The elite have questions to answer at Davos

A delayed Davos seeks to get back on the road to net zero – and rescue globalisation from current western tensions with Russia and China.

| 6 min read

This year, the World Economic Forum is meeting in May instead of the traditional February, when the snows are better for skiing in Davos.

The International Monetary Fund (IMF) heralded the event by warning us of the calamities that span the globe. The general message from the leaders of the corporate and government worlds that go to this series of lectures and seminars is they wants to try to rescue globalisation from the war and too much talk of division into power blocs, trade barriers and national self-sufficiency. It sees a possible World Health Treaty as an opportunity to strengthen world government over health policies and it remains passionate about the need to travel more quickly on the road to net zero.

The senior politicians who attend are keen to stress the need for unity in response to the Russian invasion of Ukraine. They seek to circle the wagons around the international values and trading system they represent.

Turbo-charging the energy transition

On the agenda is how to decarbonise more speedily. It backs a European Union (EU) plan to conduct an electrical revolution, is pleased President Joe Biden has shifted the US statements on global warming and will doubtless be relieved that Australia wishes to join the world governing consensus on this topic.

The special climate envoys of the two most powerful Presidents of the world, John Kerry from the US and Xie Zhenhua from China, sought to reassure that “net zero” is still a realistic aim. Davos needs to accept that disruption of fossil-fuel markets following the Ukraine war has led to more coal use from China to Germany and has helped stimulate the EU decision to categorise gas as a “green-transition fuel”. Environmental considerations are woven throughout this conference.

There is concern about food shortages in low-income countries and a wish to stimulate more investment in clean water supplies.

The conference sees food shortages and high prices as a pressing matter, whilst proposing greener farming to tackle some of the issues. It goes along with the IMF/World Bank view that national governments and the global institutions need to do more to ease the squeeze on living standards for those on low incomes, confronted by over-expensive food and energy. There is concern about food shortages in low-income countries and a wish to stimulate more investment in clean water supplies. They are interested in the development of more homeworking and the possibilities of the metaverse.

The future of work

There is no consensus on how the balance between homeworking and working in an office will stabilise. There is a new divide in the workforce between those who are required to go daily to a place of work, because it is a care home or a restaurant or a taxi rank, and those who have some choice between going into the office to work with colleagues or contacting them by video link from home.

There is also some discussion of whether a three-day weekend is a sensible proposal, with or without some increase in hours on the other four days. Senior people working from home may well put in extra hours due to homeworking and may well be more effectively on call at times of the evening or weekend that were previously reserved for other things. There is unlikely to be a single answer. The current state of the labour market will allow more tolerant attitudes to not being in the office, whilst any rise in unemployment and increase in available talent may harden employer attitudes a bit more over the right balance between home and work locations. Some employees will value the flexibility of home working and may agree different remuneration packages to reflect that.

As the world looks in on the five-star hotel world of the rich and powerful, the speakers at the conference need to be careful not to excite the wrong type of coverage. Lecturing others to use less fossil fuels as they fly in by jets to air-conditioned comfort and rich diets of meat can be a damaging look, which some journalists use to level accusations of hypocrisy.

Elite in the dock?

The governing elites have tough questions to answer but may be in no mood to respond to them. Why did so many central banks allow such high inflation to take hold? What more can be done to ease supply-chain difficulties and sky-high transport costs? How do they think central banks should now proceed, given the possible arrival of stagflation? Should the world worry more about inflation or slowing growth?

Central banks, led by the Federal Reserve are still in inflation-fighting mode, but they soon might need to worry about growth and jobs.

Davos is not going to answer these live issues conclusively. Company profits are likely to deteriorate as high inflation of input costs meets growing customer resistance to pay higher prices for the finished products. The US housing market is slowing sharply as expected, and there is some weakness in advertising expenditures, which may herald a wider slowdown.

Central banks, led by the Federal Reserve are still in inflation-fighting mode, but they soon might need to worry about growth and jobs as their tightening of financial conditions hits demand. The world is busily adjusting to a big hit to real incomes and living standards that comes from the surge in energy and food prices. This is not a good time for many of the companies and people that the delegates lead. There are new chills in the headwinds to prosperity and growth. The leaders will need to return from Davos to find a way through that allows inflation to come down with a soft landing.

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The elite have questions to answer at Davos

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