So far, globalization has been celebrated at the World Economic Forum in Davos. But this year the atmosphere is very different. The Europeans are being challenged by the US and China – and they don’t know how to react.
A few years ago there was a dictum in Davos: “inclusive growth”. It was about the kind of growth that Ludwig Erhard once so aptly described as “prosperity for all”. In the years around 2016/2017, many CEOs and politicians sensed that globalization was threatening to fly in their face. Over the decades, this had reliably brought a lot of prosperity for many people and lifted hundreds of millions of people out of poverty into the middle class, especially in Asia – but the picture was more mixed in the old industrialized countries.
In this respect, the World Economic Forum has always been a mirror of the state of globalization – Donald Trump made a grim appearance there in 2017 – but also a haven for those who, despite all the problems and inequalities, were convinced that global networking and the division of labor were a good idea.
And so this year in Davos the state of globalization was inspected, although the motto of the conference did not bode well: “Cooperation in a fragmented world”. Somewhat more optimistically, one speaks of a “multipolar world” – a world that does not split into two blocks as it used to, but does not continue to grow together, but rather splits into somewhat diffuse spheres of influence. And companies that operate globally would do well not to get caught between the fronts.
But what were the findings and lessons? What will become of the declared dead globalization? One should start with those who are still looking ahead. Davos has always been a symbol for the shifts in the world economy, which can be seen from those who presented themselves in ever larger pavilions and houses: Indonesia, Malaysia and above all India. Ever since China has been surrounded by more and more question marks, India has once again been regarded as the great hopeful market.
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On the big promenade in Davos, where all the shops and restaurants will be cleared out and renovated during the World Economic Forum, India presented itself not just once, but several times: A province like Telangana, which is probably relatively unknown to Europeans, advertised investments, tech companies like Wipro or Infosys lined up between the houses of Salesforce, Amazon and SAP. The party of the IT consultants from Tata Consultancy Services, years ago still an insider tip, has long been a must (with the best location). The United Arab Emirates also advertised on a white low-rise building with the claim “Impossible is Possible”. Next to the Uber house, Neom, the gigantic desert fantasy of Saudi Arabia, proudly presented itself.
So could it be that the world is perceived very differently in these regions? So is it the “old west” that is only fixated on the signs of decay? Europe has almost said goodbye to the promenade for years; Greece and Poland excluded this year. This year, the Germans had the chancellor and two ministers, Robert Habeck and Christian Lindner, as participants. Olaf Scholz’s speech, however, caused a shake of the head and astonishment given its dullness and colorlessness. Scholz actually listed the new LNG terminals and cubic meters individually in front of the world elite – “This is the new German speed!”.
But what can Indians and Arabs do with names like Brunsbüttel and Lubmin? The small states like Finland, the Netherlands and Belgium are more present and skilful – and one has to admit: they present themselves as smarter – not only because their government representatives mostly speak fluent English.
The Belgians even invited to an event entitled “Repowering Europe’s Industry” as if they were the powerhouse of Europe – and waited with industry giants such as Aditya Mittal, the young CEO of the steel group ArcelorMittal and Ilham Kadri, the head of the chemical group Solvay, as guests . Mark Rutte, Prime Minister of the Netherlands, went on panel hopping and summed up Europe’s challenge in a panel session with ECB boss Christine Lagarde and Deutsche Bank boss Christian Sewing: “I don’t want Europe to become a museum .” Europe, he said, must be “a player and not a playing field” in the new game of globalization – and act on an equal footing with the USA and China.
“Skillful and Clever”
Which brings us to those powers that determine world events – but which were hardly represented in Davos. The newly opened China sent Vice Premier Liu He, who politely promised China’s return to the world community. In 2017, Xi Jingping had personally presented himself as a substitute playmaker for globalization in Davos, as the country’s first head of state in Davos. At the time, he used the vacuum that the United States had created under Trump and formulated a claim to leadership for all those who still believed in free trade and cooperation. “We are a community of destiny,” Xi said at the time. All countries are dependent on each other. “We have to say no to protectionism.” You know how the story went.
Which brings us to the United States, which this time was essentially not represented by its government. A few senators and second-tier figures, a pale John Kerry – but no minister of any weight, no vice president or even president. It was almost an affront that Finance Minister Janet Yellen met Deputy Prime Minister Liu in Zurich at the same time, but did not come to Davos. An abbreviation was omnipresent for this: IRA. The US “Inflation Reduction Act” whose name is misleading. It has long been understood as a challenge to the world, as the formula “Climate protection plus ‘Buy American'”.
But more and more voices are saying that one should not be unsettled by the IRA or even respond with angry protectionism. The economic historian Adam Tooze, who is well wired in the traffic light government in Berlin, spoke of a “real mood of panic” in Europe: “Everyone says: Oh God, the Americans! They are destroying our industry with their protectionism!” The intensity surprises him.
The US, says Tooze, is always “the contrasting foil for Europe.” At first people were happy that the Americans now want to invest hundreds of billions in climate protection. Now people in Europe are amazed at how “quickly, big and ruthlessly the USA is pulling the whole thing through”. With a volume of almost 400 billion dollars, the IRA has been “the largest industrial policy response to the global climate crisis”. According to Tooze, Europeans must learn to pursue their own interests like the Chinese and Americans, but “skillfully and cleverly”.
The Germany boss of the consultants Bain & Company, Walter Sinn, cautiously joins the chorus. He is a convinced market economist. But the IRA was “the right step from the US point of view. They are showing Europe how to do it.” And should Europe respond with its own industrial policy? “We have to,” Sinn said. “At the very least, the green transformation will become an important element of industrial policy.” That doesn’t mean that you have to invent new rules and regulations again. “But the emphasis of the IRA is not exaggerated. It is comparatively simple: it supports and incentivizes decisive investments. I think that’s a good industrial policy.”
Presumably, globalization is like Mark Twain: the news of her death is greatly exaggerated. It just follows different rules. Forces and energy fields have shifted. In addition, one should not idealize the past here either: there were interests and self-interests before – as long as the pie that could be distributed grew larger.