January 11, 2024
Davos and ‘the decade of wasted opportunity’
The World Bank’s chief economist, Indermit Gill, put it plainly: “Without a major course correction, the 2020s will go down as the decade of wasted opportunity”—following the slowest half-decade of global gross-domestic-product growth in thirty years.
That’s the somber mood music, detailed in the World Bank’s latest Global Economic Prospects report, that faces global movers and shakers heading for next week’s World Economic Forum (WEF) in Davos, arguably the world’s most important annual gathering of political, business, and civil-society leaders.
I’ll be there slogging through the snow with them, hoping to hear their smartest plans to navigate the higher borrowing costs and geopolitical tensions that are dragging down growth.
When growth slows, political volatility tends to follow. That comes at a time when the world is already facing wars in Europe and the Middle East—and increasing tensions in East Asia—without a lasting solution in sight.
The WEF was born to galvanize common cause to improve the state of the world, but its own Global Risks Report 2024 is a stark look at what the world is up against, concluding that “weakened economies and societies may only require the smallest shock to edge past the tipping point.”
WEF’s survey shows that for the next two years, “the majority of respondents (54 [percent]) anticipate some instability and moderate risk of global catastrophes, while another 30 [percent] expect even more turbulent conditions.” Over a ten-year timeframe, it is looking even gloomier, with two-thirds of respondents expecting a “stormy or turbulent outlook.”
Josh Lipsky, senior director of the Atlantic Council’s GeoEconomics Center, compares the current global economy to an unstable Jenga tower, with missing pieces representing major economic disruptions that could range from shipping disruptions in the Red Sea to trade disputes with China.
“If you look from above, the tower seems tall and sturdy. That’s indeed what’s forecasted for [the] year—modest but consistent global growth,” Lipsky writes. “But if you pan the camera down and look at the sides of the Jenga tower, you see all the missing pieces. Each one is hollowing out the structure and you never know just how much instability the tower can take before it topples over.”
My only solace is that the Davos conventional wisdom often proves wrong. A hedge fund manager friend of mine says he goes to Davos each year so as to bet against this conventional wisdom.
It would be more prudent to follow the World Bank’s advice, which is to accelerate per capita investment growth and then sustain it for six or more years, reducing poverty and increasing productivity. The World Bank concedes that’s hard work, but developing economies have done it before, and the alternative is more wasted opportunity.
Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on Twitter @FredKempe.
This edition is part of Frederick Kempe’s Inflection Points Today newsletter, a column of quick-hit insights on a world in transition. To receive this newsletter throughout the week, sign up here.
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Image: People walking past the World Economic Forum (WEF) logo during the forum in Davos, Switzerland May 23, 2022. Photo via REUTERS/Arnd Wiegmann.