Monday's Musings: Davos Report - The Five Uber Forces Impacting The Global Economy
The Davos Set Convenes For A Broad Set Of Progressive Policies and Positions
Over 2,000 official and 4,500 unofficial attendees will descend on the alpine village of Davos for the World Economic Forum's annual meeting. After a two-year hiatus of the annual event, these "elite" leaders from business, academia, politics, and cultural celebrities will meet to discuss key globalist topics such as:
- Securing economic recovery
- Shaping a new era of growth
- Fostering cooperation at the global and regional level
- Driving transformation of industries
- Addressing ESG topics around climate, food, and nature
- Enabling society to improve health and equity
As in past years, more than 1300 private jets will leave their footprint into the event amidst discussions on sustainability. Moreover, expect a cadre of business leaders making the shift from shareholder to stakeholder capitalism to justify to shareholder's their initiatives and the coming year's corporate messaging on environment, sustainability, globalism, diversity, inclusion, and lobbying efforts.
Five Uber Forces Weigh Heavy On Attendees
While many of the proposed topics have good intentions, the underlying market and public sentiment have shifted due to five uber forces underpinning almost all discussions:
- Inflation. The IMF predicts an average of 8.7 percent inflation for developing countries ,and 5.7 for developed nations. Inflation has robbed any wage gains achieved during the "Great Resignation" and continues to impact the poor and middle class around the world. A great source of the blame arises from the cost of energy and the price of the accelerated green transition. Wage inflation continues to rise as the talent wars heat up with more jobs than available workers at a factor of 2 or even 3 times.
Pragmatic leaders realize that the timeline must be extended to inflict less pain on the populace despite many idealistic objectives. Targets for green energy and emissions by ambitious dates will be challenged as no longer realistic. Carbon based transition timelines must be shifted to avoid global poverty and downturn. Pragmatic ESG approaches that consider total cost will emerge as the norm over the next five years.
- Interest rates. The era of cheap money has ended. Rising interests rates with the US 10-year treasury note topping 3 percentage points has compounded the effects of inflation and is creating a drag on economic growth. The unexpected strong dollar is creating chaos for world leaders as they accommodate new exchange rates. As a result, public market valuations for growth companies have been cut in half as startups struggle to gain funding amidst this turbulent market. A shift to value stocks have not taken off and the result has been a blood bath in equity markets. The crytpo winter has entered a crypto ice age.
The death of modern monetary theory (MMT) is near as nations grapple with rising public debt. A return to rational monetary theory is about to take stage and government leaders who continue to overspend will be punished by investors and world banks. We have shifted from a culture of abundance to a self-inflicted culture of scarcity.
- Inventory. Supply chain and logistic challenges continue to hamper growth in every market. Tight labor markets coupled with a naive Zero-Covid policy in China have left global market vulnerable and brittle. The impact of lockdowns in China has compounded inflation, especially for re-open economies. China's push for global dominance has been halted for now.
Business leaders and governments will push for de-globalization in order to ensure both supply chain resiliency, and national security. Expect more efforts to encourage the creation of jobs in region as opposed to the massive supply chains of decades past.
- Infection. With over 6 million reported deaths and an estimation of over 25M non-reported death, the toll of the pandemic has been broad and deep. Lock downs have decreased mortality rates, increase mental health issues, raised suicide rates, impacted a generation of education among the youth, increased the wealth divide, and bankrupted many businesses. The wrath of Covid19 continues with China's lock down policies, potential new variants, and an assault on individual rights amidst public health emergencies.
In spite of these scenarios, global leaders continue to push for more authority and reform at the World Health Organization with a proposed new treaty to expand the unchecked powers of public health. Expect citizens around the world to rise up with a backlash against the expert class for their list of continued failed policies. Moreover, expect a demand to uncover the origins of Covid-19 despite the coordinated coverups by public health authorities and world governments. Corporations and organizations will shift to a caring economy as the need to address the welfare of employees rises in priority amidst a shortage of workers.
- Invasion. The Russian invasion of Ukraine has created a refugee crisis in Europe and driven up food prices. Fertilizer production, wheat yields, sunflower oil production, and an energy crunch from Russian oil sanctions has created massive ripple effects. Food security in Africa is threatened, and overall food costs have risen as carbon based energy prices have tripled, driving up inventory and logistic costs. War is never beneficial for the populace, though beneficial for a few powers that be.
Global leaders must band together with economic, diplomatic, military, political, and cultural strategies to keep bad actors at bay. Preventing an invasion of Taiwan by China, nuclear war on the Korean peninsula, annihilation of Israel by Iran, state sponsored terror, and Russian expansion will continue as top foreign policy priorities. A rise in defense spending from cyber security to physical security will continue, creating a drag on investment in domestic programs.
The Bottom Line: De-globalization, Populism, and Nationalism Challenge Today's World Leaders More Than Ever
The past two years of the pandemic have created a "Great Refactoring among the citizens of every nation. Trust and faith in the expert class has been shattered. The policies of globalism no longer resonate with the populace as middle class jobs have been exported, individual rights trampled on by global agendas. Faith in tech companies continue to decline as privacy is traded for convenience and security. Their status as digital giants make those digital giants who do not exercise good stewardship vulnerable for anti-trust breakup. DEI efforts and ESG will face massive backlash as nationalist sentiment has emerged despite all the efforts to influence mindshare at the cultural, educational, and societal level. A focus on the individual's merits will rebalance identity politics towards meritocracy. The expert class is right, a new world order is coming, but not the one imagined by the global elite.
This Great Refactoring is here, and the story has yet to be written. Hopefully the Davos class will be awakened to the interests of their constituents and collaboratively shape this new world. There is hope but this time it requires a public discourse, not forced policies in order to convince the general public.
Are this year's topics in line with the general populace? Do you feel the Davos set have lost their way? What outcomes do you anticipate from this meeting?
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