This year, the Russian, Chinese and U.S. Presidents did not come to the Davos annual meeting. This is not surprising given that these three countries are dealing with dramatic crisis and economic re-adjustments at home. Russia has been at war with Ukraine for almost 1 year, the United States is still grappling with an over 6% inflation, and China is dealing with the Covid-19 aftershocks and the reopening of its economy.
One underlaying factor that defined the Davos Forum this year was the recent global shift in monetary policy which was based on easy access to cheap money for all for at least 15 years. The rapid increase of the cost of money is having deep impacts for businesses and households around the world and widening the income gap between the “haves and the haves not”. The cost of money increase has directly or indirectly caused inflation, trade wars, social unrest, climate crisis and geopolitical confrontations.
In this year’s World Economic Forum Global Risks Perception Survey, most global risk experts that were interviewed for the Risk Report, anticipated high volatility until the end of 2023.
What happened at Davos in January?
The corporate and political elite were back in Davos, Switzerland, from January 16-20 for their annual conclave during the most severe protracted crisis of global capitalism since the founding of the World Economic Forum in 1970. At this year summit, however, an increased optimism was in display, but the uncertainty over the ability of global leaders to manage the crisis and shape a more resilience-based capitalism was evident throughout the duration of the event.
Among the key positive messages emerging from Davos, here are a few striking positive ones. Firstly, President Biden has secured approval for the Inflation Reduction Act, a $437 billion investment package that goes towards climate resilience and clean tech. This is the largest green-growth investment package ever approved and represents a big shift in market momentum towards more sustainable investment. Secondly, China ended the strict Covid-19 lockdown reopening its economy and its factories. According to the Chinese leadership this will help China’s GDP grow from 3% in 2022 to over 5% in 2023. This change should ease supply chain difficulties and help bring down prices will reinvigorating the global economy. Thirdly, energy prices have been coming down particularly across Europe where energy prices had grown to 40 years high due to the Russia’s invasion of Ukraine.
Who came to Davos?
This year there were around 2700 participants in Davos, and they all paid $19,000 to attend. Just to be clear, this is an invitation only event. Among the participants, there were more than 600 global corporate CEOs, 51 heads of state, 56 ministers of finance, 19 central bank governors, 30 trade ministers, 35 foreign ministers, and the heads of the leading international financial institutions and political organizations such as the International Monetary Fund (IMF), the World Bank, the European Union Central Bank, the United Nations, and the NATO General Secretary. Many decisions makers skipped Davos this year, like many leaders did not attend the COP27 Climate Summit that took place in another jet-setting event in Sharm-El-Sheikh in Egypt in Nov 2022. These leaders are not showing up because they are dealing with pressing risk at home, and they may have lost faith in these global forums as platform for actions, investment and global decision making. Let’s look at what the Davos Risk Report says for 2023.
The Davos Risk Report 2023
While many had expected a rapid return to a “new normal” following the COVID-19 pandemic, other shocks including the outbreak of war in Ukraine, triggered a fresh series of crises in food, energy and security that we all thought have been dealt with successfully. Throughout the report, it is apparent that all scenarios are dominated by high cost of living in the next two years while climate disasters and their economic impacts dominates the next decade. Despite the positive downward price pressure of the last quarter, “Cost-of-living crisis” was selected as the most severe global risk over to be expected of the next two years. What this means, is that global inflation will stay high and probably above 5% in 2023, given that it will take time fiscal and macroeconomic policies to adjust to the instable market conditions. “Biodiversity loss and ecosystem collapse” is viewed as one of the fastest deteriorating global risks over the next decade, and all six environmental risks feature in the top 10 risks over the next 10 years. This is based on the recent analysis that estimates that the nine environmental hotspots (the amazon forest, the arctics, the barrier reef to name a few) have deteriorated to such a low level and reached a “tipping point” that will cost trillion of dollars in annual damage and losses.
Conclusions: Having followed the Davos Economic forum for years and studied the Economic Forum Annual Risk report since 2009, I am not surprised by any of the report findings and many of its recommendations. What I am surprised about is how bad we are at predicting crisis and at avoiding risk. Hopefully these four years of crisis that started with the trade wars between President Trump and China, Covid, Inflation and culminated with President Putin’s invasion of Ukraine teaches government and businesses to embrace resilience and prevention. Resilience is a proactive form of prevention that systematizes risk assessment, crisis management and risk avoidance strategies that ensure that when an unexpected event happens, we are ready to deal with it.
About the Creator
Andrea Zanon is an international sustainable development and empowerment specialist who has dedicated his life to reducing poverty, promoting sustainability and empowering ambitious people