A number of big themes emerged from the World Economic Forum in the Swiss resort Davos. Here are five of most pressing questions that came to dominate this year’s gathering of the global elite.
Will China be forced to make friends with the west?
Donald Trump’s trade war with China – continued by his successor Joe Biden – has left relations between east and west at rock bottom. But with Covid and trade tensions halving Chinese growth last year to just 3% and western businesses such as Apple moving business out of the world’s second-biggest economy, Beijing has hinted it may adopt a less-hostile approach.
Vice-premier Liu He appeared on the main stage at Davos to assure foreign investors that after three years of Covid disruption, it was open for business. “We have to abandon the cold war mentality,” he said. “We must open up wider and make it work better.”
Whether the west is ready to believe that remains to be seen. Executives at several tech companies said they were approached by American intelligence officials at the summit who were keen to understand their operations in China. “They want to know which side you are on,” said a tech boss.
The FBI director Christopher Wray gave a speech arguing that China’s artificial intelligence (AI) programme would be weaponised by the country, telling attenders: “The Chinese government has a bigger hacking programme than any other nation in the world.”
Several economists also forecast that China’s rapid reopening could reignite rapid inflation by fuelling demand for commodities just as central bankers hoped they had got a grip on surging prices.
Is artificial intelligence coming for your job?
Rapid advances being made in AI have prompted a wave of warnings, not only about what it means for the world of work, but also the risks that it might produce misinformation on a grand scale.
Mihir Shukla, chief executive of Automation Anywhere, said that as a result of AI it was now possible for a machine to process a mortgage application in three minutes that previously would have taken 30 days.
Erik Brynjolfsson, digital economy professor at Stanford University said in the past machines had not been a substitute for workers but complemented the activities of humans, enabling them to do things better and leading to higher pay.
Yet IBM’s chairman and chief executive Arvind Krishna predicted a wave of job cuts from AI. “You should worry more about the clerical, white-collar jobs than the physical [jobs]. A large number of them will get replaced. So the question is: ‘What jobs do you create to replace those?’”
Brynjolfsson identified another threat. The world risked being flooded with bot-generated emails, posts and tweets peddling disinformation on a massive scale and warned there was a need for a control mechanism to separate the true from the false.
Will Biden’s $369bn green subsidy scheme help or hinder?
The US and EU nations arrived at Davos with a $369bn row simmering in the background: Joe Biden’s vast green subsidy scheme, known as the Inflation Reduction Act (IRA). It provides extensive state aid for companies investing in green technologies crucial to the transition away from fossil fuels, including electric cars, batteries, and renewable energy technologies such as solar panels and wind turbines.
Jozef Síkela, the Czech Republic’s minister of industry and trade, equated it with “doping in sport” and said it was luring companies away from Europe to the US. But Fatih Birol, the executive director of the International Energy Agency, said the IRA is the “most important climate action after the Paris 2015 agreement”.
Some have speculated it could lead to a trade war between the US and EU, akin to the decades-long Boeing v Airbus dispute over subsidies. The EU is responding with its own Net Zero Industry Act which will simplify and fast-track clean tech production sites.
Christine Lagarde, president of the European Central Bank, said she hoped the subsidy race “is not going to be a race to the bottom”. While leader of the UK’s Labour party, Sir Keir Starmer, embraced the idea of a more activist state, the UK business secretary, Grant Shapps, was distinctly cooler on the idea, describing it as “dangerous”.
Is a new debt crisis looming?
About a quarter of the countries in the world are in debt distress or on the brink of it. In Davos every one of the multilateral organisations that keep tabs on the financial fragility of poor countries – the UN, the International Monetary Fund and the World Bank – expressed concern.
Achim Steiner, administrator of the UN Development Programme said there was an urgent need for a comprehensive solution but was unsure whether there was the bandwidth or leadership required.
“Nothing is happening commensurate with the problem,” Steiner said. “There is a growing recognition that there has been a year of inactivity by the institutions created to deal with this – the G20 and the Bretton Woods institutions [the IMF and the World Bank].”
Countries are having trouble paying their debts amid slower global growth and rising interest rates. Many also borrowed in US dollars, which have appreciated on currency markets. Steiner said there needed to be an urgent injection of financial support through a fresh issuance of IMF special drawing rights – a form of money creation that boosts a country’s reserves – with debt restructuring. That will require more flexibility by two important creditors: China and the private sector.
Can the Gulf states modernise and wean off hydrocarbons?
The corporate logos that plaster shopfronts on the Davos promenade are a good barometer of changing economic fortunes. With Russia blacklisted after its invasion of Ukraine and China keeping a low profile, the Gulf states – flush with petrodollars – took over the Swiss ski resort en-masse.
The long road that winds towards the conference centre was dominated by Middle Eastern brands: from the United Arab Emirates’ logistics company DP World, to Neom, the $500bn megacity that is the cornerstone of Crown Prince Mohammed bin Salman’s plan to modernise Saudi Arabia.
The Gulf states need to prove to the world that they can modernise as companies and businesses switch away from oil and gas. The Saudis used the World Economic Forum to promote the kingdom’s modernisation plan, called Vision 2030, and the increasing role of women in the economy, while hoping the west would ignore atrocities such as the murder of Jamal Khashoggi, the Washington Post journalist whose death in October 2018 has been linked to Crown Prince Mohammed.
Several senior Saudi ministers were joined on a panel by Jane Fraser, boss of US banking giant Citi, and Kristalina Georgieva, managing director of the International Monetary Fund, to discuss more women joining the workforce and economic change.
“When one turns up in Saudi looking at what are the opportunities from a business perspective … it’s quite breathtaking,” said Fraser. “As a banker, one gets frightfully excited.”
