Inflation, Wildflowers, and Deglobalization: What to Expect as the Elite Meet in Davos

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Deglobalization, the Russia-Ukraine war, inflation and climate change will be in sharp focus this week as business and political elites flock to the small Swiss alpine town of Davos.

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They have been drawn here for more than 50 years, lured to the pre-eminent conference of global affairs and capitalism—as well as the snow-topped peaks and ski slopes. This year brings a change of weather.

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The World Economic Forum (WEF) kicks off on Sunday, in person for the first time since the Covid-19 pandemic began in early 2020, after being delayed from January. The spring climate—and lack of skiing—won’t be the only reinvention in Davos in 2022.

WEF has beaten the drum of globalization and consensus around progress for decades. Those frameworks are now being reimagined. From the Russia-Ukraine war to persistent challenges in tackling climate change, the “stakeholder capitalism” popularized by WEF founder Klaus Schwab is on shaky ground.

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“This will be the most timely and consequential annual meeting since the creation of the forum,” says Schwab at a media briefing on Wednesday. “The political, economic, and social circumstances of our meeting are certainly unprecedented.”

The five-day forum has played an integral role in global politics since it was founded in 1971. Negotiations at WEF helped Greece and Turkey avoid war over Cyprus in the 1980s. Nelson Mandela and FW de Klerk shook hands in Davos as apartheid drew to a close in South Africa. In 2000, the conference launched the Global Alliance for Vaccines and Immunization, which has helped ship more than one billion Covid-19 vaccines around the world.

Among the headliners this year will be German Chancellor Olaf Scholz, European Central Bank President Christine Lagarde, International Monetary Fund head Kristalina Georgieva, and European Commission President Ursula von der Leyen. WEF is inextricably European.

President Joe Biden won’t be in attendance, though dozens of other heads of state will be. Other than the Western executives of companies such as Alibaba,
Ant Group, and Tencent, there looks to be a scant Chinese presence. Many will be disappointed not to see JPMorgan Chase CEO Jamie Dimon.

For obvious reasons, Russian President Vladimir Putin and the titans of Russian business have been shunned. There is war on Davos’ doorstep. The title of this year’s conference is “History at a Turning Point” and Schwab says the invasion of Ukraine marks “the breakdown of the post-World War II and post-Cold War order.” Ukrainian President Volodymyr Zelensky will be present via video link.

The war in Eastern Europe has rocked two decades of regional consensus on relations with Russia, in the span of three months. It has prompted a generational reversal in German defense policy and a reckoning over the role of Russian money in the UK Yet the war in Ukraine may also be diluting the role of the business-oriented WEF.

“For a long time, Davos filled a space that multilateral, state-driven institutions used to fill,” says Gerald Butts, vice-chair of political consultancy Eurasia Group and the former principal secretary to Canadian Prime Minister Justin Trudeau.

“When you have an active, kinetic conflict in Europe, everybody is suddenly reminded how important states are,” Butts says. “Is Davos as relevant as it was 10 years ago? I don’t think you can objectively say yes.”

The inequalities and supply-chain chaos of the Covid-19 pandemic had already strained an interdependent world. Now, the invasion of Ukraine has spurred the dislocation of Russia and its economy from the West, accelerating the reversal of globalization that began in earnest with former President Donald Trump’s trade war on China.

“I would characterize this as the end of the beginning of de-globalization,” says Butts. “I think [elites are] mostly fumbling in the dark right now and I think that they don’t know what the end state looks like.”

Davos still offers hope of progress, though it faces the pitfalls of other conferences, such as the United Nations Climate Change Conference and the G-7, which can often make grand pronouncements that look like empty promises.

There remains value in bringing together a group of the world’s most powerful people. Progress is incremental, and every public panel is bolstered by behind-the-scenes and after-hours talks.

“Nudging people in the right direction with regards to the issues around prejudice, sustainability, labor, mobility—eventually you will get there, even if it doesn’t have a huge signing ceremony and sounds of trumpets,” says Paul Donovan, the chief economist at UBS Global Wealth Management.

WEF remains a forum with business at its heart—and this isn’t a great time for business. Many of the chief executives at Davos are likely to lead companies that have suffered severe stock price declines. The S&P 500 index has tumbled almost 20% this year and investors are flirting with a bear market.

The global growth outlook remains shaky, with inflation at its highest in decades, pinching the world’s poorest even harder than corporate profit margins. Now, central banks such as the Federal Reserve are moving aggressively to tighten monetary policy at the risk of denting economic demand to the point of causing a recession.

Donovan remains hopeful that central banks “can move fairly aggressively on policy early on, and then they will slow down the pace of policy tightening as they progress.”

“Even with the oil price shock, we are going to be seeing a process of moderating inflation as we go through this year,” the economist says. “Central banks are going to be moving policy back to a more normal setting, because it is a normalizing world.”

For now, the world appears far from normal. The absence of skiing at Davos only underscores that.

Write to Jack Denton at [email protected]


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