Lets Rebuild A Broken Global Economy, Say Davos Leaders

“We see the manifold political, economic and social forces creating increased fragmentation on a global and national level. To address the root causes of this erosion of trust, we need to reinforce cooperation between the government and business sectors, creating the conditions for a strong and durable recovery. At the same time there must be the recognition that economic development needs to be made more resilient, more sustainable and nobody should be left behind,” said Klaus Schwab, Founder and Executive Chairman, World Economic Forum. 

GEOPOLITICS

The need for collaboration is growing stronger. The western world is realising that global challenges of climate change; geo-political tensions; pandemic and economic slowdown have to be tackled in collaboration with emerging economic giants in Asia and Africa. In 2023, India has the presidency of G20 while South Africa is the chair of BRICS summit. 

UN Secretary-General António Guterres urged leaders gathered for the Annual Meeting to take urgent action. Taking note of a range of critical threats facing the world, from the economic crisis to war and pandemic, he said: “We are looking into the eye of a Category 5 storm.” Drawing a parallel to the tobacco industry in the 1970s – where companies knew of the dangerous health effects – he said “Big Oil” must be held to account for the damaging impact of fossil fuels on the planet.

 Of the critical threats facing the world, Guterres said one of the most dangerous is what he termed the “Great Fracture”, the decoupling of the world’s two largest economies, the United States and China – “a tectonic rift that would create two different sets of trade rules, two dominant currencies, two internets and two conflicting strategies on artificial intelligence.”

According to the International Monetary Fund, dividing the global economy into two blocs could cut global GDP by a “whopping” $1.4 trillion”. “This is the last thing we need. “Now more than ever, it is time to forge the pathways to cooperation in our fragmented world,” he said.

BLEAK ECONOMY

“Leaders around the world recognize that globalization needs reimagining, not junking, for two reasons. First, the global economy—the interregional flows of raw materials and manufactured goods, and the people, data, and capital this trade requires—is highly unlikely to come undone. No region is an island; every regional economy depends on the others for vital goods and services,” McKinsey Senior partners Tracy Francis and Daniel Pacthod said in an article on Davos 2023. McKinsey has identified five themes that will dominate this year. These are resilience to counter uncertainty; sustainability; reimagining globalization; social inclusion; and space economy. 

The World Economic Forums’s Chief Economists outlook was bleak. Almost two-thirds of the Forum’s community of Chief Economists forecast a global recession in 2023, more than double who thought the same in September. Businesses are expected to cut costs significantly, with 78% of economists in the survey forecasting layoffs at large multinationals firms. Saadia Zahidi, Managing Director at the World Economic Forum, said. “Leaders must look beyond today’s crises to invest in food and energy innovation, education and skills development, and in job-creating, high-potential markets of tomorrow. There is no time to lose.”

The more than 2,700 leaders and experts from 130 countries were in several huddles. These included more than 370 public figures from governments and international organizations, more than 1,500 business leaders and more than 90 innovators. There were also 56 finance ministers, 19 governors of central banks, 30 trade ministers and 35 foreign ministers at this meeting. As always Indian business leaders and ministers were present in strength. A small Chinese delegation attended too. European Central Bank president Christine Lagarde said that while she and other central bankers around the world were keenly aware of inflation, they also have seen a shift in sentiment. “The situation around the world must be improving a bit,” said Lagarde. “Players are moving from defense mode, that they had effectively been in 2021 and 2022, towards a more competitive mode.”

CLIMATE ACTION
An important example of collaboration to meet challenges was seen on the climate change front. The World Economic Forum, supported by more than 45 partners launched the Giving to Amplify Earth Action (GAEA), a global initiative to fund and grow new and existing public, private and philanthropic partnerships (PPPPs) to help unlock the $3 trillion of financing needed each year to reach net zero, reverse nature loss and restore biodiversity by 2050. GAEA will build on existing examples of success. For example, the Clean Cooling Collaborative, founded with the help of an initial $10 million of philanthropic funding in 2016, has mobilized more than $600 million in public and private finance to improve equitable access to low-carbon cooling and support 4.2 gigatons of avoided CO2 emissions by 2050.

Individuals, academic institutions, companies and public sector organizations supporting the initiative include: Center on Global Energy Policy at Columbia University, Centre for Strategic Philanthropy at the University of Cambridge, , Government of Egypt, HCLTech through their chairperson Roshni Nadar Malhotra, McKinsey Sustainability, Singapore University for Social Sciences and UN Environment Programme.  

PREPARING FOR DISRUPTION
The focus on technology and skilling was critical. WEF showcased the potential of metaverse with its global cooperation village. Other world leaders explored ideas to mitigate the negative impact of technology while improving the reskilling of professionals to prepare for impending disruptions. Working with more than 20 governments, 60 global chief executives and a network of over 350 organizations, the Davos led Reskilling Revolution is preparing 1 billion people for tomorrow's economy and society by 2030. From LinkedIn and Microsoft’s commitment to train and certify 10 million additional learners in essential tech roles while helping 80 million others learn new skills for digital roles since the start of the COVID-19 pandemic, to iamtheCODE’s pledge to train 1 million women and girls as coders across Africa and globally by 2030, the Reskilling Revolution is tackling the global skills gap. 

“On the one hand, technology improves people’s lives and creates a more connected world; on the other it contributes to growing polarization between those with the skills to take advantage of digitization and those without. As tech adoption continues at pace, increasing people’s employability and providing them with greater control of their prosperity and earning potential is critical to creating a future that is better for the many, not the few.” Said Jonas Prising, Chairman and CEO, ManpowerGroup. 

“The pandemic, automation and globalization have fundamentally reshaped the labour market and collective action from public and private sectors will be crucial to ensuring everyone has equal access to opportunity in the digital economy, no matter where they are,” said Jeff Maggioncalda, CEO, Coursera

 INDIA AT DAVOS
From the economy to the energy transition, India's action on crucial global issues was a major topic of discussion. Four cabinet ministers from India were present at Davos. Led by Smriti Irani, the ministerial delegation included Health Minister Mansukh Mandaviya, Power Minister RK Singh and Telecom and IT Minister Ashwani Vaishnaw. 

Highlighting key factors that will make a difference for India, Vaishnaw said, “The first dimension is to make sure India’s economy is resilient, and there is consistent 6-8% growth rate for a complete decade with moderate inflation.” He said India must figure out how to ‘attract a large number of supply chain participants’ while using local research and development capabilities.

According to Sunil Bharti Mittal, Chairman at Bharti Enterprises,“India is certainly on the move. Almost every segment of our economy is moving very well, consumption is going up.”

“China+1 has become the norm in the world: everybody is talking about being in India in addition to China, not necessarily in replacement to China. Europe+1 has started to be talked about.. because they feel India could become a very important part of the supply chain of the world.”

As G20 Chair, India has identified women-led development as one of the high-priority subjects and created an engagement group Women20 focused on gender equity. Minister of Women and Child Development, Smriti Zubin Irani, said at Davos  "Do we reduce women to only consumption of technology? Or do we want to support them to become leaders of technological institutions or enterprises? The G20 presidency gives us a unique opportunity to speak about our experiences, speaks about our commitment," she said, while helping empower the Global South.

Delegations from various states also attended and met potential investors. They included a team from Uttar Pradesh, Maharashtra, Andhra Pradesh, Telangana and Tamil Nadu. The states and Invest India had taken up several pavilions on the main promenade in Davos to showcase the strides take in subjects such as sustainability, skilling and technology. 

WEF launched its first thematic centre on healthcare and life sciences in Telangana, India, in collaboration with the state government. The centre will be an autonomous, non-profit organization, leading on policy and governance for healthcare and life sciences. “India has a unique opportunity to spearhead healthcare and life sciences in South Asia. C4IR Telangana – with the support of the Forum’s global network of Fourth Industrial Revolution centres – will be a key player in driving stakeholder engagement, building bridges between the public sector and SMEs and supporting job creation in the healthcare sector,” said Børge Brende, President, World Economic Forum.  “Life sciences is one of the priority sectors in Telangana and I firmly believe this partnership can leverage on the current ecosystem to further accelerate value and impact created by Telangana’s life sciences sector globally,” said K.T. Rama Rao, Minister for Municipal Administration and Urban Development, Industries and Commerce, and Information Technology, Telangana.

SUMMARY
The road ahead for 2023 will remain bumpy but could be improved with deeper collaborative efforts. Davos 2023 will be remembered for a sober gathering where actionable plans were hatched and existing projects were deepened. The leaders did not waste much time lamenting about the war and the pandemic. They focused on getting things done to ensure that the impact of war, pandemic and the resulting economic shocks are mitigated. Talk would be measured against action when they meet again in 2024.