Implications of Davos 2020 for Global Economic Growth (Part I)

The 50th Annual meeting of the World Economic Forum (WEF) was held from 21st January to 24th January, 2020 at Davos in Geneva, Switzerland.

The five-day event focused on how stakeholder capitalism could help address the world’s urgent and pressing socio-economic challenges.

Established in 1971, the World Economic Forum’s activities are generally nucleated around how to shape industry, regional and global agenda. The theme for this year’s forum was “Stakeholders for a Cohesive and Sustainable World.”

The Forum attracted about three thousand (3,000) participants from over one hundred and seventeen (117) countries, including fifty-three (53) heads of state.

Participants included leaders drawn from academia, civil society organisations, businesses, and governments across the globe.

Discussions held on the most pressing challenges sought to improve the current state of the world. This affirmed the need for intensification of efforts at redistribution of the global wealth through fair trade practices.

The event was guided by the World Economic Forum’s recently released manifesto captioned, Davos Manifesto 2020.

The current manifesto builds on the original Davos Manifesto of 1973 and sets out a vision for stakeholder capitalism, that is, seeks to ensure zero tolerance for corruption, respect for human rights, and fair taxation, among other significant socio-economic considerations.

The 2020 Forum at Davos was focused on six (6) thematic areas, including geopolitics, technology, industry, society, economy, and ecology. Organisers of the event derived four (4) significant issues from the thematic areas.

These included adaptation to demographic, social and technological trends; governing technology and its impacts; sustainable and inclusive business models; and climate change and ecosystems.

More than four hundred (400) different sessions were organised to explore the foregoing topics. One of the significant topics discussed at Davos on Wednesday, 23rd January, 2020 was “The Future of Economy.”

Undoubtedly, the foregoing topic was at the heart of all the government and business leaders since it could define the current and future economic fortunes of their respective countries and businesses.

It emerged as the most mentioned topic and was covered by the media with eight hundred and fifteen (815) articles. A report released by Oxfam in January 2020 revealed in 2019, the world’s richest two thousand, one hundred and fifty-three (2,153) people controlled more money than the poorest four billion and six hundred million (4.6 billion) combined altogether.

The report suggests about 58.97% ((4.6 billion ÷ 7.8 billion) x 100% = 58.974 x 100% = 58.97%) of the global population, which is estimated at 7.8 billion, is within the poverty bracket.

Leaders at this year’s forum were entreated to fully embrace stakeholder capitalism. This concept stresses the need for business leaders to focus not only on profit margins, but also on how to harness their resources and capabilities in close concert with civil societies and governments to address key and challenging issues of the current decade.

The United Nations (UN) Sustainable Development Goal Five (SDG 5) on Gender Equality and Diversity constituted an integral part of the discussions at Davos.

Participants identified gender equality as a “nagging” issue for both men and women while gender parity remains an ongoing and a daily battle.

As the leading “marketer” of the United States economy, President Donald Trump latched on the opportunity at the forum to tout his administration’s achievement and the country’s energy boom.

He believed presently; the United States is in an economic boom.

Climate Change

Human activities through industrialisation and its related ones in the past several decades have had devastating effects on the global environment.

Climate change has been a topical global issue; and has attracted extensive discourse in recent years.

Although gender equality and diversity were among key themes, climate change, renewable, and sustainability formed an integral part of the discourse, along with geopolitics.

Leaders at this year’s event expressed concerns about how islands endowed with abundant nature are being destroyed by plastic waste.

Sessions at the meeting sought inter alia, to identify ways in which the world could tackle issues related to marine waste; how wood and paper could effectively surpass plastic; and how local initiatives could keep the “singing birds” alive, among others.

President Trump affirmed his country’s preparedness to join the World Economic Forum’s initiative to restore trillion trees across the globe by 2050.

The essence of the trillion trees to be planted across the world is to “sequester carbon from the air and to protect biodiversity.”

The Swedish Climate Activist, Ms Greta Thunberg, bemoaned the lack of action taken by world leaders despite the evidence of looming climate catastrophe across the globe.

She noted the remaining budget on the 1.5 Celsius carbon target and ongoing fossil fuel subsidies and investments pose global challenge and threat.

Her submission is corroborated by a recent report released by the United Nations on the phenomenon, which revealed the world’s remaining budget on carbon would be exhausted by 2027, unless global emissions are curbed.

Ms Thunberg’s main focus at this year’s WEF was to push for radical change on the climate emergency.

In her address to global leaders, Ms Thunberg called for an immediate exit from fossil fuel investments; end to subsidies for the fossil fuel industry; and halt to current and future investments in fossil fuel exploration, and extractions by institutions, banks, companies, and governments.

She believed some world leaders have given up on the Paris Agreement goals, and deliberately created a climate crisis.

However, Chancellor Angela Merkel of Germany called for more international co-operation to tackle climate change.

She averred the price to be paid by global leaders for inaction would be significantly higher than the price to be paid for proactive and reactive action on climate change.

Prime Minister Sanna Marin of Finland believed fighting climate change presents a unique opportunity for Finland’s businesses, technology, new jobs, and to improve the well-being of citizens.

She described climate change as the greatest risk facing humanity and shared Finland’s commitment to become carbon-neutral by 2035.

In a related development, the European Commission has announced a Green Deal to realise a carbon-neutral Europe by 2050.

Contrarily, President Trump believes climate activists are alarmists with a consistent demand. That is, they always quest for absolute power to transform, dominate, and control every aspect of our lives.

He described climate alarmists as “prophets of doom” and “heirs of yesterday’s foolish fortune tellers.” President Trump believes it is time for global leaders to embrace optimism and shirk pessimism.

The position of the United States on clime change was supported by Australia, Saudi Arabia, Russia, and Brazil.

However, Mr. Eugene Scalia, the United States Labour Secretary, suggested a balanced approach to the phenomenon. He indicated the energy sector is an important source of jobs. Therefore, fully divesting from fossil fuels would harm some U.S. pensioners.

The United Nations Secretary-General, Mr. Antonio Guterres, called for a price to be placed on carbon since it has a tangible impact that could be priced.

Consistent with Ms Greta Thunberg, Mr. Guterres believes subsidies to fossil fuels must be cut, and taxation should be shifted from income to carbon; the latter would be a win-win situation.

He noted climate change would not kill the planet. However, it could kill humankind. Further, “humankind has declared a war on nature and nature is striking back in a very violent way.”

Sentiments expressed by Prince Charles on the phenomenon were not distinct from Mr. Guterres’s submission.

The former stated: “Global warming, climate change and the devastating loss of biodiversity are the greatest threats humanity has ever faced.” Mr. Andrew Liveris, former chief executive officer (CEO) of Dow Chemicals and now Board Member of Saudi Aramco believes the days of fossil fuels, which dominated the crude oil market in the 20th century is numbered.

He envisioned gradual withdrawal of investments from fossil fuels in the coming years. To expedite the process of transition from fossil fuels investments, the United Kingdom (UK) and other advanced economies are creating company accounting standards for climate-related risks.

These standards are expected to be ready by the end of this year.

Author: Ebenezer M. Ashley (PhD)

Fellow Chartered Economist & CEO of EBEN Consultancy

Email: ebenezer.ashley@gmail.com 

Website: ebenezerashley.org 

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