Mixed Messages on the World Economy from the 2022 Davos Meeting

Ah, Davos – – that yearly gathering of billionaires (some fresh from combusting unfathomable amounts of rocket fuel launching themselves into space for fun), flying in on their private jets and lecturing the rest of us about burning fossil fuels. That Swiss resort watering hole for elites who seemingly prefer to have the world run by unaccountable international corporations and NGO institutions rather than national governments elected by those pesky little people (“populism” is a dirty word). Here is the Wikipedia blurb on these meetings:

The World Economic Forum (WEF) is an international non-governmental and lobbying organisation based in Cologny, canton of Geneva, Switzerland. It was founded on 24 January 1971 by German engineer and economist Klaus Schwab. The foundation, which is mostly funded by its 1,000 member companies – typically global enterprises with more than five billion US dollars in turnover – as well as public subsidies, views its own mission as “improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas”.

The WEF is mostly known for its annual meeting at the end of January in Davos, a mountain resort in the eastern Alps region of Switzerland. The meeting brings together some 3,000 paying members and selected participants – among which are investors, business leaders, political leaders, economists, celebrities and journalists – for up to five days to discuss global issues across 500 sessions.

… The Forum suggests that a globalised world is best managed by a self-selected coalition of multinational corporations, governments and civil society organizations (CSOs), which it expresses through initiatives like the “Great Reset” and the “Global Redesign”. It sees periods of global instability – such as the financial crisis of 2007–2008 and the COVID-19 pandemic – as windows of opportunity to intensify its programmatic efforts.

The Davos meeting is usually held at the end of January, but this year was pushed back to May 22-72 because of the COVID surge last winter. How did last week’s globalization-fest fare?

From what I have read, the mood was less upbeat than usual. Douglas Sieg, managing partner of fund manager Lord, Abbett & Co., said: “It’s amazing that six months ago the world didn’t feel all that complicated and all of a sudden the last three months have been nothing but major issues.”    Obviously, the war in Ukraine is casting a pall over the world community and economy. Soldiers and civilians are being slaughtered on a scale not seen in Europe since WWII, and Europeans are realizing too late the folly of becoming so dependent on Russia for their energy supply. China’s saber-rattling over Taiwan is making other nations nervous about their heavy reliance on semiconductor chips fabricated in that island nation.

The wild orgy of 2020-2021 COVID-related deficit spending (especially in the U.S.) has predictably led to inflation; in response, the U.S. central bank is threatening to raise rates high enough to dampen demand, which means dampened (maybe negative) economic growth. A number of the non-business speakers worried aloud about these dark clouds gathering on the horizon:  

We have at least four crises, which are interwoven. We have high inflation … we have an energy crisis… we have food poverty, and we have a climate crisis. And we can’t solve the problems if we concentrate on only one of the crises…But if none of the problems are solved, I’m really afraid we’re running into a global recession with tremendous effect .. on global stability.

– German Vice Chancellor Robert Habeck

Climate change got less attention than in previous years. Europe is starving for fossil fuels at the moment, so there is more focus on keeping factories running than on pushing costly new green agendas. Trends toward re-shoring vital production and away from hyper-globalization are expected to make supply chains less efficient and thus create more persistent cost pressures.

On the other hand, corporate CEOs, perhaps taking a shorter-term view, were more chipper, saying their businesses are doing just great:

George Oliver, chairman and CEO of heating and air-conditioning manufacturer Johnson Controls, is typical of the positive current business. “We’ve been doing very well,” he said. “We see robust demand…we’re obviously watching that closely.”

 “Here [in Davos] everybody’s pessimistic,” says Standard Chartered Chairman José Viñals. “But when I ask them how their business is doing, the picture is wonderful. It may be that the business reality catches up with the [very negative] macro-political reality.”

Time will tell how the global economic scenario actually plays out.

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