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Does Donald Trump’s ascent to power in the US mark an end to the influence of Davos Man? This is a term invented by Samuel Huntington, the late political scientist, himself a participant at the annual meetings of the World Economic Forum in Davos, for a class of people he despised.
He argued that they “have little need for national loyalty, view national boundaries as obstacles that thankfully are vanishing and see national governments as residues from the past whose only useful function is to facilitate the elite’s global operations”.
So are we about to witness a decisive shift away from the aspirations of the WEF’s members and, if so, is this desirable? The answers are “yes” and “no”.
Core beliefs of the Davos creed have been global co-operation and economic globalisation. But faith in the latter was shaken after the global financial crisis of 2007-09. The ratio of trade to global economic output has stagnated since then, after doubling between the early 1970s and 2007. The stock of foreign direct investment continues to rise relative to world output, albeit slowly. But the stock of cross-border financial assets has declined outright.
This weakening of globalisation partly reflects the exhaustion of easy opportunities for global commerce and the feeble growth of demand since the crisis. But it also reflects shifts in policy: the post-crisis re-regulation of finance has had a pronounced home bias, with reduced support for cross-border activities. Trade liberalisation has stalled, while some studies already show a rise in protectionist measures.
Mr Trump’s inauguration as US president this week presages a marked tightening of the protectionist screws. The Trans-Pacific Partnership negotiated under his predecessor Barack Obama seems dead. The Transatlantic Trade and Investment Partnership is stillborn. More important, Mr Trump threatens to focus on bilateral deals, impose tariffs on imports from important partners, notably China and Mexico, and treat the World Trade Organisation with contempt. This approach could take us back to the kind of global trade-policy chaos that occurred between the first and second world wars.
At the same time, strangely, Mr Trump seems set on abolishing many of the regulations imposed on finance after the crisis. So Davos people could still take whatever financial risks they wanted but could no longer trade as freely in goods and services. Finding a rationale for this is impossible. It is a reflection of the intellectual incoherence characteristic of populism.
Yet make no mistake: Mr Trump could bring down the temple of world trade. If he were to impose punitive (and unjustifiable) tariffs on Chinese imports, the EU is likely to follow suit in order to protect its producers from a surge of Chinese imports. China would then feel obliged to retaliate. The system of trade rules could collapse.
So, too, could the very idea of a co-operative global system. Trade could be just one aspect of a bigger shift. If the US administration adopts the mindset of Vladimir Putin’s Russia — inward looking, narrowly self-interested and indifferent to moral norms in international relations — even a minimally co-operative global system could disappear.
This would be the end of the Pax Americana— the period of US hegemony since the end of the second world war. The world will not easily or quickly find a replacement for the US, particularly when similar populist and protectionist forces are at work elsewhere, notably Europe. Much of the work that countries still need to do together — tackling climate change or challenges of economic development — would become impossible.
This, then, could also be the end of a world managed for — and often by — Davos man and woman. Many will feel that might be no bad thing. But they should be careful what they wish for.
As has happened so often before, hubris led to over-reach. Davos people underplayed the role of legitimate and potent states in underpinning the global system. They forgot the need for the successful to recognise their responsibilities to the societies that had made their success possible. They ignored, above all, the obligation to share the gains of globalisation with its losers. The enthusiasm with which many of them seized opportunities to avoid paying taxes was disgraceful.
Some of the projects of the age of global economic liberalisation also went too far — notably heedless financial liberalisation, the imprudent expansion of the eurozone and encouragement of large-scale immigration. Citizenship might not matter that much to many Davos people, but it matters very much to many of their fellow citizens.
These mistakes, however, are not nearly as bad as those likely to be made by the new populists. Davos people are in business: they do not wield the instruments of mass coercion, but rather seek to engage in mutually enriching commercial transactions and believe in the desirability of a peaceful and essentially co-operative world. Elites far more brutal, stupid and damaging than this can all too easily be imagined.
The populist reaction might have become inevitable. But it will not lead to a better world, even for those who support it. Yes, policymakers should have paid more attention to what was happening to ordinary citizens, but the simple-minded populism now on the rise will soon prove far worse than the hubris of the Davos elite.