The World Economic Forum launched its seventh Global Risks report before this year’s annual meeting in Davos. The top risk this year, among the 50 most pressing risks based on a survey of 400 top business leaders, is income inequality and its associated economic and political risks. The report aptly summarized this risk as the “risk of dystopia.”
In this year’s Davos, several public and private discussion panels focused on the fragile states of the world, the weakest link in this potential dystopian world. Questions were raised on what the business sector, national governments and multilaterals could do to improve situations in these countries.
Whether the growth and political leadership in the emerging economies such as China would be strong enough to reduce this risk for the world was another hot topic. Last Wednesday I moderated a panel titled “The Next Context of China” where we had a lively discussion on this topic. Professor Canrong Jin from Beijing discussed his concerns about growing political populism in Chinese politics driven by the use of social media, as well as his confidence in the increasingly collective political decision-making process in Beijing. Professor Niall Ferguson, another panelist, put China’s growth into a historical context and argued that the country’s recent economic growth is not a “reemergence story” as the traditional wisdom holds but a sudden and rapid rise that needs much attention in order for the world to benefit from this development and to minimize the consequent geo-political risks.
Questions on emerging economies also occupied much of the bandwidth at a “Meet-the-Leader” session on Thursday, where I introduced World Bank Group President Bob Zoellick and moderated the discussion. I walked away from this off-the-record discussion with several new ideas to pursue.
A key factor related to emerging economies and global political risks, including the extreme risk of worldwide dystopia, is the conflict between governing and economic models. Early Friday morning, at the Japanese Business Breakfast organized by the Japan Association of Corporate Executives, I joined a debate with Ian Bremmer, a friend and the President of the Eurasia Group, on the role and impact of state capitalism. Ian holds a more critical view than I do on the danger of the state-led growth model. Several Japanese leaders shared their experience, as foreign investors in China, of being able to work with the state-directed system and to reap mutual economic benefits. Ian and I had different views primarily on whether the so-called state capitalism is economically or politically driven. Nevertheless, we agreed that in today’s globalized world—where domestic decisions have cross-border implications—more needs to be done to reduce the tensions and risks arising from such models.
The 2012 Davos meeting carried a distinctly different tone from last year’s gathering. My memory of last year’s Davos was largely confusion, and a somewhat unrealistic desire that emerging economies and political leadership would carry the world out of recession. This year, while the economic crisis has entered into its fourth year and bad news still abounds, the business sector even in the advanced economies seems to have gotten ready to move forward, with or without neat political solutions and strong political will that people were hoping for. In this crisis-fatigued world, while politics continues to be paralyzed in much of Europe and in the pre-election United States, the emerging economies and much of the business world seem to have come to the conclusion that life needs to go on, and that investment decisions need to be analyzed and made.
The streets of Davos have never been more treacherous, after a two-meter snowfall, the heaviest in 66 years. Davos delegates, instead of being snowed in, put on their crampons, braved the slippery pavements and went on about their business between the Congress Center, the Belvedere Hotel and other locations. Economic and political risk factors, like the particularly slippery paths in Davos this year, need to be analyzed and dealt with, rather than feared. This, as I board the Glacier Express with the town of Davos fading into the snowy mountains, gives me a glimmer of hope that the world is going to avoid dystopia and that 2012 is going to be a better year.