SEATTLE — Established in 1971, the World Economic Forum is a nonprofit foundation which unites global leaders to foster public-private cooperation using the stakeholder theory. This theory holds that each group impacted by the actions of an entity are necessary for the success of that entity, not only the capital investors. The 2017 forum in Davos, Switzerland brought up several prominent issues, including globalization, protectionism, market reform, and automation.
Xi Jinping, President of the People’s Republic of China, shared his views on globalization. President Xi views globalization as following the “historical trends” of the world and urged the pursuit of a communitarian, stakeholder-focused path towards economic development. He promoted a vision of economic liberalization and denounced the prospect of a protectionism-driven trade war as a zero-sum game.
Given the namesake and early history of the Chinese Communist Party, President Xi’s stance on global economics is surprising. Given the heated anti-trade rhetoric of the 2016 U.S. presidential election and the Trump administration’s recent scrapping of the Trans-Pacific Partnership, this creates an even more intriguing dynamic between the two countries.
Anthony Scaramucci, a former Goldman Sachs investment banker turned entrepreneur and senior advisor to President Trump, described the intentions of the U.S. in the global community. Scaramucci described an administration seeking “free and fair trade” without starting a trade war with China and described the need for increased global purchasing power to increase trade flows.
The idea of increasing purchasing power around the world could be taken as a reference to fighting global poverty. If the global poor were to gain increased purchasing power, they would be able to afford relatively expensive American-made goods, a goal which aligns with the Trump administration’s stateside job growth strategy.
Much of the anxiety in the U.S. today is due to the 2008 Global Financial Crisis, an event which took a toll on much of the country. As a result, people living in industrialized countries around the world face what is called secular stagnation, which translates into not having experienced economic growth seen since the 2008 crisis. Part of the World Economic Forum was devoted to issues surrounding this secular stagnation.
The solution is seen as coming from a reform of market capitalism as it exists today. Income inequality and austerity measures are cited as the major causes of the problem, along with the decline in labor union membership. Measures to invest in public education and jobs are cited as necessary for the future of the increasingly digital economy. These measures would increase the purchasing power of people around the world in both industrialized and developing countries.
With the ever-increasing digitalization of the world, the Fourth Industrial Revolution is understood to be a major source of change. This concept describes how increasingly-automated societies lead to increased unemployment as technology replaces the work done by humans. The conversation at the World Economic Forum included ways to eliminate gender inequality by encouraging women to get involved in science and technology industries, as well as cross-train to provide redundancy in the event of automation replacing their work.
Discussions of market reforms and policies like universal basic income are becoming more prevalent, and we will soon begin to see the effects of new redistributive wealth policies in many countries around the world. If world leaders in business and government truly embody a stakeholder approach to development, opportunities to fight poverty will present themselves hand-in-hand with good economic policy.
– Lucas Woodling