News analysis

Crafting a sustainable future for globalisation

Davos delegates debated the liberal economic order's prospects amid rising populism

At the World Economic Forum in Davos last week, founder and executive chairman Klaus Schwab noted that apart from sharing wealth more fairly, steps were also needed to "reinvigorate economic growth".
At the World Economic Forum in Davos last week, founder and executive chairman Klaus Schwab noted that apart from sharing wealth more fairly, steps were also needed to "reinvigorate economic growth". PHOTO: BLOOMBERG

The new United States President, Mr Donald Trump, would have been pleased with the outcome of this year's meeting of the World Economic Forum (WEF), one delegate said wryly when she wrapped up a debate last Thursday.

The reason: Delegates had spent much of their time talking about him.

They had pondered the significance of his unexpected election, wondered at the meaning of his recent interviews and tweets and worried about what it might all portend for the world, during many of more than 400 sessions held over the week-long conference.

The stage had been set at the start of last week, as the thousands of business and government leaders were arriving in the alpine Swiss town of Davos for their annual retreat to take stock of the state of the world.

News began to spread that the incoming President had declared the Nato alliance "obsolete", called the European Union (EU) a "vehicle for Germany" and even wondered aloud about slapping tariffs on BMWs, the cars so prized by many in this affluent circle.

Little wonder then that many began to fear for the future of the liberal global order that they had long championed and benefited from. Who will safeguard the project, keep it going and perhaps give it a renewed push?

Enter China's Xi Jinping. He made history by becoming the first President of China to address the Davos set last Tuesday. But his well-crafted address was memorable more for what he said. Many delegates were plainly chuffed at his robust defence of free trade and open markets. Mr Xi warmed their hearts when he declared that it was "pointless blaming the world's economic woes on globalisation as that was not the case" and "would not solve the problems". He also rejected protectionism and warned that "there were no winners in a trade war".

If Mr Xi was signalling China's readiness to step into the void left by an America which was turning inwards, delegates were prepared to cheer him on - never mind the irony of the global liberal economic order being upheld by a nominally communist country, once itself deeply sceptical about opening up to the world.

Many also seemed willing to overlook the fact that Mr Xi had referred repeatedly in his speech to "economic globalisation", without quite embracing the liberal political values and multilateral approaches that are associated with globalisation. He had also called for reforms to "Western-centred" international institutions and promoted Beijing-backed initiatives for collaboration, such as the One Belt, One Road effort to develop infrastructure linking Asia and the wider world.

Not so fast, declared the outgoing US Vice-President Joe Biden, in a speech the very next day. Leaders in the West could not leave it to others to safeguard globalisation, he said, urging them to keep up the "big-hearted, audacious, visionary" fight for the institutions and initiatives that their forefathers had worked so hard to foster, including Nato, the EU, the United Nations, Bretton Woods and the Marshall Plan. He went on to single out Russian President Vladimir Putin as someone with a "different vision of the future", one aimed at splitting the world into regional spheres of influence at the expense of liberal democracies and an internationalist world order.

Then, just as delegates were getting ready to don their black-tie suits for the conference's closing night gala on Friday, Mr Trump sent them all a message that reverberated around the Swiss Alps. In a defiant inaugural address, he made plain just what he thought of globalisation: "From this day forward, a new vision will govern our land. From this moment, it's going to be only America first! America first!"

He also said: "We must protect our borders from the ravages of other countries making our products, stealing our companies and destroying our jobs. Protection will lead to great prosperity and strength."

So, at the end of a bewilderingly busy week, the global leaders gathered in Davos were left no more assured about the prospects for the liberal world order they had helped to fashion than when they arrived in Switzerland, with many harbouring a deeper sense of foreboding for what's to come.

It's the economy, stupid

But the implications of Mr Trump's populist message had become clear to all: If globalisation was to have any chance of surviving, it would have to be reformed to ensure that the spoils of economic liberalisation and integration are shared more widely.

International Monetary Fund chief Christine Lagarde told participants in one session that "growth will not be sustainable if it is not inclusive". Noting that she had flagged the dangers of rising income inequalities at this forum some years ago but no one had paid much attention, she added that "if policymakers don't get it now, I don't know when they will".

Others agreed, including Mr Biden, who pointedly told delegates that the top 1 per cent of many developed countries "were not pulling their weight" and would have to accept higher tax burdens to build more inclusive societies. Closing tax loopholes, for example, would yield enough funds to pay for free college education in the US, he said. Others proposed a basic universal income for all workers - the notion that the state should guarantee all workers a minimum standard of living paid out of its tax coffers to foster social inclusion - an idea that was gaining some traction, but remained too radical for some other participants.

The WEF's founder and executive chairman Klaus Schwab noted that apart from sharing wealth more fairly, steps were also needed to "reinvigorate economic growth". Years of economic stagnation had given rise to high unemployment, especially among young people, in many countries. Slow growth meant governments had less resources to tackle challenges like income inequality or to launch education and retraining programmes to equip their peoples for the jobs of the future in the face of rapid and relentless technological change.

To give this need for more inclusive growth a push, the WEF launched a new Inclusive Growth And Development Report last Monday. Rather than focusing on economic growth and competitiveness, the report tracks a wider set of indicators to give a "more complete picture of national economic performance" than just gross domestic product alone.

As Mr Rick Samans, a member of the WEF's managing board who led work on the report, told The Sunday Times: "The world faces problems of declining economic growth and widening income inequality. Tackling these however requires a rebalancing of the idea that there is necessarily a trade-off between economic efficiency and equity. What we are saying is that we need a new growth model that is more inclusive and sustainable."

Getting smarter

But economic growth and social inclusion aside, Mr Trump also managed to feature in discussions on a whole range of other issues, from climate change - Mr Xi urged him not to walk away from the Paris Agreement but to accept the responsibility of tackling global warming for the sake of future generations - to the efforts to develop smarter cities, as well as boosting security in Asia.

During a discussion on smarter cities, Singapore's Foreign Minister Vivian Balakrishnan put the issue in its wider context when he noted that these initiatives were not just about deploying newfangled technologies as an end in themselves. Rather, harnessing technology to make cities more liveable and sustainable would help meet the economic and political imperatives of ensuring that workers had good-quality, high-paying jobs. This was what all leaders everywhere were charged with delivering, he argued.

Similarly, when asked during a panel on Asia's security outlook as to what the Trump administration's foreign policy agenda might entail for the region - given some rather loose talk and tweets in recent weeks - the minister deftly sidestepped the minefield by saying he preferred to judge the new President on his actions rather than words.

Mr Trump, he added, was "an intelligent man" and would know that the world, including China and the US, needed peace and stability, if governments were to deliver on their top concern: good jobs for their peoples. In view of this, he remained sanguine about the future, as good sense was likely to prevail, he added reassuringly.

So, after more than 400 discussions and despite much angst over what Mr Trump's new "America first" approach might portend, the bottom line seemed clear: If globalisation is to survive, business and government leaders will have to take steps to ensure it delivers on what most people want, namely, a better quality of life for themselves and their children. Only then will the global liberal economic order prevail in the face of the populist backlash that the likes of Mr Trump have capitalised on.

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