Davos wraps up with a mix of optimism and caution for the year ahead
Davos wraps up with a mix of optimism and caution for the year ahead
This year’s World Economic Forum meeting in Davos, Switzerland, is wrapping up. World leaders, CEOs and activists there have been discussing this week a slew of global challenges like climate change, global inflation and the downward trend of globalization in recent years.
So what’s come out of this year’s gathering? Reports from the summit suggest some optimism about the world’s economic outlook for 2023 due to moderating inflation, China’s reopening, and increasing investment in green technology. Yet many global challenges remain, including the war in Ukraine and a potential protectionist showdown between the United States and Europe.
“We arrived here thinking it was going to be really gloomy, you know, recession, end of globalization,” Patrick Foulis, foreign editor at The Economist, told Marketplace’s David Brancaccio from Davos. “And in fact, the mood’s a bit better. … Most companies and economists reckon the world economy has actually been doing a bit better than expected. Inflation is coming down a bit.”
The following is an edited transcript of their conversation.
David Brancaccio: Apparently, the vibe is warmer despite all this fragmentation geopolitically — Russia’s war on Ukraine, widening gaps between rich and poor. There’s a certain bounce to the step of participants that you’re detecting?
Patrick Foulis: Yeah, that’s right, we arrived here thinking it was going to be really gloomy, you know, recession, end of globalization. And in fact, the mood’s a bit better. Several reasons for that. One is most companies and economists reckon the world economy has actually been doing a bit better than expected. Inflation is coming down a bit. Secondly, people are talking a lot about China’s reopening, and China’s sent, for the first time for a long time, a senior government figure here to kind of do a charm offensive for global business saying, “China’s back, back in business.” And then the last thing people are pretty excited about, I think, is the sense of a big surge in investment in the energy transition. And the sense of that’s becoming a lot more tangible and real.
Brancaccio: Yes, because in the U.S., we have the big Inflation Reduction Act, which among many other things, tries to speed up the U.S. transition to more sustainable energy. And in fact, this week out of Davos, the European Union has a response, a plan of its own.
Foulis: Yeah, well, from the point of view of the climate, the IRA is probably a good thing, it’s going to lead to much more investment in the U.S. But the rest of the world, it’s a bit terrifying, really, because there’s a big concern that investment will be drawn away from Europe, away from parts of Asia, to the U.S. So what you’re seeing is countries and companies talking a lot about how they’re going to respond. The EU’s probably going to dilute some of its rules over competition and trade in order that it can put in place its own subsidy program, and lots of other countries are doing similar things, India, Indonesia, for example. So the world is adjusting to the new reality of that landmark piece of legislation from the Biden administration.
Brancaccio: The World Economic Forum’s annual meeting at this Swiss ski resort, I suppose, is useful for networking, you know, the great and the good rubbing shoulders, maybe friendships forged, maybe deals made. But really, after the pandemic years, the party atmosphere is really back?
Foulis: Well, I’ve been told the number of attendees is higher than ever. And you know, everything is around here queues to get through security, to get into meetings. And Davos is a bit like a school disco for chief executives, with everyone kind of making contacts, socializing, and that’s all happening. But the interesting thing is a couple of things have changed compared to a few years ago when Davos was last in full swing. One is there’s far fewer people from Russia and China, the two big autocratic countries, and they’re not really as much of a bigger presence. The democracies, India and Indonesia, now have a much bigger weight here. The other thing is Ukraine is still there. And it’s obviously of the utmost seriousness, and President Volodymyr Zelenskyy addressed Davos demanding more arms, demanding more weaponry. And that’s a kind of difference, too, a sense that that conflict is still rumbling away, and obviously the stakes there are incredibly high.
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