jason Furman, an economist at Harvard University and a former Obama adviser. “I mean, there is always concern about globalization, but the big question this year is: How do you get out of any of these things? What is the endgame for China’s lockdowns? Or Russia’s invasion of Ukraine? When will inflation go away? There are no clear slopes to any of these problems. “.
Ukraine’s war gives Davos an unusual moral edge
The antithesis of global unity – the war in Ukraine – took center stage even as the Davos crowd spoke of long-term issues such as climate change, sustainability and the importance of education. In a hypothetical speech, Ukrainian President Volodymyr Zelensky called for “maximum” sanctions against Russia and urged foreign companies to move their operations to Ukraine instead.
“Davos is in Europe, and Europe is at war,” said Ian Bremmer, founder of Eurasia Group and a longtime conference attendee. This made Davos very relevant this year. It’s immediate, it’s now: We need to end this war.”
At the same time, he and others said, the World Economic Forum is grappling with a much larger identity crisis: What does it mean to represent the global interdependence of trade and investment at a time when countries have built new walls and renegotiated their alliances?
Russian diplomats and oligarchs, who have long had a strong presence in Davos, have been barred from attending this year. Instead, the “Russian House” known for its free-flowing vodka and caviar, has instead been transformed into the “Russian War Crimes House” filled with photos and videos of war atrocities.
Meanwhile, China – the world’s second-largest economy – was largely absent from the forum due to sweeping lockdowns and travel restrictions related to its “zero Covid” policy. After years of rapid growth, its economy is showing alarming signs of slowing. The companies are talking about moving operations from China to other countries, including Vietnam, India and Mexico.
said Paul Knope, CEO of accounting and consulting firm KPMG. “The global pandemic – which I don’t think many of us expected – has provided some real lessons about supply chain shocks.”
In the shadow of war, there is no ‘business as usual’ in Davos
The rethinking of globalization comes amid a larger backlash against the global elite – and the wealthy in particular, who have seen their fortunes rise during the pandemic, even as millions around the world have fallen into poverty. About 657 million people now live in extreme poverty, up from 641 million two years ago, according to projections by the World Bank.
“A lot of people are tired of it,” said Bremer, author of Us Against Them: The Failure of Globalization. “You see it with illiberal trends, the rise of China, Bolsonaro in Brazil, Duterte in the Philippines, waking up to the left in the United States. All of these things are in no way a reaction to the global elites of the past 50 years, which the World Economic Forum has played A very powerful role.”
Although the dynamics of the world are clearly changing, momentum from decades of interconnected growth continues to build. $28.5 trillion in goods was traded worldwide last year, according to the United Nations Conference on Trade and Development.
“Globalization has already lifted a billion people out of poverty — and they are now caught up in what I call the perfect storm of the three factors: Covid, climate change, and conflict,” Pamela Cook-Hamilton, executive director of the International Trade Center, said in a session. Each of these could deal a physical blow to globalization. But the facts do not support this.”
Meanwhile, many companies are scrambling to find new suppliers and manufacturers who can keep products moving even if there is a shutdown or shortage in one country. And unlike in the past, executives say they are increasingly willing to ramp up production or stock additional products — even if that means paying more.
Economic uncertainty and ongoing war have cast a shadow over Davos
Gaming giant MGA Entertainment, which has long created popular brands like LOL Surprise and Bratz in China, recently opened two factories in Mexico, with plans for a third in the coming months. It also moves some production to India. After two years of delays and rising costs, CEO Isaac Larian said it was worth paying more to manufacture elsewhere.
“With so many Chinese cities shutting down, we didn’t know when we would get anything,” Larian told The Post. Factories couldn’t get workers, prices were going up, and provinces were closing down. Finally we said, “You know what, we have to try something new. It doesn’t just have to be China.”
Some economists worry that adjusting production and trade could reverse decades of progress.
“There is a real risk that globalization will decline,” said Beata Javorcic, chief economist at the European Bank for Reconstruction and Development. “Companies in particular are concerned that it would be too easy to use the current situation to erect trade barriers in the name of building resilience.”
WTO chief says war and pandemic are prompting companies to change supply chains
But the mood in Davos was not entirely gloomy. Many business owners said they remain optimistic, even in the face of crises including slowing economies and a rapid rise in inflation. They claimed that this moment of international concern would not last long.
“Globalization is not a good thing. It’s great,” Loic Tassel, head of European operations for Procter & Gamble said in one session. “We come to the question, is it movable, is it parked? I think it paused. Our responsibility as leaders is to continue to ensure that globalization continues to advance, not because it is in the interest of businesses – which it would be anyway – but because it is in the fundamental interest of consumers.”
Even with globalization on hold — or collapsing or completely untouched, depending on the point of view — celebrations in Davos continued hours later. Billionaire Marc Benioff of Salesforce opened a barrel of sake on stage at a Time Magazine party. Electronic music duo The Chainsmokers performed at the Cloudflare event. And Anthony Scaramucci hosted his dazzling annual wine tasting show in a venue so crowded that former House Speaker Paul de Ryan had to wait in line outside.
“I found out that if you buy expensive wine, people will show up,” said Scaramucci, a hedge fund manager perhaps best known for his 11 days as communications director for President Donald Trump. ‘Davos is still relevant and valuable.’