Davos 2019: Global elites in crisis as they gather amid populist assault and accusations of failure

  21 January 2019    Read: 2513
      Davos 2019:   Global elites in crisis as they gather amid populist assault and accusations of failure

Facing populist backlash and a worrying economic outlook, the world’s financial and political elite will gather in Davos, Switzerland, on Tuesday to discuss the future of global politics.

The influential World Economic Forum (WEF) takes place as nationalist movements continue to gain strength across Europe and the Americas, and the event’s once-dominant ideology of unrestricted global trade and close ties between countries is under threat.

In France and the UK, politicians have struggled through months of chaos, caused by the gilets jaunes (yellow vests) movement and Brexit respectively.

A year after receiving a standing ovation at Davos, French president Emmanuel Macron finds himself battling for his political life against a wave of public disorder.

Meanwhile, in the US, a partial government shutdown over funding for Donald Trump’s border wall has forced the president and a high-level US delegation to cancel its trip to the Swiss Alps.

The economic backdrop is also worrying, as experts downgraded their economic forecasts for global growth this year amid rising interest rates and tensions over trade.

Financial analysts have been frustrated by the global elite’s failure to manage discontent from voters in Europe and the US who are expressing anger over wealth inequality and immigration.

“Judging by the state of the world right now, 10 years on from the financial crisis and the dysfunctional state of global politics, I would suggest that these annual events have achieved the sum total of diddly squat,” says Michael Hewson, chief market analyst at CMC Markets UK.

Those fears have translated into turbulence in global financial markets, with the Dow Jones industrial average down nearly 9 per cent from 3 October.

David Dollar, a senior fellow at the Brookings Institute, says the buckling market “represents a lot of anxiety that we’re seeing from the corporate elite who meet at Davos”.

Brexit and the election of Donald Trump in 2016 were considered wakeup calls for the global elite who had underestimated the scale of discontent in their countries.

“The winners from globalisation have had the megaphone,” says Paul Sheard, a senior fellow at the Mossavar-Rahmani Center for Business and Government at Harvard University’s Kennedy School. “The losers have been somewhat silent but now are starting to express themselves through the ballot box and through the political process.”

Although Mr Trump will miss this year’s forum, Brazil’s newly elected far-right president, Jair Bolsonaro, will be a notable populist attendee at the event.

The WEF has frequently been criticised as hypocritical and out-of-touch with the concerns of ordinary people.

This year, hedge fund billionaires will fly to Davos in private jets to discuss the threat of climate change, and millionaire CEOs will discuss inequality at lavish drinks events.

Standard membership to the WEF costs 60,000 Swiss francs (£46,821), while Strategic Partner membership costs 600,000 francs, and attendance at the event requires an extra fee of 27,000 francs per person, according to spokesperson Oliver Cann.

However, civil society, non-governmental groups, UN leaders and government officials do not have to pay for entry, although accommodation during Davos week is expensive.

The expense is considered worth it because Davos provides a rare opportunity for world leaders and corporate executives to discuss global issues quietly in public and private meetings.

“They make the trek up to Davos, yes, to drink champagne and to wheel and deal and everything else,” says Mr Sheard, who participates in WEF projects. “But there is sort of an attempt at purification and thinking, we need to do a better job.”

Some have been left unimpressed by their efforts, such as Gabriel Sterne, head of global macro research at Oxford Economics, who argues that top economic decisionmakers have much to atone for.

In a report this month, Mr Sterne noted most major economies performed dramatically worse than expected after the 2007-2009 Great Recession.

He blames many central banks, besides the US Federal Reserve, for not responding to sluggish growth more aggressively with easy money policies. Politicians, he says, should have juiced growth with tax cuts and higher government spending.

“There was genuine underperformance by the big institutions,” the economist said. The result was a populist backlash. “If you don’t do anything about your failings, they can come back and bite you.”

Mr Sterne worries that the populist response “could trigger radical and ill-conceived” policies that overshoot and drive up inflation, swelling government budget deficits in the process.

There are few signs that the future will be any easier.

The WEF will focus next week on what it calls the “fourth industrial revolution” – a series of rapid advances in technology and medicine expected to transform society. Advances in robotics and artificial intelligence could further threaten jobs and feed the populist revolt.

“We seem to be on the cusp of an incredible new era of automation and critical breakthroughs in health sciences,” Mr Sheard said. “But how do we manage this process? And how do we manage it in a way that doesn’t leave millions of people behind?”

Independent


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