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DAVOS, Switzerland – For more than half a century, the world’s richest and most powerful have retired to this glitzy ski city, where they have mostly managed to agree on one thing: that globalization is good – for countries, corporations and people. .
Now, two years after a global pandemic, with a war in Europe and a broken supply chain weighing on the economy, senior world leaders, CEOs and economists are re-evaluating globalization and re-emphasizing sustainability. Once dominant players such as China and Russia are largely missing, and companies are talking about moving production centers closer to their customers. “Is globalization dead?” One of the 300 panels at this week’s World Economic Forum meeting asked.
The verdict: It’s complicated. But after the five-day conference and its many champagne-filled dinners, there were signs of a changing world order and trepidation about exactly where things would go.
“There are real concerns about globalization this year,” said Jason Furman, an economist at Harvard University and a former Obama adviser. “I want to say that there is always concern about globalization, but the big question this year is: How do you get out of this? What is the end of the blockade in China? Or Russia’s invasion of Ukraine? When will inflation disappear? There are no obvious deviations for any of these problems. “
The war in Ukraine brings an unusual moral advantage to Davos
The antithesis of global unity – the war in Ukraine – was central, even as the Davos mob spoke out 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 called on foreign companies to relocate operations to Ukraine instead.
“Davos is in Europe and Europe is at war,” said Ian Bremer, founder of the Eurasia Group and a longtime participant in the conference. “This has made Davos very relevant this year. This is immediate, right now: we must end this war.
At the same time, he and others said, the World Economic Forum is grappling with a much greater identity crisis: what does it mean to represent the global interdependence of trade and investment at a time when countries are building new walls and renegotiating their alliances?
This year, Russian diplomats and oligarchs, who have long had a huge presence in Davos, were banned from attending. Instead, the long-running Russian House, known for its flowing vodka and caviar, has been turned into the Russian House of War Crimes, full of images and videos of military atrocities.
China, meanwhile, the world’s second-largest economy, is also largely absent from the forum due to radical suspensions and travel restrictions related to its zero-covid policy. After years of rapid growth, its economy is showing alarming signs of slowdown. And companies are talking about relocating operations from China to other countries, including Vietnam, India and Mexico.
“After the remarkable events of the last two years, the focus is now on re-shopping, almost sharing, trying to make sure you have sources of supply around the world,” said Paul Knopp, CEO of accounting and consulting firm KPMG. “The global pandemic – which I don’t think many of us expect to come – has given some real lessons in supply chain shocks.
There is no “business as usual” in the shadow of the Davos war.
The rethinking of globalization comes amid a greater backlash against the global elite – especially the rich, who have seen their fortunes skyrocket during the pandemic, even as millions around the world have fallen into poverty. About 657 million people now live in extreme poverty, up from 641 million two years ago, according to World Bank estimates.
“Many people are fed up,” said Bremer, author of We Against Them: The Failure of Globalization. “You see it with illiberal tendencies, the rise of China, Bolsonaro in Brazil, Duterte in the Philippines and vigilance on the left in the United States. All these things are by no means a reaction of global elites in the last 50 years, in which the WEF has played a very strong role.
Although it is clear that global dynamics are changing, the momentum of decades of interconnected growth simply continues to increase. A record $ 28.5 trillion in goods were traded globally last year, according to the UN Conference on Trade and Development.
“Globalization has actually lifted 1 billion people out of poverty – and it is currently caught up in what I call the perfect storm of the three C’s: covid, climate change, conflict,” said Pamela Coke-Hamilton, executive director of the International Trade Center. per session. “Each of them can deal a physical blow to globalization. But the facts do not support that. “
Meanwhile, many companies are struggling to find new suppliers and manufacturers who can keep the products moving, even if there are downtimes or shortages in one country. And unlike in the past, executives say they are increasingly inclined to increase production or stock up on additional products – even if it means paying more.
Economic uncertainty and the ongoing war threw a cloud over Davos
Toy giant MGA Entertainment, which has been producing popular brands such as LOL Surprise and Bratz in China for years, recently opened two factories in Mexico, with plans for a third in the coming months. It also relocated part of its production to India. After two years of delays and rising costs, CEO Isaac Larian said it was worth paying more for production elsewhere.
“With so many Chinese cities closed, we just didn’t know when we’d get anything,” Larian told The Post. “Factories could not get labor, prices rose and provinces continued to close. Finally, we said, “You know what, we have to try something new. It doesn’t have to be just China. ”
Some economists worry that shifting production and trade could reverse decades of progress.
“There is a real danger that globalization will be reversed,” said Beata Jaworczyk, chief economist at the European Bank for Reconstruction and Development. “Businesses are particularly concerned because it would be very easy to use the current situation to raise trade barriers in the name of building sustainability.”
War, pandemic force companies to change supply chains, says WTO chief
But the mood in Davos was not gloomy. Many business owners have said they remain optimistic, even in the face of crises, including slowing economies and rapidly rising inflation. They say this moment of international concern will be short-lived.
“Globalization is not a good thing; that’s a great thing, “said Loic Tassel, president of Procter & Gamble’s European operations, during the session. “We come to the question, does it move, does it stop? I think it’s temporarily stopped. It is our responsibility as leaders to continue to ensure that globalization continues to thrive, not because it is in the interests of companies – which would be right anyway – but because it is in the best interests of consumers. ”
Even with the retention of globalization – either unraveling or completely intact, depending on the scene – the fun in Davos continued for hours. Salesforce billionaire Mark Benioff opened a hammer barrel with sake on stage at a Time magazine party. Electronic music duo Chainsmokers presented themselves at an event in Cloudflare. And Anthony Scaramucci hosted his annual wine tasting party in a place so crowded that even former House Speaker Paul D. Ryan was forced to wait in line outside.
“I realized that if you buy expensive wine, people show up,” said Scaramucci, a hedge fund manager perhaps best known for his 11-day tenure as director of communications for President Donald Trump. “Davos is still relevant and valuable.”
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