A number of big themes emerged from the World Economic Forum in the Swiss resort of Davos. Here are five of the most pressing questions that dominated this year’s gathering of the world’s elite.
Will China be forced to befriend the West?
Donald Trump’s trade war with China – continued by his successor Joe Biden – has left East-West relations at a low ebb. But with Covid and trade tensions halving China’s growth last year to just 3% and Western firms such as Apple moving business out of the world’s second-largest economy, Beijing has hinted it may take a less hostile approach.
Vice Premier Liu He appeared on the main stage in Davos to reassure foreign investors that after a three-year Covid shutdown, it is open for business. “We must abandon the Cold War mentality,” he said. “We need to open up wider and make it work better.”
It remains to be seen whether the West is ready to believe this. Executives from several technology companies said they had been approached by US intelligence officials at the meeting who wanted to understand their operations in China. “They want to know which side they’re on,” said a tech boss.
FBI Director Christopher Wray gave a speech arguing that China’s artificial intelligence (AI) program would be weaponized by the country, telling attendees, “The Chinese government has a bigger hacking program than any other nation in the world.”
Several economists also predicted that China’s rapid reopening could reignite runaway inflation by fueling demand for commodities, just as central bankers hoped they had reined in rising prices.
A slogan for the World Economic Forum on the boardwalk in Davos, the mood has been undermined by fears about the impact of AI on jobs. Photo: Arnd Wiegmann/Reuters
Is artificial intelligence coming to your job?
Rapid advances in artificial intelligence have sparked a wave of warnings not only about what it means for the world of work, but also about the risks it could produce misinformation on a large scale.
Mihir Shukla, CEO of Automation Anywhere, said that as a result of AI, it is now possible for a machine to process a mortgage application in three minutes, which would previously have taken 30 days.
Erik Brynjolfsson, a professor of digital economics at Stanford University, said that in the past, machines were not a substitute for workers, but rather complemented people’s activities, allowing them to do things better and leading to higher wages.
Still, IBM Chairman and CEO Arvind Krishna predicts a wave of job cuts from AI. “You have to worry more about clerical work than physical work [jobs]. A large part of them will be replaced. So the question is, “What jobs are you creating to replace them?”
Brynjolfsson identified another threat. The world risks being inundated with bot-generated emails, posts and tweets spreading misinformation on a massive scale, and warns that a vetting mechanism is needed to separate the real from the fake.
Swedish climate activist Greta Thunberg (left) leads her environmental campaign in Davos, where there were fears that US and EU green economy plans could spark a trade dispute. Photo: Laurent Gilliéron/EPA
Will Biden’s $369B Green Grant Scheme Help or Hurt?
US and EU nations arrived in Davos with a $369 billion dispute simmering in the background: Joe Biden’s massive green subsidy scheme known as the Inflation Reduction Act (IRA). It provides broad government aid to companies investing in green technologies that are critical to the transition away from fossil fuels, including electric cars, batteries and renewable energy technologies such as solar panels and wind turbines.
Josef Sikela, the Czech Republic’s industry and trade minister, likened it to “doping in sports” and said it was luring companies from Europe to the US. But Fatih Birol, executive director of the International Energy Agency, said the IRA was “the most important climate action since the 2015 Paris agreement”.
Some speculate that this could lead to a trade war between the US and the EU, similar to the decades-long Boeing vs. Airbus dispute over subsidies. The EU is responding with its own Zero Industry Act, which will simplify and speed up cleantech manufacturing sites.
Christine Lagarde, president of the European Central Bank, said she hoped the race for subsidies “will not be a race to the bottom”. While UK Labor Party leader Sir Keir Starmer has embraced the idea of a more active state, UK Business Secretary Grant Shapps has been decidedly cooler on the idea, describing it as “dangerous”.
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Is a new debt crisis brewing?
About a quarter of the world’s countries are in debt distress or on the brink of it. In Davos, each of the multilateral organizations that monitor the financial fragility of poor countries – the United Nations, the International Monetary Fund and the World Bank – expressed concern.
Achim Steiner, administrator of the United Nations Development Programme, said there was an urgent need for a comprehensive solution, but he was not sure if he had the necessary bandwidth or leadership.
“Nothing is happening commensurate with the problem,” Steiner said. “There is a growing recognition that there has been a year of inaction by the institutions set up to deal with this – the G20 and the Bretton Woods institutions [the IMF and the World Bank].”
Countries are struggling to service their debts amid slower global growth and rising interest rates. Many also borrowed in US dollars, which appreciated in foreign exchange markets. Steiner said an urgent infusion of financial support was needed through a new IMF issuance of special drawing rights – a form of money creation that boosts the country’s reserves – with debt restructuring. This will require more flexibility from two important creditors: China and the private sector.
Saudi Arabia touted its $500 billion neom megacity plan in Davos, part of a strong presence in the Middle East. Photo: Getty Images
Can the Gulf states modernize and divest from hydrocarbons?
The corporate logos that plaster the windows of the Davos promenade are a good barometer of the changing economic state. With Russia blacklisted after its invasion of Ukraine and China holding back, the Gulf states – flush with petrodollars – have taken over the Swiss ski resort en masse.
The long road winding towards the convention center was dominated by Middle Eastern brands: from the United Arab Emirates logistics company DP World to Neom, the $500 billion megacity that is the cornerstone of Crown Prince Mohammed bin Salman’s plan to modernizing Saudi Arabia.
The Gulf states must prove to the world that they can modernize as companies and businesses move away from oil and gas. The Saudis used the World Economic Forum to promote the kingdom’s modernization plan, called Vision 2030, and the growing role of women in the economy, while hoping the West would overlook atrocities such as the killing of Jamal Khashoggi, the Washington Post journalist whose death In October 2018, he was linked to Crown Prince Mohammed.
Several senior Saudi ministers joined a panel of Jane Fraser, head of US banking giant Citi, and Kristalina Georgieva, managing director of the International Monetary Fund, to discuss more women joining the workforce and economic change.
“When you show up in Saudi Arabia to see what the opportunities are from a business perspective … it’s quite breathtaking,” Fraser said. “As a banker one gets terribly excited.”
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