Davos: 'a whiff of decay' amid Red Sea fears, war fatigue and 'AI doom'

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It is not a new observation that business and political elites probably do themselves no favours by coming together at a building in the Swiss Alps, where Bond villain Ernst Stavro Blofeld would have a timeshare. But these days, with globalisation fraying at the seams, if not collapsing outright, discussion of steering us into a “new world order” appears less ominous and more out of touch.

BBC News economics editor Faisal Islam noted a “a whiff of decay” at the annual meeting, with “G7 leader appearances… getting rarer”, and cited Republican US presidential hopeful Ron DeSantis’s remarks that Davos represented a “threat to freedom.”

But Argentina’s newly elected president and self-described “anarcho-capitalist”, Javier Milei, took to the stage yesterday, apparently to express the opposite view. He told audiences western leaders had “abandoned freedom” in favour of “collectivism”,  and warned of the dangers of “collectivist experiments”, saying that “naive and well-meaning” world leaders would bring about “radical feminism, cruel environmentalism and a slide into socialism, and thereby poverty”.

“You are social benefactors, you are heroes, you are the creators of the most extraordinary period of prosperity we’ve ever seen,” he told his Davos audience. “Do not surrender to the advance of the state; the state is the problem. Long live freedom, damn it!”

Meanwhile among these distended and omnipotent states, disruptions in the Red Sea have been high on the agenda. Attacks by Yemeni Houthis on ships transiting the Bab Al-Mandeb strait, compelling shipping lines to re-route their vessels around the Cape of Good Hope, even as the US and European nations pledge naval and air cover, have dashed expectations of low interest rates and higher economic growth in 2024, with a Covid-like reduction in shipping capacity and equipment availability.

The “prospect of a wider spread of the conflict is… very concerning”, said Ngozi Okonjo-Iweala, director general of the World Trade Organisation, which projected a minor recovery in trade growth of some 3.3% in 2024, from 0.8% in 2023. She said her group was “less optimistic”, following the Red Sea disruptions, though it still expected 2024 to be an improvement.

Nicolai Tangen, CEO of Norges Bank, the manager of Norway’s $1.4tn government pension fund, told CNN it would be “very difficult to make money” in 2024.

“I think inflation will be difficult to kill off and we are seeing wage increases in many parts of the world. You see the climate impacting inflation, you see transport routes being impacted, geopolitics is not great, so it doesn’t look particularly good,” he explained.

And elsewhere, there are concerns that “fatigue” over continuing supply and support for Ukraine is liable to leave Russia with an advantage. In an opening speech this morning, Ukrainian businessman Victor Pinchuk called for greater support and weaponry, that the war was reaching “a moment of truth”.

He said: “In war it does not matter if you did a lot. It matters only if you did enough.”

The UK foreign minister, David Cameron, said Britain had “very clear agendas” for the meeting, of which Ukraine was the first.

“Ukraine’s security is our security,” he said in an X/Twitter video message. “If we let Putin win in Ukraine, he will be back for more, and that will affect us.”

Russia’s stance is one of uninterest in Davos, at least according to its communications with CNBC, reported today.

“Our business has not participated in Davos for several years. Therefore, our interest in this forum has decreased,” said Russian press secretary Dmitry Peskov.

Meanwhile, Salesforce’s Marc Benioff warned that a critical mass of AI adoption, unfettered by regulation and safety measures, would spell doom. He said: “We’re at a threshold moment.”

UK chancellor of the exchequer Jeremy Hunt, on the other hand, called for a “light-touch”, regulation-wise.