The World Economic Forum’s annual meeting has kicked off in Davos, Switzerland under the banner of “The New Global Context.” Falling in the long shadow of the financial crisis, the WEF’s theme reflects as much hope as a creeping sense that economic turmoil is the new normal.
Some seven years into the current crisis, the participants at Davos are acutely aware that the world economy still hasn’t recovered its past momentum. The US is the only major engine of growth. Japan just passed its largest-ever national budget to knock itself out of two decades of stagnation. The European Central Bank (ECB) is expected to launch quantitative easing on Jan. 22 to stop Europe’s slide into deflation. And Russia is caught in a worsening meltdown.
In the last week alone, the IMF and World Bank have cut their global growth forecasts. Shanghai’s stock market got rocked by a regulatory clampdown and China’s 2014 growth rate came in at 7.4%, its weakest pace since 1990 when the country faced post-Tiananmen sanctions. With the slowdown led by construction and manufacturing, WEF members from commodity-producing countries and companies know their pain is about to get worse.
On January 15, Switzerland acknowledged that even traditional safe havens aren’t insulated from global economic problems: the Swiss central bank threw in the towel on three years of printing money to hold down the value of the Swiss franc and support the country’s exporters. Just in case the Great Recession was starting to seem a bit abstract, Davos attendees saw their trip to the mountains instantly become 20% more expensive as the franc soared.
Global inequality is also on everyone’s lips at Davos. Oxfam published a report on January 19 projecting that the planet’s wealthiest 1% will own more assets than the rest of the world by sometime next year. Oxfam’s head, Winnie Byanyima, serves as one of the co-chairs of the WEF 2015 meeting.
This spike in inequality is partially a by-product of industrialized countries’ attempts to jump-start growth through loose monetary policies. Instead of boosting investment, a decent chunk of this extra liquidity has pushed up the values of hard assets such as real estate and art. If you were already rich before the crisis, then quantitative easing probably made you a lot richer and pushed everyone else further behind. Davos’s attendees know they’re here at a time of unprecedented scrutiny and there’s an urgency to develop better responses to the tensions widening inequality creates.
The ECB’s expected launch of a bond-buying programme sets up a new quandary, though, for Davos participants who want to save Europe from deflation and reduce inequality. Reconciling both goals could get even more complicated as the election in Greece on January 25 puts the country’s IMF rescue package and the euro zone itself back under existential threat. At the same time, it’s not clear the only partially-finished package of post-crisis global financial reforms offer enough to protect the world’s banking systems from new disruptions.
The WEF’s recently-published 2015 Global Risks Report (pdf)—a comprehensive poll of senior business leaders ahead of their arrival in Davos—acknowledges that chronic economic problems are creating new geopolitical tensions. For the first time in a decade, interstate conflict ranked as the most pressing worry amongst experts and CEOs in the poll. The scope to engage in conflict—including cyberattack, economic sanctions, and competition for resources—is wider than ever. Discussions on mitigating these flash points are writ large through the 2015 Davos calendar.
Reducing these tensions hinges on making global growth more inclusive and environmentally sustainable. Large slices of the official 2015 Davos agenda are consequently devoted to ensuring the success of United Nations summits planned for later this year to agree new international development goals, mobilize financing for these targets, and set the world on a fresh course to control climate change after the warmest year in history. These aren’t alpine side shows: they’re right at the heart of the discussions in Davos this week. And they’re complemented by private efforts to make consumption more efficient and less resource intensive through new business models that allow consumers to share goods, services, and skills.
One thing that hasn’t changed much from previous years: women still hold only about 17% of the WEF’s coveted white Davos delegate badges. This mirrors the fact that women occupy around the same proportion of Fortune 500 board seats and lead fewer than 5% of these companies. The WEF is doing its part to make the future of Davos look different—some 50% of the WEF’s junior members are women—but a real shift in its senior membership could take well over a decade to happen organically.
The world doesn’t have a decade to act on the concerns at the fore of this year’s Davos meetings. Yet, there’s a major undercurrent of concern throughout the Forum, expressed even by its founder Klaus Schwab, that our public leadership and institutions may not be up to responding to the challenges we face. The G20’s inability to deliver on a 2010 agreement to reform the IMF’s capital structure, for instance, heightens fears that it may not be possible to improve global governance structures when our leaders are forced to focus on putting out economic and geopolitical fires. As a result, the new global context could simply be the old global crisis for years to come.