A lot of “megathreats” interconnected put the near future in jeopardy. That is the conclusion left by the Davos World Economic Forum, although the global economy has managed to fly before the precipice that generated the Russian invasion of Ukraine. 2022 was a difficult year. The war caused a jump in inflation that impoverished households around the world in real terms. And inflation is here to stay in Europe and Latin America (the Argentine government was absentbut there was a Latino panel with Fernando Haddad, Guillermo Lasso and Gustavo Petro), according to the unanimous consensus of 22 high-level economists surveyed by the World Economic Forum, which organizes the meeting of politicians and businessmen in the Swiss city.
57% believe that inflation will remain high in Europe and South America. But 76% believe on the other hand that inflation will stay the same or fall in the United States: the US Treasury Secretary, Janet Yellen, insisted this week that energy prices and supply chain problems are on the decline around the world. And the consumer price index fell in December in the US to 6.5%, from its peak of 9% in June: the pace of disinflation will be crucial in 2023 for markets to recover in the world. But for the most pessimistic, the subdued inflation of the pre-pandemic period has given way to high inflation that will lead to a period of stagflation: negative aggregate supply shocks combine with the effects of lax monetary and fiscal policies. Where interest rates were previously too low, or even negative, they are now rising rapidly, raising borrowing costs and creating the risk of a cascading debt crisis.
The era of hyperglobalization, free trade, offshoring and “just in time” supply chains has given ushering in a new era of deglobalization, protectionism, reshoring, safe trade and supply chain redundancies. In addition, new geopolitical threats increase the risk of hot and cold wars, and further balkanize the global economy. Added to the fact that the effects of climate change are becoming more severe and at a much faster rate than many had anticipated, and that it is also likely that thePandemics become more frequentvirulent and costly, the scenario is one of permanent alert.
Meanwhile, advances in artificial intelligence, machine learning, robotics, and automation threaten to produce more inequality, permanent technological unemployment, and deadlier weapons with which to wage unconventional warfare. All these problems are fueling a backlash against democratic capitalism and empowering populist, authoritarian and militaristic extremists on both the right and left, around the world. The “megathreats”, is what the Financial Times recently named as “polycrisis”, the new buzzword in the world of global finance.
Kristalina Georgieva, managing director of the International Monetary Fund, speaks of a “confluence of calamities.” The economist she warned that the world faces “perhaps its biggest test since World War II.” Similarly, former US Treasury Secretary Lawrence H. Summers argues that the entire planet faces the most acute economic and financial challenges since the 2008 financial crisis. And in his latest global risks report, published just before the elites met in Davos to discuss “cooperation in a fragmented world”, the World Economic Forum warned of the landing of “a unique, uncertain and turbulent decade to come”.
with that dark horizon, Davos left a general agreement that there are unprecedented levels of uncertainty, unusual and unexpected. In the short term, economists and businessmen agree that we can expect more instability, greater risks, more intense conflicts, and more frequent environmental disasters.
In his great interwar novel, The Magic Mountain, Thomas Mann portrays the intellectual and cultural climate – and the madness – that led to World War I. Although Mann began his manuscript before the war, he did not finish it until 1924, and that delay had a significant impact on the final product. His story takes place in a sanatorium that was inspired by one he had visited just in Davosthe same place on the top of the mountain (the Schatzalp hotel) where the galas of the World Economic Forum.
This historical connection is prophetic: The current climate of crisis is much more like the tragic 30-year period between 1914 and 1945 than the 75 years of relative peace, progress and prosperity after World War II. And it was these crisis conditions that underpinned the rise of fascism in Italy, Nazism in Germany, and militarism in Spain and Japan, culminating in World War II.
The current scenario adds climate change, the threats of AI to employment, and the implicit responsibilities associated with the aging of society: social security systems are on the verge of collapse, as evidenced these days by Emmanuel Macron’s proposal to delay retirement ages. Concern shared by the President of the European Commission, Ursula von der Leyen, who highlighted the Davos: “The next decades will see the greatest industrial transformation of our times, perhaps of any era”, and marked the need to create a completely new “regulatory environment”.
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