World Economic Forum navigates geopolitical fallout
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There are few better symbols of the Trump administration’s chaotic relationship with the outside world than the White House’s last-minute decision to pull the entire US delegation out of the World Economic Forum in Davos.
The original intention was that President Donald Trump would speak in Davos, following up on his appearance last year. Even after the president himself withdrew, the US planned to send a high-powered delegation, including Mike Pompeo, the US secretary of state, and Steven Mnuchin, the US Treasury secretary. But the political pressures created by the present US government shutdown and the attendant political confrontation in Washington persuaded the Trump administration that it would be unwise to travel to Davos.
In the absence of the Americans, it will be much easier for China to make its case unchallenged. Wang Qishan, the Chinese vice-president, is set to speak in Davos. And, without Mr Trump in attendance, the populist banner will be carried by Jair Bolsonaro, the right winger recently sworn in as president of Brazil.
Mr Bolsonaro, like Mr Trump, likes to bash “globalists”. But, paradoxically, even populist political leaders seem keener than ever to make their cases to the “globalists” who assemble in Davos every year. As tariffs and sanctions proliferate across the global economy, a blame game has broken out — and politicians are keen to make their case to the multinationals and finance houses most affected by the fraying of the global order. With Brexit looming, the British government will be under particular pressure to come up with a reassuring message. Like Mr Trump, Theresa May, the UK prime minister, has cancelled her trip to Davos to attend to domestic politics but other UK ministers will travel to the WEF.
Last year, it was clear that many of the chief executives in Davos were keen to give Mr Trump the benefit of the doubt. The US president had just pushed through a large tax cut and stock markets were soaring. This year, the Trump administration will be regarded more sceptically. The US is driving the trade war. And markets are down, which always affects the background mood.
The Chinese government will be keen once again to present itself as a champion of globalisation — as President Xi Jinping did in a landmark speech to the WEF in 2017. Two years on, vice-president Wang is likely to receive a more guarded hearing. With China on the defensive over trade, multinational companies feel they can be more vocal making longstanding complaints on, for example, the forced transfer of intellectual property. There is also widespread anxiety that the Chinese economy is slowing more than previously anticipated — and sessions on the Chinese economy will be closely watched.
For the Russian government, the overwhelming mission is to try to restore the idea that Russia is a “normal” country, rather than a rogue state. If that goal can be even partially achieved, the Russians will hope to chip away at the consensus underpinning the sanctions imposed on their country by the US and the EU. The WEF has indirectly helped Russia’s cause by lifting a ban it had briefly imposed on Oleg Deripaska, the Russian oligarch who was targeted by US sanctions last year. Davos partygoers will also be relieved since Mr Deripaska traditionally holds one of the flashiest events at the forum.
Mr Deripaska’s oscillating fortunes illustrate the way in which international businesses are increasingly being ensnared by rising geopolitical tensions and the accompanying trade wars and sanctions.
In the heyday of globalisation, this was not the case. Whatever their other differences, the international political leaders who gathered in Davos generally had similarly positive attitudes to big business and high finance — which were seen as valuable sources of investment and expertise. At the WEF, the politicians wooed the businesses, and the businesses reciprocated by paying court to the politicians. It was all very chummy, which may partly explain why Davos became a target for populist movements.
These days, things are much more complicated. Many of the big corporate and financial names that rent shopfronts along the Promenade in Davos during the WEF gathering are caught in political controversies that could cost them billions — or even, in the worst cases, destroy them.
Last year’s forum saw Ken Hu, the deputy chairman of Huawei, give an enthusiastic presentation about the potential of 5G technology. This year, the Chinese tech champion arrives in Davos under unprecedented pressure. The company’s chief finance officer, Meng Wanzhou, is under arrest in Canada after a US extradition request accusing her of playing a role in sanctions-busting. A succession of western security officials have also raised concerns about awarding Huawei 5G contracts.
It is not only Chinese and Russian businesses that are feeling the heat. Goldman Sachs is accused of aiding corruption in Malaysia, during the period when the government was led by Najib Razak. The investment bank is being sued for billions by the Malaysian government. McKinsey, the most blue-chip of the management consultancies — which traditionally throws a raucous Wednesday night party at the Belvédère hotel in Davos — has had its reputation tarnished by its dealings in South Africa and Saudi Arabia.
The big tech companies — always a major presence in Davos — are also struggling to cope with a new political climate. Facebook’s efforts to wash its hands of its role in the dissemination of “fake news” have failed dismally. Google is having to answer uncomfortable questions about its handling of big data. Both companies face the prospect of much more onerous regulation in key markets.
Another Davos regular, the financier George Soros, finds himself under a more intense political spotlight than ever. Mr Soros regards himself as a philanthropist and intellectual but has become the bogeyman of authoritarians and anti-globalists. Over the past year, he has had the honour of being personally excoriated by leaders as diverse as Mr Trump, President Recep Tayyip Erdogan of Turkey and Viktor Orban, the prime minister of Hungary. As a result, the annual press conference-cum-dinner that Mr Soros holds in Davos will be watched with particular attention this year.
Bill Gates is another billionaire philanthropist who is ever-present at Davos. Unlike the other tech titans, Mr Gates has skilfully steered clear of political controversy. Nonetheless, the causes that he champions — in particular aid to promote global health and vaccinations — are no longer uncontroversial. Mr Trump regularly attacks development aid as a waste of money and “anti-vaxxers” are prominent in populist movements. Mr Gates and his foundation will use Davos to press governments to fund Gavi, the global vaccination alliance, and The Global Fund, which targets Aids, tuberculosis and malaria, pointing to their spectacular success in reducing child mortality rates since the early 2000s.
Amid all this din and political contention, the continuing success of the WEF, under the wily leadership of Klaus Schwab, is striking. In a tense geopolitical climate, the forum has become expert at maintaining good relations with key governments. So its coup in persuading Mr Trump to speak at Davos last year was not secured at the expense of relations with China. Indeed, last year the 80-year-old Mr Schwab popped up in Beijing to receive an award from President Xi for being a special friend of China.
The forum’s choice of “Globalisation 4.0” as the theme of this year’s conference sounds almost defiant in tone at a time when the backlash against globalisation is still growing. But Davos has survived by adapting to changes in the intellectual and political climate. That skill will be on full display at this year’s forum.