Davos: A World Upside Down
Davos 2017 was an unfamiliar and uneasy scene. The specter of populism loomed large, given Brexit, the U.S. election result and impending contests in France, Germany and Holland. There was a transfer of power and responsibility from America to China. There was a passing of the torch to a new group of leaders, some by election, others by ouster in the wake of corruption. In the course of a year, the most important public figures on the stage became Chinese President Xi Jinping, UK Prime Minister Theresa May and Secretary-General of the UN Antonio Guterres, instead of the familiar faces of German Chancellor Angela Merkel, former UK Prime Minister David Cameron and former UN Secretary-General Ban Ki Moon. The rejection in the past six months of the traditional Davos construct of globalization, innovation and a tolerant society was simply bewildering to the elites who have been consistently wrong in their prognosis.
Martin Wolf of the Financial Times gave the most coherent explanation of the electoral revolt: "It began with the financial crisis in 2008, which most people still do not understand. We had to save the sector but then nobody was punished. Then the unequal distribution of growth, with most free-market nations (the U.S. and UK) seeing the greatest rise in inequality. Add to this the rapid decline in manufacturing jobs, which moved to developing markets. And now the onset of automation/robots, which makes workers feel that they are disposable. This is the protectionist death rage spiral." He insisted that business can make the difference, to tell employees they will be trained to compete, they will have job security, and that there will be support for a redistribution of some of the gains from globalization. But he was gloomy in his conclusion, forecasting the onset of tariffs and nationalism. Charles Michel, the Belgian Prime Minister, acknowledged that globalization has "brought us the best and the worst, with great anxiety over a world that is changing and pressure on those left behind.
"The most important speech was given by Jinping. If you closed your eyes, you could have imagined the same words uttered by President Obama, including a quote from Abraham Lincoln's Gettysburg Address on government "of the people, by the people and for the people." He gave a stirring defense of globalization, criticizing protectionism as "locking oneself in a dark room," crediting trade with being the basis of growth and the natural outcome of scientific advances, a veritable "treasure chest in the Arabian Nights, instead of the Pandora's Box described by critics." He hoped that other nations would stay open to Chinese investment just as "we open our arms to the people of other nations to China's express train." He recognized the pitfalls of globalization, arguing for a balancing of efficiency and equity "because all should share in the benefits of a global economy." He said that our real problems are hunger, poverty, superstition and prejudice. He asked the world to keep its promises on the COP 21, to meet the sustainability challenge together. He concluded, "History is created by the brave." In many respects this speech represented a moment when the baton of global leadership was passed from the U.S. to China.
With the economy forecast to grow 7 percent, a stock exchange official said that there are 600 IPOs waiting to come to market. There is real progress toward a consumer economy, with Chinese millennials adopting the same tastes as those in the U.S. or Europe. There is a need for more innovation, instead of simply prowess in manufacturing, to satisfy that growing consumerism.
There were several panels on the future of the media, beset by a decline in advertising and an increasingly partisan audience that reads only that which pleases. Both Facebook and Google executives defended their position of "platform, not media." There was acknowledgement of a failure to understand and predict Brexit and the U.S. election. One senior journalist, describing the new relationship with the Trump Administration, said, "If you are independent media, you are being pushed into being opposition media." It is also harder to maintain the hierarchy of importance, specifically how to handle the stream of tweets, as the mainstream media must now consider 24/7 staffing. There was a recognition that readers need a better sense of reliability of sources in a world where news comes direct instead of through filters. Brad Smith, president and chief legal officer at Microsoft, gave a clear assessment of the risk of fake news, with users posting to a news feed and friends seeing and sharing it, "because the vast majority of those who share fake news are doing this intentionally." Mathias Dopfner, CEO of German media group Axel Springer, was deeply optimistic about the flowering of media in a world of dispersed authority, citing the global development of his Business Insider unit to over 120 million monthly users because they like its speed, visual orientation and attitude. And the commitment to quality journalism was reiterated when The New York Times on Thursday announced the expansion of its Washington D.C. bureau.
The Latin America panel recognized a trend toward free markets and trade, with the Alliance of the Pacific and election of center/right candidates. The region is experiencing exciting growth in those with university degrees-double in the past decade-with two-thirds of those first-time college attendees ready to be part of the emerging middle class. But the investment in innovation is lacking, with companies in the area spending only .5 percent of GDP on research and development, compared to 2.5 percent for the OECD members. There is also a need for digital infrastructure, with Mexican economist Angel Gurria calling for a doubling of investment in public-private partnership, using the third lane of the Panama Canal as a model. There are quick wins possible in gender equality, inter-regional movement of talent, and investment in urban infrastructure.
I attended several panels on health:
1. Dick Boer, CEO of food retailer Ahold, said that the problems of non-communicable diseases are moving into the developing world, most notably Brazil and Mexico. He cited five key risk factors, including tobacco, unhealthy diet, air pollution, alcohol and lack of exercise. He said that the company had initiated a program with 30 Dutch cities, focused on children ages 0-9 in low income areas where there is a seven times higher incidence of obesity (20 percent) than in higher income neighborhoods (3 percent). The interventions included healthier school lunches, a change in product mix at the check-out counter and giving access to sports facilities both in and after school. There is great optimism about the progress of vaccines.
2. I heard both Bill Gates and Dr. Peter Piot speak about the SEPI initiative, aimed at providing incentives from foundations and public sector to the private sector to speed the development of 25 promising products for Ebola and Lassa in West Africa, MERS in the Mideast, and WEPA in Southeast Asia. The goal of the Gates Foundation is "to solve the epidemic threat for known and unknown pathogens."
3. There are two areas of great potential health improvement: road safety and vision care. One and a quarter million people die each year in traffic accidents, with another 50 million injured, and 90 percent of the fatalities occur in the developing world (though they have only 50 percent of the total cars on road).
There was a breakfast on gender diversity and the following day a panel featuring Sheryl Sandberg, COO of Facebook and Keith Weed, CMO of Unilever. At the present rate, it will take 170 years to achieve gender parity in major corporations. It must be made an integral part of corporate strategy, with measurement of progress. Weed talked about using the power of marketing to do "un-stereotyping," for example ads for Unilever tea in India encouraging women to marry at 18 instead of 14. The company also uses the power of its supply chain to contract with female smallholders in Africa. A senior UPS female executive suggested that companies always consider a balanced slate of candidates, half male and half female, for promotions or international transfers. Sandberg talked about Lean In Circles, a safe place for women to discuss issues such as being talked over by males in a meeting, now set up in 31,000 companies. Companies such as PWC, Unilever and Vodaphone have signed onto Gender Parity 2020, with an aim of 50 percent females in top management and board positions.
There was an alarming panel on the Future of Oceans. Thus far, the extinction of wildlife has been limited largely to the land and fresh waters, with only 15 species having disappeared from oceans. But a prominent ocean scientist said that with global warming, the oceans are becoming more acidic, making it harder to provide oxygen. One specific example is the destruction of 70 percent of the coral surrounding Japan in the last few years. He went through the implications of the disappearance of the sea otter, now imperiled, on the balance of the food chain. He also noted that there are five trillion pieces of plastic in the ocean. The ocean economy is worth $24 trillion.
My most fascinating encounter was with Marie Haga, director of the Crop Trust, the repository of seeds on an island in the North Atlantic that has 3,000 polar bears and holds 850,000 seeds, including strains of corn, rice and wheat. This was designated by the UN Food and Agriculture Organization in 2004 as the place of last resort, the backup for the nearly 2,000 plant gene banks around the world that are owned by companies, governments and universities. The director told me that it is like a hard drive for agriculture. An example of the work is moving the seed bank located in Aleppo, Syria, to Lebanon and Morocco given the continuing violence. She is looking for private sector or foundation support; all money now comes from government.
I joined the Business & Sustainable Development Commission (BSDC) board in Davos. With members including Paul Polman of Unilever and Ho Ching of Temasek, the group seeks the integration of the Sustainable Development Goals of the UN into business strategy and operations. Jeremy Oppenheim, director of the BSDC, made the case for the goals as a business opportunity: "There are 60 countries that are hot spots, which can deliver the SDG targets for sustainability. There are 380 million jobs that can be created in energy efficiency, mobility and healthcare, 90 percent of which will be in the developing world." The working theme for the group is "A Better Model for Growth." Among the ideas being discussed are Blended Finance (a merging of public and private money to de-risk new projects); a public measure of degree of compliance with the SDGs that would be available to individual and institutional shareholders; plus a fund for preservation of tropical forests.
I left the mountain with mixed feelings. America looks like the best bet geographically for investment by multinational corporations. There was a lack of clarity on economic outlook, which depends so heavily on an uncertain political future for such key countries as Brazil, France, Germany and South Korea. But thankfully, CEOs appeared ready to step up on societal issues, from sustainability to diversity. NGOs seemed much more realistic, recognizing that they need involvement of the private sector to succeed. Government leaders were focused and humble, as epitomized by Britain's new leader, Theresa May, who positioned her nation as global at the core, open for business. With the world in such a state of flux, it is up to Davos attendees to both listen to and engage with all stakeholders and then act on their words to deliver tangible results for society as well as shareholders.