A summary of Davos 2019

Another year, another World Economic Forum in Davos. What is new this year?

Some of the themes are indeed hold-overs from prior years, but some are relatively new. In summary, the sense of angst has grown among the corporate leaders assembled here. 

On a superficial level, this year’s Davos is different because of the relatively smaller representation of heads of state and celebrities (which thankfully has made it easier to get around town). The most notable absences, although for different reasons, are President Macron and President Trump. Last year the former was the darling of Davos and the great hope that globalization could be kept alive. This year it is telling that he was forced to stay home because of increasing domestic troubles. The latter was the anti-Macron who crashed the Davos party with an anti-globalization message; he too was forced to cancel to deal with domestic troubles, including the government shutdown.

The theme at Davos has been Globalization 4.0 — a bit of misnomer perhaps because of the focus on anti-globalization pressures. One country after another has chosen to turn inward and question many of the tenets of a more open, inter-connected world. Populism is certainly not a new theme at Davos, but what is new is that populism has moved from the fringe to being mainstream all over the world (Mexico and Brazil being among the latest examples). The center of the political spectrum in one country after another has been hollowed out with the extremes on left and right filling the gap. Intensifying polarization leads to paralysis, in turn making it harder for leaders to craft effective responses to public anger. Some leaders at Davos reflected that governments simply don’t have the levers of power that they used to; this is partly due to the fact that technology has dispersed power, not only facilitating democracy but also enabling “bad actors.”

While “techlash” — popular concerns and regulatory responses to the power of technology firms — is another holdover topic from prior Davos sessions, it has been dwarfed by several new dominant themes.

The first is the future of the multilateral order. One senior business executive captured the mood during dinner one evening when he spoke of how the United States has become a revisionist power and China a status quo power when their relative positions would suggest that they would adopt opposite positions. The institutions and the laws that form the sinews of the multilateral order are now under serious threat. Another business executive spoke of the need to replace multilateralism with “multi-stakeholderism”, meaning the importance of non-governmental actors (including business) to invest in the preservation of the post-war consensus that has generated a unique period of growth and prosperity.

The second theme is the paradox that peoples all over the world are voting in democratic elections for policies that will make them poorer. This, perhaps, is historically unique. During one Davos session, a senior political leader observed, for example, that the city of Sunderland in the UK voted overwhelmingly to leave the UK despite the fact that many jobs are linked to Nissan, the Japanese car company that may well choose to reduce employment post-Brexit; today polls in Sunderland indicate that a large majority would still vote to leave, jobs be damned. Although the governing coalition in Italy is promoting policies that result in stagnation, lower investor confidence and job destruction, it retains wide support. Politics trumps economics. Much of the politics is rooted in sense of identity, as well as cultural and ethnic insecurities.

The third theme is the likelihood of serious clash between the US and China, especially on trade, but perhaps on a broader spectrum, including technologies of the future. While there was some chatter at Davos about a possibility tactical truce, involving some Chinese offer to buy more US exports and movement on market access, there was skepticism that the truce would be strategic and durable. One senior European business executive said that the world was a passenger in an aircraft with the US and China as bickering co-pilots. The hope is that they can land the plane.

That ties into the fourth theme: the slowdown in China’s growth that is already impacting companies around the world. Apple’s announcement that its growth will be impacted by faster than expected contraction in Chinese growth has already spooked the markets. The economic outlook at Davos, according to one participant is a “tale of two worlds.” On the one hand, business confidence (at least among the multinationals represented at Davos) remains pretty strong, especially with regard to the US this year. But there was widespread acknowledgement that China’s deceleration could be made even more serious by geopolitical factors. Dark clouds loom on the horizon.

The fifth theme is that the impact of “artificial intelligence” (a term as frequently used in Davos this year as “block chain” was last year) on the labor market is about to reveal itself. At a lunch hosted by leading US technology firm, there was hope that more jobs would be created than lost over the long term. But concerns remained about the delay between the destruction and creation of jobs. And experts worried aloud that the jobs would be created in different sectors than the ones suffering the impact; that our societies have not proven adept enough at creating skills for the future; and that the pace of change could be historically unique and unsettling.