The Challenge at Davos: A Crisis of Global Politics, Not Just the Economy

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Fabrice Coffrini / AFP / Getty Images

Staff members prepare the main stage of the World Economic Forum (WEF) at the Congress center of the Swiss resort of Davos on January 23, 2012.

Despite its rugged alpine beauty, there are few places where the world seems more flat than Davos, Switzerland. The World Economic Forum’s grand annual conclave, set to kick off this Wednesday, draws myriad heads of state, global power brokers and cognoscenti for a rarefied meeting of the minds amid canapes and caviar. For years, the forum projected a degree of bullish confidence, heralding the march of globalization and the spread of neo-liberal, free market values across an increasingly interconnected and interdependent world. The meeting’s famous “Davos Men” — bankers, public intellectuals, CEOs, politicians — may have reflected an elite, jet-setting global 1%, but these were elites-in-the-know, stewards of a changing world with boundless optimism in the planet’s progress, no matter the howls of those motley anti-globalization protesters forever kept on the margins of WEF events.

Not anymore. The atmosphere surrounding this year’s summit is perhaps the gloomiest yet. German Chancellor Angela Merkel will kick off proceedings with an address attempting to reckon with the eurozone’s miserable year. A panel wringing its hands over the future of liberal capitalism will follow soon thereafter. A report issued by the WEF itself warned starkly of the “seeds of dystopia” being sown in various continents as “current fiscal and demographic trends could reverse the gains brought by globalization” and lead to “formerly wealthy countries that descend into lawlessness and unrest.” Responding to spiraling debt crises and a year of upheaval and protest, Klaus Schwab, the WEF’s founder, summed up the mood of many ahead of the meeting: “We are in danger of completely losing the confidence of future generations. We have the impression of a global burnout.”

If that sounds dire, it’s because the situation is dire. Oxfam, the international humanitarian NGO, published its own report last week, detailing a dramatic rise in rates of inequality over the past twenty years in virtually every single major G20 country. The anger that animated 2011’s mass anti-austerity protests in Europe and the Occupy movement in the U.S. is backed by hard numbers. A snippet from Oxfam’s press release:

“The evidence is exploding the myth that governments can wait for economic growth to trickle–down to the poorest,” said Paul O’Brien, vice-president for campaigns and advocacy for Oxfam America. “Too many policy makers have their blinders on to the interests of poor people. It is having devastating impacts, not just on the lives of the poor, but on our natural resources and economic prosperity overall.”

And while popular dismay with business elites and political leaders spawned global protest movements, it’s also led to nationalist backlashes at home that challenge the cosmopolitan dreams of the WEF’s supposed Global Shapers. A recent Pew Global Attitudes survey found that, twenty years after the dismemberment of the Soviet Union, significant majorities in a number of former Communist bloc states have fallen out of love with multi-party democracy and free-market capitalism, a damning repudiation of neo-liberal intellectuals in the U.S. who two decades ago trumpeted the end of history and the ascension of a global order built very much upon the Davos ethos.

From the plazas of Madrid to the maidans of New Delhi, democratic governments now face the wrath of the disenchanted. Corruption scandals and feckless political leadership fuel populist rage; countless ordinary citizens, such as those protesting for months in Greece, grew outraged that their democratic rights and the social contract wrought in Athens were being undermined by the vagaries and imperatives of unaccountable international institutions abroad. The German magazine Der Spiegel writes of a noticeable hard-right turn in parts of Eastern Europe and a general disillusionment overall with the liberal project of the European Union:

It’s not just the fragile economies that are at risk. Many central and southern European societies also lack political and social stability. These regions have two decades of uninterrupted reforms and tough austerity policies behind them. Many people there are exhausted, and democracy fatigue, euroskepticism, and aversion towards the once deified West are on the rise.

“In many respects, it’s a process similar to the disillusionment in Eastern Europe with socialism in the 1970s and 1980s,” says Hungarian economic scholar and publicist László Lengyel. “The danger of this is that entire social classes or regions like those in eastern Poland, Slovakia and Hungary fall victim to hopelessness and extremism.”

This is brought into particularly stark relief by the relative success of other political and economic models. For all those who claim that China’s embrace of capitalism would lead inevitably to democratic reforms, the proof has yet to emerge in any sort of pudding. Published in time for Davos, the Economist ran a special report on the vitality of state capitalism — as seen in authoritarian and quasi-authoritarian countries like China and Russia, and even to a degree in democracies like Brazil and India — with the growing influence and clout of Chinese state-run companies becoming increasingly apparent in every corner of the globe. The report’s author, Adrian Wooldridge, writes: “The era of free-market triumphalism has come to a juddering halt… State capitalism increasingly looks like the coming trend.” Ian Bremmer, head of the Eurasia Group, a global consultancy, and now known for being the town-crier of “the end of the free market,” explains the key logic behind state capitalism this way: “The ultimate motive is not economic (maximizing growth) but political (maximizing the state’s power and the leadership’s chances of survival).”

That shift in calculus and political emphasis is a serious challenge to the global do-gooders at Davos, made all the more tricky by the seeming inability of many democratic, liberalized countries to reconcile the dilemmas of international crises alongside the concerns of national politics. A blogger writing on the website of the Washington-based Institute for Policy Studies suggests Davos, with its desire to promote “dialogue and leadership”, can provide a vital platform to curing the rot:

A summit focused not on growth and competitiveness but on practical steps on issues such as debt reduction and institutional reform would be a good first start. Central to this must be real attempts to tackle the ‘seeds of dystopia’ at their source – even if this means asking difficult questions and hearing uncomfortable answers in the major financial capitals of the world.

Those “practical steps” won’t emerge from this week’s WEF meeting. But one can safely assume there will be a lot uncomfortable questions aired — if not answered — behind Davos’s closed doors.