My dear Friends,

what do you relate Davos with? Skiing, or the annual World Economic Forum that just happened this week. It is a little bit of both for me, as I know most ski runs inside out.

Davos is a small city in the Swiss Mountains that became famous in the 19^th century for curing all sorts of lung problems. It quickly became a pretty fashionable place for the affluent, who would seek help for all kinds of ailments, including loneliness, in one of the big sanatoriums.

Consequently, its architecture is not very ski resort-like, more like a small town. The most prominent buildings in the historic part of Davos are the 19^th, and 20^th-century Grand Hotel and Sanatorium buildings.

A quick note: The German Novelist ThomasMann’sn Magic Mountain”(Zauberber) is about a group of people meeting in a sanatorium in Davos and is worth reading.

Today, Davos is known for two things skiing and the annual World Economic Forum.

But what is Forum all about, and does it really have any relevance for the global economy?

How it all started

For over 50 years, numerous business, government and civil society leaders have made their way to the high Alps to consider the significant global issues of the day and brainstorm solutions to address them.

In 1971, Professor Klaus Schwab, a professor of economics and an engineer, founded the European Management Forum as a non-profit foundation in Geneva, Switzerland.

Initially, the meetings focussed on how best European firms could catch up with U.S. management practices.

At that time, Prof. Schwab had an unconventional idea that he would call “stakeholder theory”. In brief: a company should serve all its stakeholders, not just its shareholders. But also its employees, suppliers, and the community it is part of.

Hence, his vision for a socially responsible “stakeholder capitalism” became the guiding principle of the World Economic Forum.

With the collapse of the Bretton Woods fixed exchange rate mechanism in 1973 and the Arab-Israeli War, the Forum expanded its focus from management to economic and social issues. The first political leaders were invited to attend the Davos meeting in January 1974.

Thirteen years later, in 1987, the European Management Forum became the World Economic Forum. Finally, in 2015, the Forum was formally recognized as an international organization.

Milestones

The European Management Forum was the first non-governmental institution to initiate a partnership with China’s economic development commissions. This eventually prompted economic reform policies in China. 

In 1988, the Davos Declaration was signed by Greece and Turkey. A war between the two countries was therefore prevented.

North and South Korea’s had their first ministerial-level meeting in Davos during the 1989 Forum. East German Prime Minister Hans Modrow and German Chancellor Helmut Kohl met during the very same Forum to further discuss German reunification.

The Forum also played a significant role in ending Apartheid in South Africa. South African President de Klerk met Nelson Mandela and Chief Mangosuthu ButhIte Annual Meeting in 1992.

In fact, it was their first joint appearance outside South Africa and a milestone in the country’s political transition.

If we did not feel the need to talk, for dialogue, we would live in a global dictatorship

Prof. Klaus Schwab, Founder and Executive Chairman, World Economic Forum

Broadly irrelevant?

Despite plenty of press coverage and the big show, some events put on an increasing number of people are less than favourable to the alpine meeting.

It seems the venue where influential political, economic, and business leaders like to meet has become more and more about big dreams and less about actual problem-solving.

While the Forum lauds itself for being instrumental in “improving the state of the world”, others criticize the event for being entirely out of touch with the real world, ineffective and irrelevant. This is mainly due to its participants, like the bosses of heavy-weight global companies and financial institutions. They mingle with BigTech -CEOs and handpicked celebrities. Shakira, the Clooneys and Angelina Jolie were there, to name a few. So quite a brouhaha.

“The forum is a talking shop without any consequence for world affairs”

Michael Ivanovich, former senior economist OECD

More and more see Davos as becoming a giant business conference. A gathering of distant elites, an overpriced, futile talking shop more self-serving than serving the world.

As the global population grows increasingly frustrated with the widening spread between the haves and have-nots and a mounting climate crisis, it has become harder for some to view Davos’s earnest sentiments as anything more than an elaborate public relations stunt. 

The Forum, however, will maintain its relevance as it is the opportunity for billionaires, heads of state and CEOs to meet, wheel and deal, and do business.

Controversial image

Inviting controversial politicians like Donald Trump and Jair Bolsonaro did not help sell the Forum‘s high-minded mission, nor did the protesters who flock to Davos in growing numbers.

They demand workable solutions to the climate crisis or measures to end social inequality.

Any advantage that politicians saw in attending the World Economic Forum is increasingly weighed against the disadvantage of being seen to attend the Forum by their voters.

While membership and partnership fees range from 60,000 Swiss francs ($62,243) to 600,000 Swiss francs (around $622,000) “depending on the level of engagement”, non-business participants, from heads of state to celebrities, do not pay to participate. They are invited! This also raises questions of impartiality.

Protestors, for example, accuse big oil firms of hijacking the climate debate. The CEOs of major energy firms, including B.P., Chevron and Saudi Aramco, are among the 1,500 members and business leaders gathering in Davos alongside state leaders.

Members of the YGL – a sort of youth organization of the WEF – accuse Prof. Schwab of hypocrisy because WEF‘s head Klaus Schwab said the letter comparing Ukraine with Palestine was ‘deeply insulting’ and ‘offensive’. Al Sabawi, the author of that letter, was suspended indefinitely from the YGL community.

“It feels like I’m at a firefighters conference and no one’s allowed to speak about water,” 

RUTGnER BREGMAN, Dutch historian on taxing Billionaires

Another glitch: the Forum is male-dominated. Not a good idea! The term “Davos Man” has become a nickname for the type of wealthy, elite male who typically goes. But maybe this is because women are simply less in need of a platform to show their importance.

The best ratio of female participants in WEF’s 52-year history of in-person gatherings was 24 per cent in 2020.

“I think Davos is totally irrelevant”

Rana Foroohar, Financial Times columnist

2023- a Polycrisis

The Forum has been derided as an out-of-touch orgy of billionaires, and for a number of critics, the 2023 gathering seemed to have been more divorced from reality than usual.

On the flip side, 2700 participants were registered, and the Forum still draws big names. Do they all suffer from FOMO, or is there some benefit after all?

Top CEOs were on the list, such as JPMorgan Chase’s Jamie Dimon and Microsoft’s Satya Nadella. So were Uber CEO Dara Khosrowshahi and B.P.’s Bernard Looney.

But there were also notable absences. For example, U.S. President Joe Biden and China’s Xi Jinping skipped this year´s meeting. So did Indian Prime Minister Narendra Modi, French President Emmanuel Macron and U.K. Prime Minister Rishi Sunak.

Some politicians, however, bravely dared show their faces. Olaf Scholz and Ursula von der Leyen were attending, and China sent its Vice Premier Liu He. South Korea‘s President Suk-Yeol, US climate envoy John Kerry and Prime Minister Pedro Sánchez were also on the speaker’s list.

Nuclear Now

Oliver Stone was a most unexpected attendee. He came to Davos with another provocative movie. The film advocates for nuclear power as a force for good.

Stone claims nuclear is the only existing technology that could help meaningfully bring down carbon emissions from energy and claims its danger has been drastically overstated.

I am positive plenty would consider this a pretty controversial statement, especially Europeans, with their deeply rooted nuclear phobia.

Russian Oil

During a panel on the food and energy crises, India’s power minister, Raj Kumar Singh, defended his country’s imports of Russian oil and gas. At the same time, Western sanctions have prevented Russian officials and oligarchs from attending the World Economic Forum in Davos. Certainly welcome news for Ukraine, but there is a downside.

The world’s CEOs grapple with the new reality of operating in a world where working with Russia is off the table. And Russia’s absence at Davos has business chiefs raising questions behind the scenes about how long the global business community can ignore Moscow and simultaneously find new markets for energy, metals and food.

Industry Captains

Industry captains who had travelled to Switzerland seemed pretty confused as the global economy is grappling with high inflation, deglobalization and rising energy cost.

However, some were definitely determined to wire their mindsets to “positive”.

“Things are not great, but they are much better than they could have been how Daniel Pinto, JPMorgan’s President and chief operating officer, summed up the prevailing state of mind.

The fact is, many CEOs are deeply insecure if their business models still work in a fundamentally changed global economy. Supply chain issues are a significant problem, and there is no solution insight. China‘s big “reopening” after rigorous Covid rules could boost the global economy, but oil prices could also rise, and so would inflation. This would not be so good for the global economy.

Economy

There are some reasons to be upbeat, however. As mentioned before, China ditched its Covid-19 much faster than anyone expected. Analysts at Standard Chartered expect the world’s second-largest economy to expand by almost 6% this year, which is excellent news. Or isn`t it?

Despite all fears after Russia’s invasion of Ukraine 11 months ago, Europe has managed to keep the lights on. Just about, to be honest. A hot winter, so far at least, and a rapid shift to alternative energy meant the continent avoided potentially disastrous power cuts. S,o far, at least!

Yet most importantly, inflation is showing some signs of easing. Consumer prices in the United States and the Eurozone were respectively 6.5% and 9.2% higher in December than a year earlier. However, the increase was slightly lower than in previous months.

Things are not great, but they are much better than they could have been.” 

Daniel Pinto, JP Morgan, President and COO

Many executives now hope the United States and Europe will suffer only a mild recession this year and may even avoid economic contraction. It seems executives remain determined to make their supply chains more resilient. Quite a few undoubtedly will take advantage of generous U.S. subsidies. European politicians, therefore, fret over U.S. subsidies. They claim this would fuel protectionism and lead to a downturn in European markets…

WARNING: The Davos confab has a well-deserved reputation for delivering a consensus which turns out to be wrong in the 12 months that follow

Send the weapons

In the World Economic Forum session in 2022, the War in Ukraine loomed large in discussions. It was no different this year, President Zelensky and his wife, Olena Zelenska, made sure to rally political leaders and major corporate bigwigs to support their cause, and almost without exception, everybody repeatedly voiced their steadfast support for Kyiv.

The hottest ticket in the Swiss mountain town was an early morning breakfast session hosted by the foundation of Ukrainian oligarch Victor Pinchuk. To plea, the Ukrainian President was beamed in the Ukrainian case, and his wife, Mme Zelenska, delivered a speech in front of a panel of politicians, big finance and other CEOs.

Behind the scenes, David Solomon(Goldman Sachs) and Larry Fink(Blackrock) teamed up with Billionaires to discuss “Nation Building,g” aka “rebuilding Ukraine”. Indeed not without seeing the pecuniary advantages of such an ambitious project. Europe seems to have missed that event. Alas, others will do the business instead.

Financial Institutions

Global financial institutions are dealing with a host of headwinds. Consequently, they struggle with finding the right size for a slowdown. The threat of inflation is still hanging over central banks, and financiers are facing demands from regulators for higher capital levels to prepare for a downturn. This could make some banks very unprofitable.

“We shall stay the course until such a time when we have moved into restrictive territory for long enough so that we can return inflation to 2% in a timely manner.”

Christine Lagarde, President European Central Bank

However, this is not all; debt levels are pounding for quite a few countries- 54, to be precise. Higher interest rates, a strong dollar and a looming global recession changed their bargaining position. These countries are the most vulnerable; 31 countries are in Africa. They need urgent debt relief, debt restructuring and long-term loans before they default.

 we are looking into the eye of a Category 5 hurricane 

Antonio Guterres, UN Sectretary General 

Banks are also under mounting pressure to finance the global transition to a greener future at a higher speed than they have done so far. Geopolitics, cybersecurity and the unregulated crypto market are other exogenous events that complicate financial markets.

Globalization

There is a fast-spreading rumour about deglobalization. Not only due to supply chains that were severely interrupted during the pandemic but growing geopolitical disruptions.

We risk what I have called the Great Fracture – the decoupling of the world’s two largest economies.

Antonio Guterres, UN Sectretary General

More than 1,000 Western companies have curtailed operations in Russia since its invasion of Ukraine. Further, there are growing tensions between the world’s two biggest economies, the United States and China. China’s strong-arm approach to containing Covid-19 played a significant part in spooking companies and investors alike.

“Stay put. My message is it is less bad than we feared a couple of months ago — but less bad doesn’t quite yet mean good.

Kristalina Georgieva, Managing Director of the IMF

Now businesses and governments are pushed to rethink supply chains for critical products because reducing vulnerabilities and protecting national interests have taken precedence over maximizing cost savings.

“It’s basically too simple to say it’s an era of globalization or an era of deglobalization, it’s an in-between era.” 

Markus Kornprobst, Professor for International Relations, Vienna School of International Study

Nationalism and populism encouraged some leaders to criticize tenets of a globalized economy, such as porous borders and trade barriers trade. A looming deglobalization is something economists, politicians, and CEOs must consider. They now have to find solutions to keep economies growing.

Although the trend towards deglobalization is expected to have some negative consequences, such as adding to inflation, there will also be opportunities. For instance, the chance to reinvigorate communities that lost out on jobs during the free-trade bonanza or the opportunity to reduce the carbon footprints of supply chains or to ease the crippling global inequality.

Green Hushing

Whilst executives are flying in with their private jets or clogging the streets between Chur and Davos with their limousines, several important climate speeches were delivered.

Climate envoy John Kerry said on Tuesday that time was running out for the world to tackle climate change. He said that ‘money, money, money’ is needed most to tackle climate change.

Many executives were frustrated with a lack of progress on issues like a global framework to tackle things like climate-risk disclosures.

Equally important, it seems that CO₂ Certificates and the ESG rulebook are primarily used to greenwash environmental sins rather than prevent further damage to the environment-this was not addressed, on the contrary.

India’s economy is going to benefit from the big domestic market and discounts on oil and will do better than its emerging economy peers

Kenneth Rogoff, Professor for Econmocs, Harvard; former chief economist IMF

Tech save the world

Regularly, Davos is the place to discuss innovations like Artificial intelligence, Global Industry 4.0 or Quantum Computing.

However, this year the mood was less euphoric. Many tech companies had to face losses. Because cheap money is around, having a vision is not enough anymore.

“It’s Showtime”, said Microsoft‘s Satya Nadella. Tech companies must finally make their products available to the market and beneficial for the user.

Showtime: Microsoft introduced its ChatGTP in an elaborate show while sacking 10.000 employees.

At the same time, as leaders in Davos kept trying to find clues to solving global problems such as climate change, the energy crisis, or inclusive growth, executives of tech giants boasted that many of their innovations could offer solutions. I guess we`ll have to see.

Conclusion

The World Economic Forum is undoubtedly a big circus and spectacle but also a seismograph of global wellbeing.

But what was actually achieved? Nobody really knows. Many said a lot, while others repeatedly warned about doom and gloom. There is also no doubt the planet was analyzed in depth; the global economy was thoroughly dissected many clever and not-so-clever remarks were made; the big question, however, remains: is there more clarity now? Not really. Are there any viable solutions? Not really.

The world faces a hughe stress test in 2023

Kenneth Rogoff, Professor for Econmocs, Harvard; former chief economist IMF

Politicians tried to convey restrained optimism, while CEOs and economists remain deeply apprehensive and suspect over what we are currently experiencing. A member of Berenberg Bank called it the “spring of relief” everybody tries to hold on to before we fall off the cliff again.

Climate activists are, as usual, disappointed and frustrated, claiming the industry actually ” throws them under the bus”. On the other hand, the industry comes up with viable solutions to cut emissions while keeping the economy going.

Buzz Feed

1971, Professor Klaus Schwab founded the European Management Forum. His vision was a socially responsible “stakeholder capitalism”. His mission was the principle of the foundation.

The Forum generates headlines yearly and puts on a big show. However, its relevance is increasingly questioned. The Forum’s impact on global politics, economies, and climate is negligible.

As always, many issues were discussed, analyzed and dissected again and again. Plenty of people talked and talked and talked or gave one interview after the other. Nobody, however, came up with a solution to ease global CEO‘s confusion and worries or something viable to facilitate the most pressing matters.

Ukraine could be the only exception. Boris Johnson advocated for unlimited help for Ukraine. Larry Fink and other big financiers eluded how they would help rebuild the country by making available zillions to rebuild Ukraine once the War is over. Blackrock‘s and the other members of the finance industry‘s massive gain in such “generosity” probably played a substantial part.