Overcoming the Davos hype
COMMENT: The 48th meeting of the World Economic Forum in Davos from January 23 to January 26 generated a huge amount of optimism about world growth prospects, with business leaders and heads of state falling over themselves to highlight their contributions and views, writes Ben Hackett.
Even US President Donald Trump appeared on the scene claiming credit for the booming stock market. This was a week before it collapsed in what has been termed a 'correction'. No one took credit for this.
All the talk was of co-operation and the need to work together, even from Mrs Merkel who is playing hard ball on Brexit terms despite not being able to form a government in Germany for over five months.
Various intra-national bodies, including the International Monetary Fund, have produced new forecasts to correct their previous, somewhat pessimistic growth global growth rates for 2018 and 2019. This wave of optimism comes at a time when some of the economic fundamentals, including consumer confidence, consumer spending and purchasing managers' indices all suggest a slowdown in growth prospects.
At the end of the 20th century, politicians believed that greater economic interdependence among countries, buttressed by liberal democratic institutions, would ensure peace and stability well into the new century. That thought has since been turned on its head in this century which has been characterised by conflicts, dangerous populism, and attacks on free trade and open borders. Such policy predictions are fragmented, biased or uninformed in today’s world of strife, radicalism and hatred.
Does anyone really believe that this process of delegates slapping themselves on the back and seeing a rosy future will bring a brave new world? Perhaps President Trump and the President of France, Emmanuel Macron, do, but their societies are as fractured as anyone’s.
What does all this mean for global trade and the prospects for further growth on what was, it now transpires, a good 2017? Not a lot, I must say. Despite all the news, the demand forces are not that strong and the uncertainty of geo-political events and the danger of further conflicts do not make for a overly positive outlook. The damage to trade in the EU caused by Brexit positioning, combined with the attack on free trade by the US may well override all the optimism generated at Davos.
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