Active Stocks
Fri Dec 01 2023 15:59:55
  1. Tata Steel share price
  2. 129.95 1.56%
  1. Reliance Industries share price
  2. 2,393.45 0.72%
  1. NTPC share price
  2. 269.05 2.97%
  1. ICICI Bank share price
  2. 946.35 1.19%
  1. HDFC Bank share price
  2. 1,555.5 -0.22%
Business News/ Opinion / Views/  The return of history has begun to unravel the Davos Consensus
Back Back

The return of history has begun to unravel the Davos Consensus

The World Economic Forum (WEF) 2023 at Davos that got over recently was conspicuous in underlining the influence of geopolitics on contemporary global economic trends

Photo: BloombergPremium
Photo: Bloomberg

The World Economic Forum (WEF) 2023 at Davos that got over recently was conspicuous in underlining the influence of geopolitics on contemporary global economic trends. Though this high-profile annual gathering in a Swiss resort is ostensibly aimed at reiterating the conventional economic wisdom on the need to further the agenda of economic globalization, there has been a distinct shift in the global mood over the last few years and there is no likelihood that things are going to return to “end of history" euphoria any time soon. If anything, the untrammeled globalization of yore is leading to a more cautious and confined embrace of the forces of economic interconnectedness. And this year’s conference happened “against the most complex geopolitical and geo-economic backdrop in decades."

This tussle was also reflected in this year’s theme, ‘Cooperation in a Fragmented World.’ That today’s world is fragmented needs no explication. Great power contestation is back with a bang and the global multilateral order is unable to provide an effective framework for governance. With a war raging in Europe and potential for multiple crises in the Indo-Pacific, cooperation among key global players remains a commodity in short supply. In the past, it could have been assumed that economic issues would be key to forging global cooperation. Today, that is not a real possibility. Instead, the weaponization of almost all aspects of inter-state engagement is creating challenges that most states are struggling to cope with.

It is in this context that one must try to comprehend the gradual unravelling of the Davos Consensus as geopolitical issues permeate the discourse. Arguing that it was imperative for China to open up to the world, China’s vice-premier Liu He asked the world to abandon its Cold War mentality. He met US Treasury Secretary Janet Yellen to discuss how to “strengthen macroeconomic and financial policy coordination", but ties between the world’s two largest economies have been going downhill for quite some time, a trend unlikely to change anytime soon. Davos had once feted leaders from China and Russia, hoping to shape these nations in the image of the West, but the political forces shaping Chinese and Russian destinies turned out to be far more potent.

This run of great power competition is shaping up against the backdrop of a fundamental rethink on economic globalization, with many regions around the world and a large majority in the wealthier world left out of its benefits, thereby fuelling anger amid growing socioeconomic inequality. The covid pandemic, China’s weaponization of economic dependencies and the Ukraine war have all further pushed large parts of the world to reimagine the contours of globalization.

The Trump Administration in an undiplomatic way and the Biden Administration in a more civil manner have pursued an ‘America First’ agenda, with US middle classes explicitly kept at the heart of policymaking. The American rust belt has made its political point potently and today the trade policy emanating out of Washington is being criticized for setting off “a dangerous spiral into protectionism worldwide" and even imperil “the causes of liberal democracy and market capitalism."

Europeans have been making their reservations clear about the Inflation Reduction Act passed by the US Congress last August to make America a key location for green investment. The EU argues that certain provisions of the Act might be in violation of global trade rules; tax credits granted for electric cars made in North America have become a particular bone of contention. In response, European nations are trying to stand up to American economic coercion by mobilizing state aid and a sovereignty fund to keep firms from moving to the US.

The US is trying to make a strong case for “friend-shoring" amid growing tensions with its European allies. Trade and technology cooperation with like-minded nations is the new mantra, where political comfort will define the limits of economic engagements. Though this is clearly the future for big economic players, it will pose challenges for poorer nations that may find themselves cornered should bloc politics shape global economic arrangements.

Already, the brunt of the Russia-Ukraine war is being borne by the most vulnerable nations, with food, fuel and fertilizer crises hammering the weakest economies and sections. And this year at Davos, hard power took centre-stage as Ukraine’s allies pressed ahead with making a case for stronger military support to Kyiv. Negotiations were also viewed through the lens of battlefield realities. As Nato secretary general Jens Stoltenberg underlined: “If we want a negotiated peaceful solution tomorrow, we need to provide more weapons today." For a large part of the world, a fast return to the negotiating table might be a better option as fears of an economic deceleration swirl around.

Amid this broader ideological shift at Davos, India certainly stood out as a ‘bright spot’, but Indian policymaking is also responding to most of the same pulls and pressures that were on display at the WEF meet earlier this month. The wider geopolitical and geo-economic churn is unlikely to leave any shore untouched.

Harsh V. Pant is professor of international relations, King’s College London, and vice president for studies at Observer Research Foundation, New Delhi

Milestone Alert!
Livemint tops charts as the fastest growing news website in the world 🌏 Click here to know more.

Catch all the Elections News, Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Updated: 30 Jan 2023, 11:19 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App