Davos in the Age of Geopolitics

 January 26, 2014

The 2014 annual gathering of the world’s business and financial elite in Davos was initially supposed to consider major issues of our time, such as inequality and climate change. I say consider and not debate because one cannot rationally expect a serious discussion of possible ways to tackle inequality at a conference which reunites its chief promoters.

At least equally important would have been a debate about the threat of secular (or great) stagnation, whose specter is hovering over Japan, USA and Western Europe and seriously harming the export potential of emerging countries’ economies. The polichinelle secret is that the West’s insistence on plunging the world into fully-fledged economic and political liberalization has backfired badly. It is now in the process of spewing instability, revolutions and regional armed conflicts around the world. Sadly, the global liberalization agenda looks today every bit as utopic as the communist blueprint had been in its time.

Instead of global economics, Davos guests have had to busy themselves with current geopolitical developments. Of course it isn’t easy to talk about a global economic recovery when only profits and share prices are on the rebound, when middle class incomes have at best remained stagnant or have at worst been drastically reduced (as in Italy, Spain, Greece, Portugal or Ireland) and unemployment is high. Global demand remains stubbornly sluggish, a sure sign that Adam Smith’s “trickle-down” effect has failed to work, yet again, in the absence of resolute government-led redistribution policies. This is why leading economists are as yet loath to call this a full economic recovery. Progressive economists concentrate their attention on recommendations for diminishing inequality, alleviating poverty and boosting aggregate demand. As always, the orthodox ones are engaged in defending austerity and low taxes, however disastrous the consequences.

The center stage at the Davos conference, therefore, was taken up by political leaders hard-pressed to deal with intricate geopolitical developments in their respective regions. The Ukrainian prime minister thus took pains to explain why the two-month unrest that followed President Yanukovych’s refusal to sign a trade deal with the European Union was about to turn ugly in Kyiv. Shinzo Abe, “the troublemaker”, did not miss the opportunity to blast China’s bellicose stance – and vice versa from the Chinese delegation’s side. In a CNN interview, the Egyptian prime minister defended the brutal repression of the Muslim Brotherhood and even had the cheek to compare General Al-Sissi’s potential candidacy to the presidency with those of General De Gaulle’s or Eisenhower’s. (Following his incredible televised performance, one is left wondering just when did the latter order the army to open fire on their own citizens in order to qualify for the top job ?) Syria’s elusive peace talks and potential political future were discussed by newly-elected President Rouhani of Iran, even as the peace negotiations next door in Geneva were apparently leading nowhere. Meanwhile, the civil war raging in Syria is spreading to Lebanon and Iraq. Ethnic and tribal conflicts are engulfing chunks of Africa, from Mali and Central Africa to South Sudan. For the first time in a long while, the West seems neither willing nor able to foster peace in all these regions, diplomatic and military efforts notwithstanding.

Alas, this is a far cry from the rosy “one-world ecstasy” scenario from Francis Fukuyama’s End of History best seller. For over a decade now, both history and geopolitics have been back with a vengeance to interpret how old, new or hitherto frozen conflicts are tearing countries and societies apart.