"Trying to forecast the state of the world each year by gauging the mood of participants at the annual meeting of the World Economic Forum in Davos is as valuable an exercise as flipping a coin.
That long-held suspicion was confirmed by an analysis in the Financial Times last week. Scouring data from a half-century of Davos conferences, it found that the consensus of the elites who gather there every January is almost exactly as likely to be wrong as right.
This will come as no surprise to Davos skeptics. It is explained in part by the increasingly monolithic ideology of the talks -- a range of views equivalent to the range between the 45-yard lines on a football field. This year there was less dissent than ever from the plutocracy's orthodoxies, and the loudest voices were those of the self-adoring establishment left.
These included a ludicrously performative rant on climate change by Al Gore, a claim by John Kerry that his all-seeing global wisdom was "extraterrestrial," and the usual procession of tech, financial and other CEOs wagging their expensively manicured fingers at the rest of us and our sinful ways.
The curious story of how the world's business leadership became married to progressive ideology is one for another time. The challenge for now is to assess whether 2023 is a year when the mood is predictive or a contraindication. If I were a betting man, my money would be on the latter.
Almost everyone agreed that across a broad range of risks, things were looking up this year compared with a few months ago: There was rising optimism about a soft landing for the economy, or at least that any recession would be short and shallow; expectation that China's economy will re-emerge with benign force, helping bolster growth and reduce inflation; self-satisfaction that the scary tide of populism is terminally receding, with Donald Trump down and Brexit discredited.
There's room for skepticism on every point.
The soft-landing story looks like a continuing example of the triumph of hope over experience.
Inflation may be down, but with real wages flagging and labor markets still tight, getting the inflation rate from the current 6.5% year over year to the Federal Reserve's 2% target looks as daunting as ever. The odds are still high that some time this year the Fed is going to have to choose between settling in for a long Volcker-like squeeze or accepting an inflation rate higher than it wants in the face of mounting layoffs and broadening pain.
This Stagflation Revisited picture is made only more vivid by the great China reopening everyone is celebrating. The optimism focuses on the idea that an open China will further ease supply-chain pressures and cool inflation while adding to growth. But there's an alternative view -- that China's reopening will be like America's after the pandemic, with pent-up consumer demand flooding still-tight supply and pushing up costs.
Then there's Ukraine.
The Germans' last great tank battle was at Kursk, near the Russia-Ukraine border, in 1943. They lost to the Red Army. The current German tank battle is mercifully only diplomatic, but Berlin has learned its history. Its reluctance to send Ukraine their Leopard 2 tank stems from fears of the image of armored vehicles bearing the iron cross of Germany rolling across the Ukrainian steppe toward Russia. This isn't mere historical German self-loathing. It underscores the continuing ambivalence about the North Atlantic Treaty Organization's support for Ukraine. The alliance wants to help Kyiv but it wants to do so without getting into a war with Moscow.
The Germans may be right that pouring more NATO materiel into the fight isn't the best way to avoid escalation.
The largest flaw in the thinking of the Davos globalists is that the world belongs to them again.
Much was made of the spectacle of Liu He, the Chinese vice premier, promising a new era of cooperation with the West. But the olive branch was familiar, and Mr. Liu's own economic liberalism may not last longer than his own term -- which ends this year.
The deeper reality is the continuing reversal of the globalization the Davos crowd helped create and whose excesses they promoted.
The nearest thing to a genuine rift last week was over U.S. trade policy. Sen. Joe Manchin found that he is about as unpopular in Western Europe as he is in West Virginia. He spent the week defending last year's so-called Inflation Reduction Act, which has enraged Europeans for favoring American-made green energy.
The Biden Democrats seem to be continuing the policies they derided under Donald Trump in other ways as well, including the Chips Act and restrictive measures against technology trade with China.
Whatever happens in 2023, the longer-term story is this: the U.S. is pursuing a bipartisan America-first approach to global economics; in Europe, a new Iron Curtain has descended a few hundred miles east of the old one; in Asia, a demographically challenged China looks inward and threatens outward.
They still don't see it, but for the globalists, it's the glimmer of twilight: "Never glad confident morning again!"" [1]
1. Free Expression: The Davos Crowd Sees a New Dawn, but It May Be a False One
Baker, Gerard. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 24 Jan 2023: A.15.
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