Nothing better captures this apoplexy than the choice of 2017’s showstopper, Xi Jinping, the first Chinese president to address the WEF in Davos. China, notwithstanding its remarkable economic rise over the past decades and its success in lifting hundreds of millions out of poverty using the opportunities provided by globalisation, is the most unconvincing poster boy for the WEF’s values of universal openness and transparency as well as the limited role of the government. For the most part, the developed countries of the west and as well as China’s Asian rivals such as Japan have steered clear of accepting it as a “market economy”. Not surprisingly then, Mr Xi’s attempt at elucidating the merits of globalisation was symptomatic of the deep panic among business leaders of the world.
While leaders spent most of the time denying the harsh ramifications of rising nationalism, political populism and trade protectionism among the countries that were till yesterday the torch-bearers of globalisation, the truth is that this moment was in the making for a while. It started with the global financial crisis of 2008-09, which shattered the faith that the people had in the existing economic framework and its architects. Since then it has been downhill: global output growth has decelerated and the ratio of trade to global output has stagnated. Underscoring faltering trade and output growth has been the sharp fall in labour productivity in the US, Europe and Japan. Falling productivity reflected in smaller increases in income, even in countries such as the US, where the unemployment rate fell, and contributed to rising inequality across the developed world. It was only a matter of time that the resulting distrust in the forces of trade and globalisation would spill over into the political realm. It is that grassroots backlash, as evidenced by Brexit and Mr Trump’s election, which now threatens to bring down the whole edifice built over years of laying down rules of global co-operation.
It is true that the fruits of globalisation and trade have not been shared equitably, but turning back the clock — by countries becoming insular and protectionist or, worse, starting a trade war, as many fear might happen if Mr Trump takes his statements from the campaign trail and the inaugural speech too seriously — could be a case of the cure being worse than the disease. A sudden, unilateral reneging on the accepted rules of the game by any one partner could spark off retaliation and lead to further depressing job opportunities and exacerbating inequalities. As it is, Brexit has introduced enough uncertainty in the system and might just be the first of many such breakouts.
It is here that this year’s WEF failed to step up to its role as the thought leader. There were many discussions on the angst of the middle class and the growing disparity and inequality in the world. All attendees had a view on rethinking capitalism and making it more inclusive, but no clear answers on how to go about it. It was strikingly symbolic that the Davos meet ended on the day that Mr Trump, whose chance of getting nominated was dismissed by the world’s elite at this annual shindig last year, took over.
