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Sunday 21 April 2019
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Uncertainty Rampant: Interpreting the 2017 World Economic Forum Meeting in Davos

wef-logoWhether or not it was her intention to set an example to the Trump administration, May showed, at least in terms of discourse, how the perceived gap between popular disillusionment and advocacy of globalisation can be bridged.
 
The new populism hardly featured in last years’ Davos meeting. In 2016, historian Niall Ferguson in fact dismissed the possibility of Brexit as a risk factor. Despite this, some prominent WEF figures insisted in 2017 that they have long emphasised the potential marginalisation of ‘losers’ in developed countries as a problem. At the first press conference of the 2017 event, WEF CEO Klaus Schwab read out a warning he had written more than 20 years ago against increased populism and demanding that globalisation benefit the majority, not just a small elite. IMF CEO Christine Lagarde complained that she had first warned of rising inequality four years ago but that her views ‘did not gain much traction’. The past prescience claimed here is not merely irritating (neither Schwab nor Lagarde are known as consistent campaigners for egalitarianism) but dangerous. It implies that someone or some group is to blame – and that is the central and potentially most baleful claim of the new populism.
 
The implication of the new (developed world) populism for the developing world received some consideration at Davos although the theme was almost overwhelmed by need to ‘interpret Trump’.
Hung Tran, director of the Washington-based Institute for International Finance, pointed out that ‘reshoring’ (the return of significant parts of manufacturing value chains to the US) was bad news for developing countries. It certainly does harm to the idea that the way ahead for emerging market countries involves capturing parts of those value chains and, as Tran notes, means ‘the business and growth model which worked for many countries, especially in Asia, won’t provide the same growth opportunities as before.’ He added ‘That’s the big challenge for emerging economies that are only just trying to take off… it’s much harder to do than 20 years ago when all you needed to do was attract investment, produce and export.’
 
The WEF has in the past been prominent in promoting development opportunities through globalised values. However while emerging market leaders such as Brazil’s finance minister Henrique Meirelles and Francisco Gonzales Diaz, head of the Mexican civil service, were impassioned in defending the merits of globalisation, more detailed discussion of the role of globalised manufacturing value chains was honoured more in the breach. In fact the more limited and potentially dangerous tendency to promote the beneficiation of raw materials as the optimal growth path for the developing countries may have been more in evidence, although this was certainly not a major theme of discussion. Anil Agawal, CEO of Vedanta Resources, which has extensive mining holdings in Africa, spoke about how the company was looking downstream, seeking to find entrepreneurs to process the copper and zinc it mines. This may be Vedanta’s chosen growth path but it smacks rather of conformity with demands being made by a number of African political leaders. While there is nothing wrong with beneficiation, the danger is that it often seems to lend itself to development by political decree, which is fatal to investor confidence. The South African delegation, led by deputy President Cyril Ramaphosa was right on message in 2017, in marked contrast to its fumbling performance last year.
 
Last year’s WEF meeting came only a few weeks after President Zuma had sacked two finance ministers (in December 2015) and delegates were hoping for explanation and reassurance. Instead Zuma kept a low profile and did not appear at the panel discussion he was scheduled for. This year’s performance was much more coherent. Speaking in a session entitled “Coalition for African Research and Innovation’, Ramaphosa presented a more traditional Davos ‘open for business’ message. He did not duck the problems of 2016 referring to the ‘turbulence’ of the last 12 months but stating the South Africa remained committed to inclusive growth. What gave Ramaphosa credibility was the backing of not only much of the government delegation including finance minister Praveen Gordhan, trade and industry minister Rob Davies and economic development minister Ebrahim Patel (thereby at least presenting a positive front in an area that has been characterised by multiple, sometimes contradictory plans) but the strong private sector (corporate) delegation from South Africa (as well as a trade union leader, Dennis George of Fedusa), all seemingly keen to emphasise the extent to which the headwinds of 2016 had been managed by deepened tripartite (business, labour, government) relationships, led by Ramaphosa.
The South African delegation certainly supported Ramaphosa’s central argument, that South Africa remains a good place to do business. University of cape Town Vice Chancellor Max Price pointed out that while disruptive protests made the news headlines, South Africa’s universities continued to function and successfully graduated the cohort due to finish in 2016. Investec CEO Stephen Koseff gave a number of interviews in which he stressed that the crises in 2015/16 have led to a stronger and more cohesive relationship between business, government and labour. Koseff referred to a number of major projects, developed over the course of business-government interaction in 2016 which, he hopes, will be finalised before President Zuma’s State of the Nation address in February. These include a youth employment programme designed to cover 330 000 internships as well as a programme to support small business.
 
Amidst the need to interpret the incoming Trump administration, the official theme at WEF 2017 – “Responsive and Responsible Leadership” – seemed a little marginalised. But the central purpose of the theme, to regenerate global growth while making the global economy more inclusive did of course underpin the concerns articulated about the Trump administration, the new populism and the global foreign direct investment slowdown in recent years. Dow Chemicals’ Andrew Liveris published a discussion paper on the second day of the conference to show that the way ahead was not a zero-sum game and that ‘inclusive capitalism’ can fix the ‘broken’ global economy.
 
The big problem is of course that the WEF appeals to the same international elite (who attend its events) to lead the world out of these problems whereas the new populism is inclined to place its faith elsewhere.
 
That its alternative is unknown, untested and potentially deeply threatening to a system that has delivered enormous benefit (one billion people raised out of extreme poverty in the last 20 years) does not worry the new populist movement. But its leaders should know better. Theresa May attempted to show how globalist policies can be combined with populist leadership. But it is far from clear that that message crossed the Atlantic to the US.
 
David Christianson is a Political Analyst and this piece serves as his comment on the recently concluded 2017 World Economic Forum.



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