Clouds Over Davos

Every year, heads of state, top corporate executives, and thought leaders gather for the annual meeting of the World Economic Forum in Davos, Switzerland. Three big storm clouds hang over this year's summit—providing a fitting backdrop for the global elite to mull the challenges now roiling societies around the world.

First, domestic politics has forced a number of world leaders to abandon their Davos plans. These high-profile absences speak to a broader trend: the tenets of open borders, free capital flows, and global competition long favored by the Davos crowd have undermined political stability.

Here's a look at who is not attending and why:

  • US President Donald Trump canceled his trip as a government shutdown over a border wall intended to slow the flow of migrants across the southern US border enters its thirty-second day.
  • UK Prime Minister Theresa May is still dealing with the aftermath of a failed Brexit vote last week. In voting for Brexit, Britons rejected the idea that interconnectedness is an undeniable force for good.
  • French President Emmanuel Macron continues to grapple with ongoing Yellow Vest protests, a movement of middle class anger and angst that reflects the contribution of hyper-globalization to increasing national inequality.
  • And Chinese President Xi Jinping opened a meeting on Monday of Communist Party officials from across the country on the management of economic risks, as new data showed China's economy growing at its slowest pace since 1990 (see graphic below). Xi is under growing political pressure at home as he contends with US protectionism.

Second, the global economic outlook is starting to sour, in part due to the US-China trade conflict. Disruptive competition rather than productive cooperation is now the name of the game.

  • The IMF announced yesterday that the world is expected to grow at a slower clip over the next two years.

Third, world leaders are grappling with a slew of deepening structural challenges. Inequality, climate change, and technological disruption are among the topics that the decision-makers gathering in Switzerland will struggle to get to grips with this week.

  • On inequality, a new report from Oxfam – released to coincide with Davos – shows that the world's 26 richest people own as much as half the planet's people. Addressing such large disparities may require coordinated action at the global level – some, for example, have proposed a wealth tax. But despite their profound impact, there's little sense of urgency to act on any of the issues.

In Davos, the party goes on. But each passing year leaves us with less confidence that openness to the free flow of ideas, information, people, money goods and services is destined to continue.

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First came Crimea. When the Kremlin decided in 2014 that Western powers were working against Russian interests in Ukraine, President Vladimir Putin ordered Russian troops to seize the Crimean Peninsula, which was then part of Ukraine. Moscow claimed that Crimea and its ethnic Russian majority had been part of the Russian Empire for centuries until a shameful deal in 1954 made Crimea part of the Ukrainian Soviet Republic. Americans and Europeans imposed sanctions on Russia. But Ukraine is not part of NATO or the EU, and no further action was taken.

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How is coronavirus jeopardizing the legitimacy of a 2020 presidential election?

Well, what coronavirus is doing is a lot of states are worrying about people who aren't going to want to come to the polling places in the fall, and they're worried about a shortage of polling workers who are going to want to come out and volunteer to get sick by interacting with a bunch people in person. So, what they're doing is they're looking at making a shift to vote-by-mail. Most states allow some form of absentee balloting today. Five states just automatically mail you a ballot and they don't do any in-person voting. But the challenge here is that a lot of states are unprepared for the sharp increase that's expected. In the last election, 25% of ballots were cast by mail. You may see 50, 60 or even more percent of ballots cast by mail this time, which could overwhelm election administration, which happens at the state level.

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The United States and the European Union have comparable population sizes, but their COVID-19 death toll trajectories have diverged. As of July 8, the average number of new deaths every three days in the EU had fallen 97 percent since peaking at the beginning of April. The US number, however, has fallen only 67 percent over the same period. That means that although both regions' death tolls peaked with only two weeks difference, the EU has flattened its COVID-19 fatality curve faster than America. Some experts attribute the difference to EU countries' more robust public health systems and better compliance with mask-wearing and other social distancing measures.