Doubts in Davos


The annual gathering of the great and powerful in the Swiss ski resort of Davos this year does not seem the normal ebullient bean-feast, even though the IMF has just issued positive figures for global economic growth.

The 2018 World Economic Forum is certainly not as glum as it was after the 2008 financial meltdown. The international investment bankers, who once dominated Davos as Masters of the Universe, have long been unmasked. Largely unpunished for their suicidal deals that plunged the financial system into chaos, leading bankers who have not retired with fabulous pensions are now cutting a far lower profile around the resort.

Nevertheless, all reports suggest there is a tentative, almost unconfident air to this week-long event. Perhaps it has something to do with the weather. Switzerland has been hit with substantial snowfall that has cut off many winter resorts, stranding thousands of holiday skiers. And it is not as if the snow has produced perfect downhill conditions. Many slopes have been closed because of Level 5 avalanche warnings - the highest danger alert.

Perhaps, despite the encouraging global growth statistics, the Davos attendees fear a metaphoric economic avalanche. These days of elite-level networking have always been informed by globalization and the presumption that ever more integrated trade and financial relationships spell greater prosperity for everyone.

But this model is now being challenged. President Trump’s apparent contempt for international trade agreements and his insistence on putting the interests of America first go very much against the Davos grain. Western leaders are also realizing that China, which has benefited so strongly from globalization since it joined the World Trade Organization in 2001, has not been playing by the rules. Inward investment is still strictly controlled. While Chinese companies have made spectacular overseas acquisitions, there is no open door for foreign businesses to make acquisitions in China, even assuming that the accounts of a corporate target are sufficiently transparent. Though many in Davos would be loath to admit it, President Trump’s thundering actually chimes with their own anxieties. They had long been predicting the global economic dominance of China, but the looming reality now concerns them.

Trump says that China has been cheating. History is on his side. Even while backing globalization, American business and finance have long sought to base it very much on their own terms. There is indeed a reasonable argument that a dose of protectionism in which countries defended their own markets and manufacturers might not be a bad thing. It would shake out some of the unfairness inherent in globalization and perhaps make for better world trade rules in the future.

Canadian Prime Minister Justin Trudeau seemed to catch the Davos mood when he warned delegates they could not neglect their responsibilities to the people who mattered most - the ordinary people who were not there in expensive Davos and never would be.

Though still a liberal advocate of free trade, Trudeau was clear that the present globalized system that companies exploited to avoid taxes and produce record profits while they slashed their workers incomes and benefits had failed. “That approach won’t cut it any more,” he warned.

The concern of many is that massive wealth disparity is undermining popular faith in the present economic system, above which is hovering a potentially devastating avalanche of Trump-supporter style discontent.