Look back at Davos 2024: A shift towards the centre, the Red Sea and AI

Mon 22 Jan 2024
Posted by: Richard Cree
Trade News

Davos

The Annual World Economic Forum (WEF) meeting in Davos, Switzerland brings together the global elite for serious debate and intelligence gathering.

The get together can be painted in different ways, with the line you take depending on your perspective on the role and value of Davos. 

The sceptics’ view is somewhat boosted by forecasts made (or rather missed) at recent gatherings, with the event having failed to forecast most major global shocks, from the 2008 financial crash to Brexit and the Covid-19 pandemic. The last is particularly alarming as by the time the 2020 meeting closed, cases had already been confirmed in the US, France, Japan, Singapore, Thailand and South Korea, as well as most provinces of China.

Those with a less cynical view would say that Davos is a chance for some of the world’s leaders across the political, business and technology sectors to meet, share ideas and debate crucial topics.

Either way, the last week saw a plethora of panels and speeches by world leaders, all sharing their perspectives on where they think the world is heading in 2024.

Radiating positivity 

The overall tone of this year’s event has been one of positivity about the state of the global economy, but it’s an optimism overshadowed with fear about the potential fallout from rising geopolitical tensions and upheavals.

If many in Davos are relieved the world’s major economies appear to have avoided outright recession in 2023 and are heading for “soft landings” in 2024, they also see dangers ahead with several regional conflicts having the potential to escalate and interrupt global trade and the world economy.

Red Sea mist

A consistent theme at this year’s event was the potential impact of the current conflagration in the Middle East and its knock-on effect on trade, as shipping in the Red Sea continues to be disrupted by Houthi rebel attacks.

Former governor of the Bank of England and current climate crisis finance guru, Mark Carney, offered a pithy take on the impact this will have.

“The world is being rewired,” he said.

“Our trade routes are being rewired through de-risking of supply chains, while energy systems are being rewired with addressing climate change.”

Carney added he expected supply shocks should be expected with a “relatively high degree of certainty”.

For WTO director-general, Ngozi Okonjo-Iweala, the Red Sea crisis, combined with events in the Panama Canal, means the world economy will struggle to hit the WTO’s forecast for growth for this year. But she claimed the current geopolitical uncertainties were not necessarily a reason to turn to solutions such as nearshoring or isolationism and protectionism.

Rather it was time for a more positive rethink about how globalisation works, with a new model for trade that offers a more even share of the benefits.

She said:

“The reason globalisation got a bad name is because poor people in rich countries were left out, and poor countries or developing countries were at the margin.

“We need to think of globalisation not in the way it was done before, but differently. And we need to make sure that those who did not benefit during the first round benefit this time. In the new paradigm, we don’t want to repeat the same story.”

Focus on the bigger picture

For his part, UN secretary general, António Guterres, warned that the current geopolitical divides can’t be allowed to get in the way of the global search for solutions and responses to major challenges such the climate crisis or artificial intelligence. He called for reforms to global governance systems.

The potential dangers from the misuse of AI in the various elections being held this year was a regular topic throughout the event. The lack of a coherent set of global governance rules for AI, despite UK prime minister Rishi Sunak’s AI summit in November last year, and the fear of the power of misinformation and deep fakes was a concern voiced in several sessions.

European Central Bank (ECB) president, Christine Lagarde, warned the meeting not to expect normality in the near future. “What we’re heading towards is not normality” she said.

Later, when asked about the impact of a second Trump presidency Lagarde suggested the best defence against Trump was for a stronger European single market:

“The best defence, if that’s the way we want to look at it, is attack. To attack properly, you need to be strong at home. So being strong means having a strong, deep market, having a real single market.”

Financial upside

While the early part of the meeting was dominated by politicians and the gloomy and uncertain state of geopolitics, the last couple of days were focused more on finance where the tone got distinctly more upbeat. Several leading bankers reported they’re looking forward to a more positive year in 2024.

Many expect to see interest rates around the world start to come back down from the middle of this year and – as the cost of borrowing starts to drop – many expect to see a pick-up in corporate activity, notably in mergers and acquisitions (a major source of income for investment bankers).

Global M&A activity dropped as dramatically as interest rates went up in recent years. The lack of funding has meant fewer buyers, which has meant lower valuations for those looking to sell. So many VCs hope for a change in 2024, as the M&A market gets its mojo back.

In an an entertaining piece from the FT, Gillian Tett sat in on a discussion at Davos with rapper will.i.am, who made the case for AI as a tool for levelling up.   

Shift towards the ‘centre’

For some, a focus on popular issues such as the climate crisis and diversity are signs the event has been “captured” by the left. Semaphor offered a fascinating “scoop” that World Economic Forum (WEF) leaders had been urged to move away from the left and back towards the centre.

Looking at the roster of speakers and events at this years Davos, which included a high voltage show from Argentina’s new president Javier Milei, it might well be that the organisers had listened to those criticising previous meetings, which range from Washington Republicans to the Gulf states that underpin the event’s finances.