Donald
Trump is due to visit the World Economic Forum in Davos on 21 January.
Photograph: Drew Angerer/Getty Images
Davos 2020
should be all about climate crisis but Trump won't admit it
Larry Elliott
Subject was
not an issue at forum’s first meeting in 1971 but should now be at forefront
for US president
Sun 19 Jan
2020 12.49 GMTLast modified on Sun 19 Jan 2020 20.55 GMT
A protest
against governmental inaction over climate breakdown and environmental
pollution held in Lausanne, Switzerland, days before the start of the Davos
summit. Photograph: Stefan Wermuth/AFP via Getty Images
Richard
Nixon was in the White House, Mao Zedong was running China and Ted Heath was
the prime minister of the UK when hand-picked members of the global business,
academic and policymaking elite were first invited to a get-together in the
Swiss resort of Davos in 1971.
This year
marks the 50th Davos but there is not exactly a party mood. The World Economic
Forum, the body that organises the annual talkfest in the snow, is “committed
to improving the state of the world” but in key respects things look worse
today than they did at the start of the 70s.
Not in
every way, obviously. The percentage of the world’s population living in abject
poverty has come down sharply, largely because of rapid growth in China and
India. The gap between rich and poor within countries has increased over the
past five decades but inequality is not the same as destitution. Living
standards have risen, whether measured by incomes per head, life expectancy or
technical progress.
There were
no smartphones in 1971 and nor was there an inkling that they would be
manufactured in the economic superpower that China has become. Under Mao, China
was essentially a peasant economy and the reforms that led to industrialisation
and the migration from the country to the cities were still some way off.
Nobody had the slightest interest in China’s growth rate or its trade policy. A
small group of developed countries – led by the US – accounted for the lion’s
share of global GDP and called all the shots. That is no longer the case.
By the
early 70s, the long period of post second world war growth was coming to an
end. The Bretton Woods currency system, held together by the link between the
US dollar and gold, would collapse in 1971 as a result of the inflationary strains
on the American economy caused by the cost of the Vietnam war and higher
domestic spending.
The mood
music does not seem to have changed all that much. The 2020 Davos takes place
amid concern that a crisis is looming. It is more than a decade since the end
of the financial crisis of 2007-09 but the recovery has been tepid. Wage
growth, investment growth and productivity growth have all been poor. Financial
markets look dangerously overvalued.
So why is
the current state of affairs more troubling than it was in 1971? Well, for a
start there seemed a simple – if harsh – way out of the economic problems
associated with the end of Bretton Woods. Inflation, according to economists
such as Milton Friedman, was caused by profligate governments printing too much
money to pay for excessive wage settlements and public spending pledges. The
answer was to reduce budget deficits, to rein in the power of organised labour
and to give control of interest rates to independent central banks.
This was
broadly the system in place from the mid-1970s to the moment when everything
went pear-shaped in 2008. At that point, there was something of a crash
rethink. Interest rates were slashed, central banks pumped money into their
economies, budget deficits were allowed to balloon. Yet the strong and
sustained recovery that was expected has not happened. The main impact of the
extraordinary policy stimulus has been seen in asset prices rather than in the
real economy. In the event of another crisis, central banks look to be short of
conventional weapons.
Tentatively,
there are signs that fiscal policy – regulating the economy through tax and
public spending – is making a comeback. In Britain, the chancellor, Sajid
Javid, says interest rates are going to stay low for years to come, making it
possible to borrow cheaply for long-term infrastructure projects.
Clearly, the
money could be put to good use. The big, inescapable difference between the
1971 Davos and the one this week is the threat posed by the climate emergency.
A flick through Fritz Schumacher’s seminal 1973 green text – Small is Beautiful
– finds no mention of global heating. It simply was not a political issue back
then.
Now, of
course, it is. Each year the WEF asks a sample of experts and policymakers to
list the most likely risks the world will face over the next decade.
Unsurprisingly, against a backdrop of droughts, hurricanes, bushfires, melting
glaciers and a steady heating of the planet, for the first time the top five
threats are all environmental.
Klaus Schwab,
the founder of Davos and the WEF’s executive chairman, has written to all those
attending this year’s event urging them to commit to net zero carbon emissions
by 2050. An indication of how successful that appeal will be should come on
Tuesday when Donald Trump drops by.
What Trump
should say – but won’t – is as follows: the US recognises the existential
threat posed by global heating. It accepts that multilateral cooperation is
needed if the problem is to be tackled before it it is too late. As a
businessman, he is aware that no company could hope to survive if it depleted
its own capital in the way that humans are consuming natural resources.
To that
end, the White House is working on an ambitious plan for the climate change
summit due to be held in Glasgow at the end of this year. As the world’s
biggest economy, the US will commit to stringent emissions targets, commit to
renewable energy and bankroll a modern equivalent of the postwar Marshall Plan
to help poor countries make the transition to a low-carbon future. Why? Because
whereas the threat in 1948 was the spread of communism, now it is the much
greater danger that capitalism will eat itself.
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