Important socioeconomic reflections from Davos

The author of this blog post, Vladan Lausevic, discusses the most recent Davos summit, offering a good analysis of certain issues on economy and society.
The latest Davos summit was different from the previous ones, mainly due to recent discussions about globalisation and the US elections. The current political development in the USA was now seen as risky and potentially resulting in a negative impact on the further global economic and political development. For many, the surprising moment of Davos was that China was now representing itself as both defender and promoter of globalisation and global governance. “In 1989, China was saved by capitalism and in 2009 saved capitalism” sounded a joke some years ago. It had a connection with the global development taking place after 2008 despite it being more of a “Western” crisis.

2009-2014 was a period characterised by “emerging markets” as China and Brazil experiencing GDP growth while USA and EU were struggling with economic and social burdens. For example, China was during that period making large investments in EU and buying USA treasury bonds.

What can be concluded from Davos is that globalisation, regionalization of Europe and transnational development are under siege. From political actors that are sceptical, protectionist and promising solutions that see a return to closed national borders marketed by political communication that is nationalist, welfare statist, rejecting of immigration and human rights, and aspects of industrial society such as manufacturing.

Moreover, as historian Johan Norberg argues in his book Progress, globalisation is not a zero-sum game – it is a zero-plus game with much more “winners” than “losers”. For the last 25 years, it can be seen as a plus-sum game which has resulted in a more equal world and improved quality of life for many. The fourth industrial revolution with robotization and artificial intelligence is already taking place. This means large structural changes and that current policies are not going to be enough and cannot “save” or “bring back” American jobs.

The debate about globalisation is framed as a political struggle between “nationalists and globalists”. In reality, it is more complex. Socialists often favour more open humanitarian immigration, with right-wing populists often in favour of free trade. The truth is that the political divide is presented as global but it is a Western crisis based on perceptions of identities constructed around the industrial society, nation-state and welfare policies.

From Davos it was assumed that globalisation is at a low ebb in the USA and EU. This raises the question of how to deal with the issue of ‘winners’ and ‘losers’ of globalisation. One solution raised during the summit was the idea of universal basic income. When the debate started in Europe during the 1980s it was often seen as being impossible and absurd. Today such debate is becoming popular with supporters having affiliations ranging from libertarians to Marxists. This creates common ground for compromise and policy solutions. The idea of a universal/basic income presents the opportunity to reform welfare states around the world, especially in Europe. The future of the welfare should be based on reducing costs of administration, simplifying current programmes and making payments easier. Finland is already testing the idea by providing 560 Euros every month to 2000 participants during a two-year trial, with the aim to learn how to avoid both the benefit and administration traps.

Additional benefits of having basic income policies as cornerstones of the future welfare system would also deal with processes of further integration, digitalization and automatization, creating a higher degree of social security, wellbeing and trust among the citizens. Further potential exists to use something similar to replace traditional aid policies. Labour migration has already been proven to be more efficient at reducing poverty than government payments. It also mitigates the issue of money aimed at reaching those in need instead reaching corrupted political actors.

Therefore, wealthier states or regional actors like the EU could start implementing ‘give direct’ policies where money is, for example, provided to NGOs, able to redistribute the money in order to directly improve conditions for local populace as well as stimulate local economies. It also minimises the risks of corruption by being under responsibility and influence of residents. One example of similar policy can be seen in Turkey where the refugees from Syria are being provided pre-paid credit cards from the EU to go towards in order to be used for basic needs. This would also have the impact on reducing the humanitarian migration movements by improving the local conditions in large parts of Africa.

Davos surprisingly offered several analyses about the current problems and challenges facing the world, as well as solutions. In these times, people are responding in different ways based on their values and experiences. The current political struggles are not only between left and right, optimists and pessimists. In this, liberals must always be the ones who say “we believe in the future”.

Vladan Lausevic

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