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Friday 19 April 2019
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Uncertainty Rampant: Interpreting the 2017 World Economic Forum Meeting in Davos

The World Economic Forum (WEF) annual meeting in Davos is unique in the extent to which it brings top political and business decision-makers together. Since the first meeting in 1971, it has been branded as the ‘must attend’ conference, offering insights not available elsewhere. Indeed it often delivers, setting the tone and raising themes that the media will chew over for the rest of the year. This profile makes it especially galling for organisers that the 2017 event should be so comprehensively overshadowed by an event elsewhere – the assumption of office by Donald Trump’s government in the US. The decision makers gathered in Davos were reduced to a commentariat, trying to explain Trump’s election and the assertion of similarly nationalist politics in Europe.
 
If supporters of Trump, Brexit, le Pen and other political forces said to be representing an anti-globalisation backlash are indeed the embittered ‘losers’ of caricature, they must surely feel satisfaction at the way the rich and powerful are now forced to share the sense of irrelevance and helplessness they know so well. This serves too as a salutary reminder that global business is not simply about rational calculation; the arena is permeated too with less-than-tangible sentiments. Ray Dalio, founder and CEO of hedge fund Bridgewater Associates commented that ‘politics will have a bigger affect than it usually does’. While it doesn’t take a WEF meeting to show that sentiments have turned negative, the contrast between the concerns articulated in January 2016 (‘where will growth come from?’) with the much more fundamental uncertainty a year later (‘The global economy is broken’ – Andrew Liveris, CEO Dow Chemicals, WEF Davos 2017) is striking.
 
Trump’s anti-globalisation credentials were established on the campaign trail during the 2016 US presidential election. To distinguish himself from the globalist Hilary Clinton, Trump has made assertions and indeed promises, which if literally put into practice will take the US – and thus the global economy – back to a degree of protectionism not seen since before the Second World War. He has promised to withdraw from the Trans Pacific Partnership (TPP) – effectively the extension of the North American Free Trade Agreement (NAFTA) to nine other Pacific rim economies (but excluding China) – and to initiate the process on ‘day one’. On NAFTA, he has threatened to withdraw entirely unless Mexico and Canada agree to reformulate the agreement. Trump’s rationale appears to be that these agreements have been implemented at the expense of his core support base, ordinary working class Americans.
 
This is a claim that is appropriately described as ‘populist’. It is also, as Michael Porter put it at WEF 2017, ‘simplistic’. Other Davos attendees pointed out that a great deal of what is known about Trump’s policies is known only through 140 word tweets made during the US election campaign and may represent rhetorical rather than substantive positions. This seems to be the view of Lloyd Blankfein, CEO of Goldman Sachs. ‘If Trump really is anti-trade, then I’m at odds with him’ said Blankfein in an interview with Bloomberg TV at Davos. ‘But if he’s saying “I want to renegotiate some of these trade deals to make them better for the US” … I’ll take that’, he explained. Blankfein clearly suggested the second interpretation was more likely. Using terms like ‘push back’ he implied his view was that Trump had initiated a tough process of renegotiating but not fundamentally challenging the terms of the international trading system. Goldman Sachs may be in a position to know as the bank has provided more appointees to the Trump’s administration than any other corporate (including new National Economic Council head Gary Cohn).
 
The only prominent Trump appointee to attend WEF 2017 was a Davos regular, Skybridge Capital founder Anthony Scarmucci, named a week before Davos as an ‘assistant to the President’. Trump’s cabinet-level appointees are drawn from precisely the class that gather at the WEF – bankers and hedge fund managers, and the absence of many Trump insiders looks deliberate. Attending Davos could be seen as a betrayal of the populist movement that brought him to power. Scaramucci, effectively Trump’s ambassador to the WEF, was much in demand at the event. Describing his role as ‘translating Trump’, he argued that he sees Trump very differently to ‘the Davos crowd’. But his contributions boiled down to asserting that Trump was a defender of US citizens whose economic and occupational (upward) mobility had been compromised by globalisation. He gave little clarity on substantive policy issues other than to assert that Trump was ‘not an enemy of globalisation’ and sought ‘a strong bilateral relationship with China, not a trade war’.
 
Others are less sanguine than Blankfein and Scaramucci. Commenting of Trump’s apparent espousal of a Two China policy (i.e. recognition of the sovereignty of both Taiwan and Mainland China) Bridgewater’s Dalio commented that ‘making this a big thing is not good’. One of Trump’s first acts after winning the election was to take a congratulatory phone call from Taiwanese President Tsai Ing-wen, the first formal contact between the two heads of state since 1979. Observing that issues like this are usually dealt with behind the scenes, Dalio observed that this raised the ‘face’ issue for (Mainland) China, makes compromise less likely and that it is ‘hard to see it as a smart decision’.
If WEF 2017 was the whole of the arena Donald Trump is contesting with China, the Davos event would have been a hands-down victory for the emerging Asian power. China Global Television Network (CGTN) carried the event almost continuously with frequent almost triumphalist remarks on the size of the Chinese delegation and the prominence of Chinese issues.
 
President Xi Jinpeng – the first Chinese premier to attend the event – delivered what amounted to a keynote address on the opening day of the conference. In a much-remarked and extraordinary role reversal, his vigorous defence of globalisation and free trade seemed to be a direct rebuttal of Trump’s ideology, although the Chinese leader never mentioned the new US president by name.
Jinpeng said that trade protectionism was akin to ‘locking oneself in a dark room while at the same time depriving that room of light and air’. He argued that ‘no-one will emerge as the winner in a trade war’ and responded to Trump’s criticism that China’s success relied on currency manipulation. ‘China has no intention to boost its trade competitiveness by devaluing the renminbi, still less will it launch a currency war’, he said. Some Davos attendees were less than impressed with Jinpeng’s avowed espousal of openness. German Ambassador to China, Michael Clauss, was among those who remarked that these assertions (of openness) had been made many times before and yet non-tariff obstacles to investment in China remain. Chinese dumping of steel, aluminium and solar panels were cited by participants as another indication of Chinese ambiguity.
 
Alongside the Chinese statement, an equally strong assertion of the virtues of globalisation and market capitalism came from British prime minister Theresa May on the second day of the event. May reiterated the main points of her 12-point ‘hard’ Brexit plan announced at Lancaster House the previous day. Asserting that the Brexit vote was ‘a vote for parliamentary sovereignty’, she claimed that it was also a mandate to ‘become even more globalist and internationalist’. Her government will be seeking a free trade agreement between Britain and Europe and ‘wants to emerge as a truly global Britain’, while asserting control over immigration from Europe. This, she asserted, is consistent with (Britain’s) profoundly internationalist history and culture. It means leaving the EU’s single market as that would mean ‘complying with the EU’s rules and regulations… without having a vote on what those rules and regulations are’.
 
While May’s affirmation of a multi-lateral rules based global order contradicts the twitter-based impression of where the Trump administration is heading, May’s position on populism is very similar. Government’s first responsibility is ‘to serve the people… especially those who feel the modern world has left them behind’, she asserted. In a nod towards her populist audience she added that ‘talk of globalisation makes (many) people fearful’ and that many feel that ‘those who prosper do so under a different set of rules’.
 
*David Christianson is a Political Analyst and this piece serves as his comment on the recently concluded 2017 World Economic Forum.
 
Catch part two of Uncertainty Rampant in next week’s edition.



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