Economic trends

Unseasonably warm Davos grapples with chill of global issues

Delegates have their work cut out, if they are to make headway with the challenges facing the world economy

It’s unseasonably warm here in Davos as delegates embark on the annual meeting of the World Economic Forum (WEF). In previous years, cold weather served a useful purpose, as journalists and policy makers were able to describe the mood in the congress centre by reference to the wintery conditions outside.

As a Davos junkie, who has been making the annual pilgrimage for far too many years, I predict this year will be different for the masters of the Davos metaphor, and not because the temperature is well above zero.

The theme of this year’s Davos gathering – The Reshaping of the World: Consequences for Society, Politics and Business – is customarily sweeping in scale and sombre in tone.

Delegates won’t be able to escape the realities of the here and now

We are told by WEF that “profound political, economic, social and, above all, technological forces are transforming our lives, communities and institutions”, with a complaint that the “international community remains focused on crisis rather than strategically driven in the face of the trends, drivers and opportunities pushing global, regional and industry transformation”.

Although this implies discussion of the longer-term, structural issues facing the world, delegates won’t be able to escape the realities of the here and now:

The global economy is recovering, but not out of the woods yet

In its latest update on the global economic outlook, the IMF says the recovery is strengthening, with world growth projected to expand 3.7 per cent this year, compared with 3 per cent in 2013. Although the outlook is optimistic, the IMF cautions that the recovery remains weak and uneven. The US is faring better than Europe, and growth in emerging markets – while lower than in the past – will remain high.

Creating jobs and growth remains a huge challenge for policymakers 

The WEF Global Agenda Council on employment paints a stark picture in a report published this week: the performance of different countries on growth and employment varies considerably, and even though growth is resuming in many parts of the world, job creation remains subdued, and many people “are experiencing deeper crisis”. According to the International Labour Organization, global unemployment is set to rise in 2014, with more than 200 million people out of work across the world.

Rising inequality raises serious doubts about the sustainability of the world’s current economic model

In its annual Global Risks Report, WEF identifies severe income disparity as a serious risk for society, saying that this “raises concerns about the Great Recession and the squeezing effect it had on the middle classes in developed economies, while globalisation has brought about a polarisation of incomes in emerging and developing economies”.

The inclusive multi-stakeholder approach works at Davos but needs to work elsewhere, too

Clearly, the delegates at Davos have their work cut out for them this week, if they are to make any headway with these challenges, let alone the deeper-lying structural issues in the global economy.

It’s worth bearing in mind that tackling the challenges isn’t down to policymakers alone. Banks need to provide credit to fuel the real economy, the private sector must create quality jobs, and civil society must help to ensure accountability. This inclusive multi-stakeholder approach works at Davos but needs to work elsewhere, too.

The Davos weather is likely to catch up with the mood of the delegates soon. Snow is forecast for later this week.