The Davos razzmatazz is gone, but the issues are more urgent than ever

Show caption Swedish climate change activist Greta Thunberg takes part in a climate strike protest at the annual meeting in Davos in 2020. Photograph: Denis Balibouse/Reuters Economics viewpoint The Davos razzmatazz is gone, but the issues are more urgent than ever Larry Elliott Urgent questions from the climate crisis to tax avoidance remain on the table Sun 16 Jan 2022 16.15 GMT Share on Facebook

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It is January 2020. Donald Trump and Greta Thunberg are the star turns at the annual festival of globalisation organised by the World Economic Forum in Davos. The fossil fuel-loving president and the teenage environmentalist have a pop at each other. There are reports of a new virus emerging from China but Covid barely gets a mention.

Much has happened since. For a second year running, Davos is not going ahead in person. US billionaires will not be parking their private jets at Zurich airport. The skies above the ski resort made famous by Thomas Mann in the Magic Mountain will not be thick with helicopters. Hotels will not be able to charge five times their normal rates for a captive audience of policymakers, business leaders, academics, campaigners, journalists and assorted hangers-on.

Let’s face it: few of us are going to miss being lectured about the need to tackle global heating from those with the biggest carbon footprints, or watching company bosses who do all they can to avoid paying tax shed crocodile tears about the lack of decent schools, skilled workers and public infrastructure.

That said, the issues that were salient at the 2020 Davos have not gone away. In many respects, the trends have worsened in the past two years.

Take inequality, where there has been a widening of the gap between rich and poor, both within countries and between them. The sort of people who attend Davos have been insulated from the worst of the pandemic and, in many cases, have actually prospered from it. Academics, journalists, PR consultants have all been able to work in relative safety at home while less well-remunerated frontline workers have put themselves at risk.

Stimulus policies pursued by central banks – zero interest rates and quantitative easing – have put rocket boosters under asset prices. Poorer countries have had far less scope to stimulate their economies and have been squeezed out in the global race for vaccines.

In the early stages of the pandemic, there was much talk about how the pandemic would bring people and countries together, but the opposite has been the case. In the UK, the mood has soured since the days when people stood on their doorsteps to clap for the NHS. In Europe and the US there have been vociferous, and sometimes violent, anti-vax protests.

In the labour markets, there have been faint echoes of what happened after the Black Death in the mid-14th century. Back then, shortages of workers caused by a much more deadly virus put upward pressure on wage rates. Lockdowns in 2020 and 2021 have had similar effects: firms – especially those in low-wage sectors – are having trouble recruiting and retaining staff, and have had no option but to raise pay rates.

The risk of a wage-price spiral has alarmed some of the world’s leading central banks, including the US Federal Reserve and the Bank of England, who feel – rightly – their credibility is at stake. With interest rates on their way back up, belief in the Goldilocks scenario (just enough tightening to reduce inflationary pressure but not so much as to halt recovery) is going to be put to the test this year. Clearly, there is a risk of the porridge in 2022 either being too hot, in which case inflation is longer lasting, or too cold, in which case there will be a global recession.

The sharp contraction in the global economy in 2020 did not remove the threat posed by climate change, and those who would have turned up in Davos know it. Each year, global movers and shakers are asked by the WEF what they perceive to be the biggest long-term risks. Even though the world is still struggling with Covid, this year the top five issues identified were all linked to the environment.

Action on climate change is being made more difficult because the crisis has made countries more domestically focused. In part, that’s because disruptions to global supply chains have encouraged a drive for self-sufficiency, but there has also been a tendency for governments to look after their own, self-defeating though this will prove to be.

Vaccine apartheid is a classic example of the lack of international solidarity, but there are other worrying trends too. The World Bank and the International Monetary Fund have warned repeatedly that more and more countries are struggling with unpayable debts, to little effect. A new debt crisis is about to erupt, amplifying the impact of the pandemic. As the Bank’s president, David Malpass, noted last week, before the pandemic on average 53% of 10-year-olds in the world’s poorest countries were unable to read a simple story. The figure is now 70%.

Any hopes that the departure of Trump from the White House would lead to a de-escalation of geopolitical tension have proved groundless. Joe Biden has turned out to be just as hawkish towards China as his predecessor, while relations between the west and Russia are as bad as they have been since the end of the cold war. The collapse of communism was supposed to usher in an era in which free markets and democracy would spread around the world, but the golden age of globalisation lasted barely 15 years. The World Trade Organization – the symbol of the new world order – is moribund, while authoritarian leaders are back in vogue. The end of history thesis proved to be wildly overblown.

The plan is that Davos will still take place, in the late spring when the Omicron wave has abated, and if it happens there will be plenty to discuss. How many members of the usual crowd show up once the snow has melted remains to be seen. We have had peak globalisation; we’ve also had peak Davos.