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As in past years, IHS Markit sent a delegation to the 2019 World
Economic Forum (WEF) in Davos, Switzerland. The highlight of this
year's IHS Markit presence at the Forum was a breakfast seminar on
Tuesday, 22 January that was attended by over 80 CEOs from top
global companies. The topics of discussion included the economic
outlook, energy markets, and geopolitics.
The mood in Davos
Compared with the euphoric mood in Davos 2018, this year the
delegates were more subdued and wary. The long list of worries
included: weaker data on the Chinese and eurozone economies,
Brexit, the simmering trade war between the United States and
China, the stock market selloff, and the US government shutdown
(which did not end until the Forum had concluded).
While many of the attendees, especially those from financial
sector firms, began the gathering by expressing fears about a
possible recession, by the end of the three days the mood had
become less dark, with a growing sense that the global economy was
slowing but not slumping. This mood swing can partly be attributed
to the delegates talking to each other and hearing comments such as
"I am worried about the outlook, but my company is doing OK."
Some prominent financiers were highly critical of the Federal
Reserve's tightening in 2018 (both interest-rate hikes and
balance-sheet reductions), blaming the financial market turmoil on
the US central bank's lack of flexibility in the face of financial
stress and slowing global growth. Others at the Forum warned
against making the Fed the scapegoat for the many forces that are
slowing global growth, including policy mistakes regarding
trade.
Comments from world leaders
In a sense, the 2019 WEF was defined by the world leaders who
did not show up, including US president Donald Trump and prime
ministers Theresa May of the United Kingdom, Emanuel Macron of
France, and Narendra Modi of India-all of whom were highlights of
the Forum in 2018, but stayed home in 2019 because of domestic
political challenges.
Among the leaders who did speak, perhaps the most anticipated
comments were those by Jair Bolsonaro. In his short (seven-minute)
speech, he made it quite clear that he was going to pursue a
pro-business agenda including privatization, lowering the tax
burden, reducing regulation, and tackling corruption. Like so many
leaders in the past, he made a plea for global business leaders to
invest in Brazil. President Bolsonaro's speech was short on
specifics. Those were provided by the Brazilian economics minister,
Paulo Guedes, who was also in attendance. The new president was
asked about his prior, unfriendly comments regarding environmental
policies. His answer was that the goal of environmental protection
needs to be balanced against the goal of economic development. Both
deserve equal weighting, Bolsonaro concluded.
Comments by Prime Minister Shinzo Abe of Japan and Chancellor
Angela Merkel of Germany were also intended to be reassuring at a
time of high anxiety. Abe talked about the progress made by Japan
during his tenure (higher wage and productivity growth and rising
labor-force participation rates among women and older workers), and
asserted that "defeatism about Japan has been defeated." He said
two of the areas of focus during the upcoming G20 meeting (to be
hosted by Japan) will be data governance, as well as innovation for
carbon capture and other ways to meet global climate-change
targets. He emphasized that the United States, Japan, and Europe
should cooperate to make the World Trade Organization more relevant
in a world of data- and technology-driven trade.
Chancellor Merkel provided a strong endorsement of the existing
global architecture, pointing to the hundreds of millions of people
who have been lifted out of poverty in recent years. She also
pointed out that this architecture needs to be updated to meet the
challenges of big data and artificial intelligence. Merkel said
that Germany faces three big challenges: meeting environmental
goals, preparing for the digital revolution, and dealing in a
humane way with migration. The chancellor said that Europe should
resist the forces of nationalism and isolationism, and stated
strongly that the only way to deal with the challenges facing
Europe is in the context of a strong European Union.
Other European leaders-in particular, prime ministers Giuseppe
Conte of Italy and Pedro Sánchez of Spain-provided divergent
visions of Europe's future. Conte talked about "Europe of the
people, by the people, and for the people." Sánchez described
his government as "feminist, ecological and pro-Europe." Conte
called for power to be handed back to the Italian people, who felt
deceived by the promises made about the benefits of a single
currency and other EU institutions. In contrast, Sánchez
called for Europe-wide cooperation to tackle issues such as
inequality and environmental degradation. He bemoaned the rise of
"reactionary populism and far-right political parties."
Tensions among European leaders were also apparent on more
specific issues. Prime Minister Rutte of the Netherlands criticized
the EU for being too soft on Italy's breaching of budget rules,
agreed to by prior governments. Prime Minister Mateusz Morawiecki
of Poland censured Italy and the Netherlands for low tax rates.
Perhaps the speech that got the strongest reactions was that of
Chinese vice president Wang Qishan. He said that China's current
success should be viewed in the context of the country's long
history, and that over a 70-year period the Chinese Communist Party
had succeeded in transforming a weak agrarian state into the
world's second-largest economy. He made frequent references to
China being on a "socialist path with distinctive Chinese
features." Wang also made references to imbalances in China's
economy and the need for structural reforms. He admitted that this
is an area where China's success has been limited. He warned of the
importance of respecting national sovereignty and asked that
nations refrain from seeking "technological hegemony." Wang said
that Western economies put too much importance on efficiency and
not enough on equality.
There was an unusual amount of pushback at this year's WEF
regarding comments by Chinese officials-more so than in prior
years. Some pointed out that the first 30 years of Communist Party
rule in China were a disaster, including the Great Leap Forward and
the Cultural Revolution. Others worried that artificial
intelligence (and other new technologies, as well) in the hands of
repressive regimes could be very dangerous. Some also pointed out
the irony that, notwithstanding Wang's assertion about inequality
in Western economies, China has experienced one of the most rapid
increases in inequality over the past couple of decades.