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DAVOS, Switzerland – For more than half a century, the richest and most powerful people in the world have moved to this gleaming ski town where most have been able to agree on one thing: that globalization is good , for countries, corporations and people.
Now, two years after a global pandemic, with the war in Europe and a broken supply chain weighing on the economy, top world leaders, CEOs and economists are recently re-evaluating globalization and recently emphasizing resilience. In the past, key players such as China and Russia have largely disappeared, and companies are talking about bringing manufacturing centers closer to their customers. “Is globalization dead?” asks one of the 300 panels at the annual meeting of the World Economic Forum this week.
The verdict: It’s complicated. But signs of a changing world order and uneasiness about exactly where things would land permeated the five-day conference and its many champagne-filled evenings.
“This year there is a real distress for globalization,” said Jason Furman, an economist at Harvard University and a former Obama adviser. “I mean, there’s always anxiety about globalization, but the big question this year is, how do you get out of these things? What’s the end of the blockades of China? Or the Russian invasion of Ukraine? When will it go away? inflation? There are no obvious exit ramps for any of these problems. “
The war in Ukraine brings an unusual moral advantage to Davos
The antithesis to global unity, the war in Ukraine, was prominent even though the Davos crowd pontificated on long-term issues such as climate change, sustainability and the importance of education. In a virtual address, Ukrainian President Volodymyr Zelensky called for “maximum” sanctions against Russia and urged foreign companies to relocate operations to Ukraine.
“Davos is in Europe and Europe is at war,” said Ian Bremmer, founder of the Eurasia Group and a longtime conference attendee. “This has made Davos very relevant this year. It’s immediate, it’s right now: we need to end this war.”
At the same time, he and others said, the World Economic Forum is struggling with a much bigger identity crisis: what it means to represent the global interdependence of trade and investment at a time when countries have built new walls and are renegotiating their alliances? ?
Russian diplomats and oligarchs, who have long had a significant presence in Davos, were barred from attending this year. Instead, the former “House of Russia”, known for its free-flowing vodka and caviar, became a “House of War Crimes of Russia” full of images and videos of war atrocities.
Meanwhile, China, the world’s second-largest economy, was also largely absent from the forum due to general closures and travel restrictions related to its “zero covid” policy. After years of rapid growth, its economy is showing problematic signs of slowing down. And companies are talking about relocating operations from China to other countries, such as Vietnam, India and Mexico.
“After the remarkable events of the last two years, the focus is now on relocation, quasi-shoring, trying to make sure you have sources of supply around the world,” said Paul Knopp, executive director of accounting and consulting company. KPMG. “The global pandemic, which I don’t think many of us saw coming, has provided some real lessons about supply chain shocks.”
In the shadow of the war, there is no “business as always” in Davos.
The rethinking of globalization comes amid a backlash against the global elite, and the rich in particular, who have seen their fortunes soar during the pandemic, even though millions around the world have fallen the poverty. Some 657 million people are currently living in extreme poverty, up from 641 million two years ago, according to World Bank projections.
“A lot of people are fed up,” said Bremmer, author of “Us vs. Them: The Failure of Globalization.” “You see it with illiberal tendencies, the rise of China, Bolsonaro in Brazil, Duterte in the Philippines and woke-leftism in the United States. All of this is largely a reaction to global elites over the last 50 years, in which the WEF has played a very strong role. “
While it is clear that global dynamics are changing, the momentum of decades of interconnected growth continues to grow.. According to the United Nations Conference on Trade and Development, a record $ 28.5 trillion worth of goods were traded worldwide last year.
“Globalization has lifted 1 billion people out of poverty, and right now it’s stuck in what I call the perfect storm of the three C’s: covid, climate change, conflict,” said Pamela Coke-Hamilton, executive director of the Center for International Trade. he said in a session. “Each of them can give a blow to globalization. But the facts do not support it.”
Meanwhile, many companies are struggling to find new suppliers and manufacturers who can keep their products moving, even if there are downtime or shortages in a country. And unlike in the past, executives say they are increasingly willing to increase production or stock up on additional products, even if that means paying more.
Economic uncertainty and the ongoing war threw a cloud over Davos
Toy giant MGA Entertainment, which for years has produced popular brands such as LOL Surprise and Bratz in China, recently opened two factories in Mexico, with plans for a third in the coming months. It is also moving part of the production to India. After two years of delays and rising costs, CEO Isaac Larian said it was worth paying more to manufacture elsewhere.
“With so many Chinese cities closed, we didn’t know when we would get anything,” Larian told The Post. “Factories could not get labor, prices were rising and the provinces continued to close. We finally said, “You know what, we have to try something new.” It doesn’t just have to be China. ‘ ”
Some economists fear that a reshuffle of production and trade could reverse decades of progress.
“There is a real danger of globalization receding,” said Beata Javorcik, chief economist at the European Bank for Reconstruction and Development. “Companies in particular are concerned that it would be very easy to use the current situation to erect trade barriers in the name of building resilience.”
War, pandemic push companies to change supply chains, says WTO chief
But the mood in Davos was not entirely sad. Many business owners said they remained optimistic, even in the face of crises, such as a slowdown in economies and a rapid rise in inflation. This moment of international anxiety, they argued, would be short-lived.
“Globalization is not a good thing; it’s a big deal, “said Loic Tassel, president of Procter & Gamble’s European operations, in a session. I think it is temporarily stopping. Our responsibility as leaders is to continue to ensure that globalization continues to move forward, not because it is in the best interests of companies, which would be right anyway, but because it is in the best interests of consumers. “
Even with globalization on hold, either falling apart or perfectly intact, depending on the view, the brawl in Davos continued after hours. Salesforce billionaire Marc Benioff opened a barrel of sake on stage at a Time magazine party. The electronic music duo Chainsmokers performed at a Cloudflare event. And Anthony Scaramucci hosted his annual wine tasting in such a crowded place that even former House Speaker Paul D. Ryan was forced to queue outside.
“I found that if you buy expensive wine, people show up,” said Scaramucci, a hedge fund manager perhaps best known for his 11 days as director of communications for President Donald Trump. “Davos remains relevant and valuable.”