19 February 2018

Monday, 23:32

CURRENCY

SHARED FUTURE OR FRACTURED WORLD?

Davos-2018: dynamic, mainly contradictory and explicitly intriguing

Author:

01.02.2018

The World Economic Forum (WEF) launched forty-seven years ago in Davos mainly as a management forum is now one of the largest and most influential negotiation platforms for the global political, financial, and business elite. This year, the attendees included Donald Trump, Emmanuel Macron, Angela Merkel, Theresa May, Justin Trudeau, Benjamin Netanyahu, Mauricio Macri, Emmerson Mnangagwa, Narendra Modi, and many other politicians and representatives of the largest companies and NGOs. Azerbaijani president Ilham Aliyev is also a regular participant of the Davos meetings.

Being a manifest of global perturbations, the decisions adopted at the forum this year look very interesting indeed. Davos-2018 turned out to be a dynamic, mainly contradictory and explicitly intriguing event. Officially titled Creating a Shared Future in a Fractured World, it became remarkable for shaping trends that used to be a set of issues talked about in hushed voices until quite recently. For instance, there were harsh accusations against large technology companies and social networks. It was obvious that the participants were going to reconsider the significance of technology, as technological progress is no longer regarded a force ultimately connecting the world. Like globalization, modern tech solutions have both many positive and negative implications. One of them is the growing inequality in incomes, which carries a variety of risks not only to the poor and the rich but also to the social tension. Apparently, the powerful are puzzled by the growth of populist sentiments in many countries and believe that the factors mentioned above significantly contribute to the existing state of affairs.

 

Any evidence for optimism?

The general tone of the Davos forum was quite optimistic, considering the promising statements about the ongoing development of global economy. IMF analysts predict that all economically developed countries (except Britain) will achieve greater growth indicators by 2019. The world economy has been accelerating since mid-2016, and in 2017, global GDP grew by 3.7%. International consulting company PwC published a similar opinion after polling the heads of transnational corporations. Markets are stable, while the investors anticipate profits.

However, not everyone is happy with existing symptoms of a stable economy, which indicates its imperfection – a situation fraught with danger of weakening unexpectedly. The most serious concern is the growing inequality in income both between countries, and between different generations of these countries. Oxfam’s report published just before the meeting in Davos indicates that 1% of the richest people on the planet owns 82% of the world's wealth. Statistically, the eight of the richest people own as much wealth as the four billion poorest people. Or, the three richest Americans have almost the same amount of wealth as the poorest half of the U.S. population. Since 2010, the wealth of the world's richest people has increased by 13%, which is six times higher than the rate of increase in wages of employees. 2017 was a record year for billionaires – they earned the largest revenue ($762b) ever, which would be enough to put an end to global poverty once and for all.

Critics say that Oxfam is too much focused on exposing the rich instead of dealing with the poor. They remind that millions of people have managed to overcome extreme poverty in recent years thanks to free markets, the rich pay high taxes and their forced bankruptcy will not result in a fair redistribution of income. Also, the requirement to raise minimum wages will inevitably lead to reduction in jobs. On the other hand, it is clear that the existing situation cannot remain as is and large businesses understand this. That is why the chairman of the world's largest asset management company BlackRock Larry Fink appealed to both public and private companies to serve a social purpose, while Oxfam stressed the need to channel the tax system and expenses to the redistribution of income. Yet another increasingly challenging issue is the confrontation of blue-collar jobs and artificial intelligence. As a result, even low and volatile wages can disappear completely in our digital age simply because the relevant jobs will disappear.

However, it is possible that we will soon witness the end of unchallenged supremacy of large IT companies, which have suddenly become targets of harsh criticism at least in Davos. Indian Prime Minister Narendra Modi, whose country is one of the leading suppliers of workforce to the Silicon Valley, said that along with all the useful things that the technology brings into human life, it can also divide and destroy societies. British Prime Minister Theresa May spoke out against social networks, noting a great loss of trust in them. The hardest hit on big American tech corporations came from the billionaire George Soros.

Google, Apple, Facebook, Amazon and others have been criticised largely due to the alleged interference of Russia in election campaigns in the West through the social networks. Even greater concern is associated with the spread of fake news. It is noteworthy that the annual sociological survey Trust Barometer conducted by the American Edelman company has revealed a record-breaking drop in trust in social networks versus an improved image of traditional media in many Western countries. Tech companies are also accused of spreading computer dependence, manipulation, unfair taxation, monopoly, and the planned obsolescence of their products.

 

Who is a strong leader?

Our world needs strong leaders rather than populist politicians. It is noteworthy that the French Le Monde praised President Emmanuel Macron, noting that the participants of the summit awarded “this young “passionate” and “optimistic” leader, who gave them a vision they were waiting for so long – a globalization with a human face, with a standing ovation.” However, all observers acknowledge that Macron will not be able to implement his plans without the support of Germany, especially reforms in the EU. But German Chancellor Angela Merkel, who is still trying to form a coalition government, is now taking a weakened stance. At the same time, Merkel supported Macron, as she believes that his election “gave a new momentum to Europe.” Merkel also noted the difficulties in domestic politics and the “poison of right populism”, warning the delegates that “self-isolation and protectionism is not the answer to the world’s problems.”

As for Asia, if the Chinese leader Xi Jinping was in the centre of attention in Davos-2017 trying to guarantee the niche of global leadership for his country after the election of Trump, this time everyone were listening to Indian Prime Minister Narendra Modi. India is the largest democracy by population and the world's seventh economy. By 2050, it can take the second place after China. However, many Western observers agreed that Modi did not follow the steps of his Chinese colleague and did not even hint at global leadership.

Well, what about the current global leader? The U.S. President decided to appear in Davos, although usually the American presidents do not like participating at the forum. Bill Clinton was the last president who visited Davos back in 2000. Trump’s participation in the forum, nicknamed the “club of globalists”, aroused great interest. Everyone was eagerly awaiting Trump’s speech and he lived up to expectations saying that “the world is watching the recovery of a strong and prosperous America”; now is the best time for investments in the U.S., which “is experiencing strong economic growth”; America is open to business and again competitive. Trump also spoke out against dominance in the energy sector, for a fair system of world trade, so that some countries do not cash out at the expense of others.

However, Trump did not blend in the Davos community, as European leaders clearly tried to oppose themselves to the American president. It was also obvious from the agenda calling to stop the reduction of taxes for the richest contrary to the large-scale tax reform initiated by Trump, which just benefits them. Also, one of the main topics of discussions was migration and its political consequences. Interestingly, Merkel once again emphasized the importance of establishing the European Defence Fund, noting that Europe has become accustomed to “rely on the United States. As long as the U.S. is absorbed by itself, we need to take destiny into our own hands,” she added. This statement was voiced when Trump again urged the allies to increase their contribution to their defence and fulfil their financial obligations to NATO for common defence.

 

Top three leaders

The Azerbaijani President also participated in panel meetings of Davos speaking at the interactive meeting titled Strategic Vision: Eurasia, and held numerous meetings, including with WEF President Børge Brende, Chevron Vice President Jay R. Pryor, LUKoil President Vahid Alakbarov, Founder, Chairman and Chief Executive Officer of BlackRock, Inc. Larry Fink, OPEC Secretary General Muhammad Barkindo, IBM CEO Ginni Rometty, Vice-President of the European Commission in charge of Energy Union Maroš Šefčovič, BP CEO Robert Dudley, and VTB CEO Andrey Kostin. Most of these meetings concerned the expansion of existing ties and cooperation. Ilham Aliyev said that Azerbaijan has created a favourable investment environment, Baku has achieved good results in economic diversification.

Economic achievements of Azerbaijan are recorded in international reports. Azerbaijan was among the top three developing countries in the WEF’s annual Index of inclusive development-2018 coming after Lithuania and Hungary only and leaving behind 70 countries, including Russia, Georgia, Armenia and Iran. This indicator is considered an alternative to GDP and reflects a more holistic picture of economic development. It shows whether there is a steady increase in the standard of living of the population, and not simply an increase in the production of goods and services. This is an important guarantor of sustainable development, and Azerbaijan’s rating indicates that the economic policy of the state in recent years has certainly been successful. Also in the global competitiveness index for 2017-2018, Azerbaijan was ranked 35th among 137 countries becoming the first in the CIS. International rating agency Standard&Poor's (S&P) forecasts that by the end of this year, the state budget of Azerbaijan will close with a surplus.

Successful economic policy inevitably attracts investors, and numerous meetings of Ilham Aliyev were aimed at promoting this factor. For example, CEO of BlackRock Inc., the largest investment company in the world, expressed his hope that in the near future his company will act for Azerbaijan not only as an investor, but also as a reliable partner able to reach investment goals. Fink plans to visit Azerbaijan in the near future and get acquainted with the country's investment opportunities again.

The successful participation of the president in the Davos summit highlighted Azerbaijan's contribution to international cooperation, the importance of its participation in global energy and transport projects, such as the Baku-Tbilisi-Kars railway, TANAP and TAP, the South Caucasus. It was noted that Azerbaijan, which has rich oil reserves, develops the non-oil sector and every year the inflow of tourists increases.

By the way, on January 23, the presentation on the nomination of Baku for the WorldExpo-2025 was held at the forum. Azerbaijan, which has become the venue for numerous international events in recent years, has all the necessary conditions and infrastructure for WorldExpo-2025.

Meanwhile, speaking at yet another important panel discussion, Strategic Vision: Eurasia, the president indicated the absence of any internal risks and threats in Azerbaijan. Therefore, it is necessary to guarantee security at the borders, and the best way to achieve this is to establish pragmatic and sincere relations with the neighbours by respecting their national interests. “I think that Azerbaijan has managed to establish such a partnership with all its neighbours, with the exception of Armenia, which continues to occupy 20 percent of our territory,” said Ilham Aliyev. He also briefed his colleagues on the current state of talks on the Nagorno Karabakh conflict. It is important that the truth about the Karabakh conflict was once again voiced at such a high summit, which is the Davos forum. The more are the opportunities of Azerbaijan to speak the truth, the better, and Ilham Aliyev enjoys each of them.

 

Dialogue is important

Many concerns have been voiced lately about the efficiency of WEF. It is believed that nothing useful is happening there for the prosperity of our world. However, dialogue is always good. With this in mind, Azerbaijan attaches great importance to this global event. If we can make at least a step towards the solution of some social, economic or political problems, if new jobs are created, then the Davos forum fulfils its mission. It is clear that most of the conversations and decisions conducted and adopted at the forum will never become known publicly. But at least this year, we have enough information to ponder on.



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