The Davos balance: the world is no longer flat

Globalization has not disappeared, learned a week at the World Economic Forum. But it is becoming more complex, less reliable and more political.

For the first time, the World Economic Forum (WEF) took place in Davos without the snow, without the Chinese and without the Russians. In that way, the village showed how the world is doing. We have not yet recovered from the corona pandemic. China is going its own way in crucial areas. And the West again has a common enemy.

These are worlds apart from globalization that flourished after 1989. Trade agreements were made, technology brought people together, borders disappeared and multinational corporations conquered the planet’s shopping streets with their brands. NY Times journalist Thomas Friedman summed it up in ‘the world is flat’.

The essence

  • The talks at the World Economic Forum in Davos this week showed how globalization is under pressure.
  • Countries seem to be on the verge of entering into more flexible alliances with each other.
  • More than ever, companies are forced to take political risks into account.
  • The danger is that an integrated world economy will be separated again, the IMF fears.

In 2022, she is no longer. “We are concerned that we are moving towards a world of more fragmentation, trade blocs and currency blocs, towards a separation of the integrated global economy,” said IMF chief Kristalina Georgieva.

Supply lines

These concerns are not only related to Russia but also to China. This is because the country wants to develop its own economic system at crucial points, especially in technology and data. That there were almost no Chinese in Davos was due to their stubborn adherence to a zero-covid policy in another crucial area – the fight against the pandemic.

A lockdown will also close factories and ports, meaning global supply lines are still cut off. It shows how globalization must be managed more than before. Volkswagen CEO Herbert Diess told the WEF this week that he sees “improvement” in computer chip supplies and “hopes” that car production can recover.

Flexible alliances

It shows that more robustness is needed. One way to do that is to make production more local, which the EU is striving for in the chip sector. Another way is to tie a lot of international ties so that it is less of a burden when cutting. Prime Minister Alexander De Croo (Open VLD) defends this approach.

Former Finnish Prime Minister Alexander Stubb also said last week that it is “too simplistic to say that we are moving towards a new cold war between a liberal and an authoritarian world.” ‘In particular, I think alliances need to be much more flexible than what we are used to’.

In particular, I believe that alliances need to be much more flexible than we are used to.

Alexander Stubb

Former Finnish Prime Minister

Some countries seem to have understood it right away. On the Promenade in Davos, the House of Russia had disappeared this year, as well as the posters from the Russian bank Sberbank and Gazprom. Instead, large Qatar banners were hung up and the Saudis had set up pop-up cafes. Namibia and Botswana occasionally had their homes in Davos. India had eight: one for the federal state and seven for states.

The cost of free trade

These flexible alliances are necessary because globalization has become more uncertain, but also more political. NATO chief Jens Stoltenberg warned on Tuesday that we can no longer be naive about free trade because we have relied too much on authoritarian regimes. “Our security must come before profit,” he said, which is why he says we should not buy Chinese 5G technology.

It shows how companies can afford to claim less and less that they are politically neutral and economically global. Communications company Edelman on Monday presented a survey of 14,000 people in fourteen countries in Davos. Almost everyone said they expected companies to resist the Russian invasion.

The latter was by far the central theme in Davos this week. “It’s hard to believe we’re talking about war here,” said Commission President Ursula von der Leyen on Tuesday. “You can see how the whole world is reorganizing itself,” De Croo said of the impact of the war. ‘My biggest concern? The domino effects of war ‘, said Professor of International Politics Ian Bremmer.

The dominoes that have already fallen have been energy, higher defense budgets, refugees and inflation. Now the biggest concern is food. “We are facing the worst humanitarian crisis since World War II,” said David Beasly, head of the UN Food Program in Davos. “We take food from the hungry to give it to those who are at risk of starvation.” “I think the problem is getting bigger rather than smaller,” said IMF chief economist Gita Gopinath.

We take food from the hungry to give to those who are at risk of starvation.

David Weasly

Head of the UN Food Program

This also puts pressure on globalization. India issued a grain export ban on 14 May. The country’s trade minister told the WEF this week that he has no immediate plans to withdraw from that decision.

This week’s World Economic Forum was no longer the ‘global village’ where politicians and businessmen from around the world gathered to discuss greater prosperity. Without the Russians and without the Chinese, it was more like a Western economic forum, in a world where peace is more fragile, the economy more political and the alliances more insecure.

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