Analysis

Davos 2017: On the Road to Irrelevance?

The cold blast from the surprise U.S. election and the rise of populism has reached the rarefied environs of the annual powwow of the world’s most rich and the powerful

An armed member of the Swiss Police watches from the roof of the Hotel Davos ahead of the World Economic Forum (WEF) in Davos, Switzerland, on Monday, Jan. 16, 2017.
Simon Dawson/Bloomberg

The annual meeting of the World Economic Forum held in Davos, Switzerland will kick off Tuesday. Is the event fighting for its life this year, or just for its relevancy?

The meeting, which is held every year in the snow-covered Swiss ski haven in freezing temperatures, has been the most important gathering for the global elites over the past 30 years. Over 3,000 political leaders, finance ministers, central bank governors, billionaires, CEOs of large corporations, economics professors, nonprofit organization heads and of course media barons and senior journalists all come together.

The four-day gathering does not necessarily lead to new policies, but it does represent the consensus opinions and the ruling global economic view.

The conference has even created its own new political economic jargon: “Davos Man,” a global leader or CEO who has control over hundreds of millions of people, or dollars, and is not necessarily attached to any specific country. Davos Man is a person looking for an opportunity or low taxes wherever it may be found, and whose friends and networks are made up of others like him.

Israel’s representation at Davos always included Shimon Peres. Prime Minister Benjamin Netanyahu usually appeared at Davos in recent years, and the CEOs and chairmen of Bank Leumi and Bank Hapoalim did not miss out on the event. In addition, a small group of tycoons and other Israeli businessmen and people from high-tech were invited, and did not hesitate to pay the $70,000 – and more – fee to participate, not including travel and lodging, of course.

Netanyahu was scheduled to attend this year too and his flights had already been arranged, but in the middle of last week his office announced he had canceled his participation. Not, God forbid, because of the police investigations being conducted against him, but because of “the schedule of the meeting, which is not attractive enough, and the decision of a number of leaders, whom Netanyahu was supposed to meet, not to participate in the conference.”

But this year the meeting and the image of Davos Man are being threatened. Their relevancy is at risk, for the same reason that many things in the global economy are filled with uncertainty: Donald Trump.

While Davos represented globalization and international cooperation, Trump ran for president and was elected on the basis of a directly opposite agenda. He, his cabinet secretaries and advisers speak out against globalization, against free trade agreements, in favor of unilateral policies and strategies of “America First,” in favor of achieving things through unilateral economic and military pressure. International cooperation? That’s so 2016.

Railing against Davos

Trump himself did not regularly attend Davos, if he ever did at all. His special adviser and the first person he named to the White House staff, Steve Bannon, came out against the “Davos phenomenon” during the election campaign against Hillary Clinton and afterwards too.

“The central thing that binds [Trump’s camp] together is a center-right populist movement of really the middle class, the working men and women in the world who are just tired of being dictated to by what we call the party of Davos. A group of kind of – we’re not conspiracy-theory guys, but there’s certainly – and I could see this when I worked at Goldman Sachs – there are people in New York that feel closer to people in London and in Berlin than they do to people in Kansas and in Colorado, and they have more of this elite mentality that they’re going to dictate to everybody how the world’s going to be run,” Bannon has said.

And it is not only Trump. Populism, the battle against globalization and immigration, and the turning inwards by nations, ethnic groups and communities are the central political phenomena of the past year. They are expressed by the Brexit vote as well as the likelihood of victories by the right in other national elections.

These worldviews are almost completely the opposite of the “Davos spirit,” the brand promoted by the founder and head of the World Economic Forum, Klaus Schwab. Trump has even harmed the Davos schedule – his inauguration falls during the Davos conference week this year. This coincidence will force many senior American figures to miss out on Davos this year, as well as stealing from it the media limelight and world public interest.

The Davos conference is unlikely to disappear anytime soon, partly because for the world financial media it is a huge source of news, exactly the same as the Olympic Games and the soccer World Cup are celebrations for the sports media, and it does not really matter which country of economic-political worldview wins.

Yet Davos has a problem. The participants and organizers of the conference are asking themselves not only if the meeting is still relevant, but maybe it is part of the problem – one of the factors that have led to the wave of populism and frustration that is now sweeping the Western world.

So maybe Davos will become a simple economic conference, without too much pretention about changing the world? Even in this, Davos has not been particularly successful. Prof. Kenneth Rogoff of Harvard, a regular at the meeting as well as a regular interviewee of TheMarker, told Bloomberg that the conventional wisdom of Davos is always wrong, and off of Harvard, a regular at the meeting as well as a regular interviewee of TheMarker, told Bloomberg that the conventional wisdom of Davos is always wrong, and he “can pinpoint the moment he started to grow concerned Donald Trump would be the next U.S. president”: It was when Rogoff’s fellow attendees at the World Economic Forum’s meeting last January “said it could never happen.” 

That’s the way it is: Especially just before and after the world financial crisis of 2008, the forecasts almost never came true. When the European debt crisis broke out and we asked Rogoff himself for his predictions, he said countries in great debt create inflation to erode that debt, so long-term interest rates would climb quickly to high levels. And what really happened? The exact opposite, interest rates are still hovering just above zero. Based on past performance, if you look at Davos to make an investment decision, then you will be disappointed – unless you take the opposite approach.

Schwab and the other leaders of the Economic Forum, which is a totally private Swiss nonprofit foundation, know all this quite well. At this year’s meeting, they will hold sessions on the populist trend and on everything that will affect the world without any connection to economics and financial markets: Technology, the future of the job market, health, medicine, neuroscience, natural disasters and even art. In the risk survey conducted by the organizers before the event, CEOs of large corporations said the most likely large-scale dangers in terms of probability were aberrant weather, unwanted immigration and natural disasters. Terrorism, cyber attacks and wars only appeared farther down the list.

China aspirations

The problem is that without politics it is hard to really stay relevant . Every political change creates an opportunity, and this time the opportunity for Davos comes from the East, or, more precisely, from China.

The most senior participant from China this year is President Xi Jinping, the most powerful person in the world’s most populous nation. This is not the first time very senior Chinese officials have come to Davos, but it is a first for a Chinese president. Commentators say it seems Xi and the Chinese leadership have decided that if America has given up its role as the political and economic leader of the world, then they are willing to fill this vacuum.

China seems to be interested in becoming the leader for globalization, and Xi sees Davos as an opportunity to make the first major step to stepping into the shoes of the American empire. It is hard to miss the irony involved: The Communist superpower may be the one to lead the battle for free trade without borders.

Another possibility that cannot be ruled out is that the global wave of populism will be exploited by politicians to take power. But when they take office they become the new elites and will connect to the Davos spirit. Some of the millionaires and billionaires whom Trump chose for his cabinet, including Gary Cohn, the No. 2 man at Goldman Sachs who Trump appointed as his director of the National Economic Council, were regular guests at Davos.

Davos has prepared the appropriate narrative for them. The theme for this year’s meeting is “Responsive and Responsible Leadership.” The sessions will focus on the question of how leaders need to respond to the real frustration of the public that has been left behind, in light of global capitalism and the market economy – and what are the practical, fair and existing long-term solutions. Anyone, regardless of their views and what they represent, can agree with that.

In practice, the Davos meeting has never dealt with the themes or topics of the sessions, it is a global meeting of those in power, the rich and the media, who come to do business, meet customers and suppliers, promote their business – and in the end make money. And in the case of the Davos Man, who is already quite rich – become even richer.