This year, titans of business, government and society face a near tidal wave of anxiety-provoking events and trends in “The New Global Context” they will discuss this week. Rather than upbeat discussions of start-ups and breakthroughs, they will confront some of the world’s most intractable issues just as global events highlight the failure of sufficient vision, creativity and cooperation to prevent catastrophes large and small. And while the United States may be feeling mildly triumphant about its economic resurgence, globally, the State of the Union is volatile, uncertain and fragile, not strong. Among the negative “disrupters” commanding attention from the world’s best and brightest are:
Climate change — while not a new topic at Davos, there is a greater sense now that we are running out of time and options. Last year was the world’s hottest (according to NASA) and rife with “weather events.” Sea levels have risen faster than expected for nearly 20 years. A January Science report finds that even as sea levels rise, sea life and all marine ecosystems have been badly damaged by human activity (though less than ecosystems on land) and a real likelihood of a “major extinction event.” Scientists now cite a loss of global environmental “carrying capacity” and the risk that we are approaching several “tipping points.” Apparently, even Pope Francis is fed up, and plans an encyclical on the matter before November negotiations in Paris.
Pandemics — Ebola is slowing for now, but deadly microbial “superbugs” are still mutating to be resistant to the best medicines we now have. Jim O’Neill (former Goldman Sachs chief economist) chaired a just-released report for the UK-government report that finds that failure to combat antimicrobial resistance (AMR) will cut global GDP by up to $100 trillion, and kill an additional 10 million people worldwide, by 2050. WHO Director General Chan, government leaders and medical experts warn that unless we accelerate globally development and proper use of diagnostics, new medicines and infection prevention measures, common diseases will become untreatable and standard medical procedures too dangerous to use. The lack of awareness as to the dangers of current overuse and wrong use of antibiotics, and of the need for vigorous infection prevention, is profound — in both developed and developing countries. R&D costs are very high and incentives still too low to revitalize the pipeline of new medicines, despite progress in several developed-country markets, where capacity and science-based industries exist. Global understanding and cooperation will be essential to winning this battle.
Inequality and Social Fragility — While global poverty has fallen dramatically in the last 20 years, middle class wages are stagnating and inequality (economic and political) is rising in much of the world — both developed and developing. This undermines the view both within and between countries and regions that participatory, market-based economies and democratic governance can deliver better lives for the majority. Worry about this will make for strange bedfellows in Davos. Oxfam International executive director Winnie Byanyima (Davos 2015 co-chair) and Bill Gates will join Larry Summers, IMF’s LaGarde, OECD Chief Gurria, Mohammed El Erian and unexpected others in arguing passionately for a policy agenda (e.g. higher wages, global tax reform, infrastructure investment, access to education and “inclusive growth”) to address inequality. China’s slowdown, Europe’s doldrums and Japan’s inability to re-capture its “Japan Inc.” vibrancy overshadows good news, such as Africa’s faster growth. Worse, economic pain and social frustration encourage interest groups and countries to protect vigorously their piece of the economic pie, rather than to cooperate to grow it, e.g. via trade and investment efforts.
Geopolitical instability — Major transitions and challenges to political and economic leadership are today occurring in every region of the world. The whole world (and those in Davos) is watching to see how the Greek elections affect Europe’s unity, what Swiss Central Bank head Thomas Jordan has to say, and whether Mario Draghi and the European Central Bank can get agreement on Thursday for stimulus that might also buy time for the European Union to mend the cracks in its economic and financial architecture. China’s economic slowdown places a laser focus on Beijing’s effort to reconcile its political system with market disciplines while addressing its own growing inequality and popular frustrations. Many countries in the broader Middle East and North Africa are in a state of political upheaval and transition and the rise of the Islamic State has heightened fears of “failed states” and of the inability of pluralistic, national governments to provide order and deliver basic services. Old tensions are finding new outlets even as old enemies recognize new shared interests. Energy markets (already rocked by U.S. shale oil) have been directly impacted, with big winners and losers (including the dynamics involving Russia, the Ukraine and Europe). The recent attacks in Paris will give France’s President Hollande, UK’s David Cameron, Germany’s Angela Merkel and Italy’s Matteo Renzi plenty to talk about in addition to QE, energy and European unity. Leaders from Egypt, Jordan, Iraq and Kurdistan will also be in Davos along with Ukraine’s President Poroshenko and US Secretary John Kerry.
Oil and Geopolitics — The fast and dramatic drop by some 50 percent in oil prices represents a massive, short-term wealth transfer in the hundreds of billions of dollars from oil producers (including Russia, Venezuela, Iran, Saudi Arabia, Nigeria) to others that import oil and/or subsidize energy domestically (e.g. Europe, Japan, the US, Morocco, Egypt, Jordan, Tunisia). The gain is estimated at some $230 billion over one year to US consumers and energy dependent industries alone.
While there are many game-changing positive discoveries and trends that could be discussed in Davos, this year the focus will be on critical challenges and risks. Today’s situation tests the capacity of even those at Davos to help explain how — to those who are frightened, frustrated and disaffected — governments, rule of law and economic and social systems and institutions can meet these challenges with popular participation and support. But along with justifiable hand-wringing, expect those at Davos to surface some very smart ideas for how to get that done. Perhaps next year we can figure out how to “crowd-source” new approaches and solutions.