February 4, 2019

The Formation of a New World and the Crisis of Globalization

Results of the World Economic Forum in Davos

 

Since the beginning of the 2010s, the main trend in the development of the geopolitical situation in the world has been the formation of a new multi-polar model of international relations. Thus, the USA's sole leadership is being replaced by a new complex and dynamic system with several centers of power of the world and regional level. To date, the main ones are China, the United Europe, Russia, Japan, India, Brazil, South Africa and a number of other countries.

Despite the growing interdependence of the leading countries of the world in the process of deepening the processes of the world globalization, this tendency is accompanied by aggravation of problems and contradictions between them. The reasons for this are the intensification of the struggle for influence in the world, for mineral resources, markets, territories and transport routes. These issues become particularly acute in the face of increased human needs and negative effects of the global climate change, which causes a shortage of all vital resources.

The result of these trends is the increasing tension in the world, as well as the growing risks of new wars and conflicts. Based on historical experience, this situation is characteristic of all periods of global changes in the world, as evidenced by the First and Second World Wars, and also by the series of conflicts in the Balkans and post-Soviet territories after the collapse of the Eastern bloc and the USSR.

At the same time, in today's situation, all these problems are becoming more complex, due to both, — globalization of the world and the fourth industrial revolution, namely — the massive proliferation of digital and other innovative technologies. As a result, there is an expansion of forms of confrontation between different countries and blocs: from the classical military sphere — to the struggle in the economic, information and other spaces, including with the use of “hybrid” methods.

We should also point out the increasing inequality in the socio-economic development of different countries, which is an additional negative factor affecting the situation in the world.

At the Davos Forum emphasis was placed on the ambiguity for the mankind of the consequences of globalization and the breakthroughs in science and technology
At the Davos Forum emphasis was placed on the ambiguity
for the mankind of the consequences of globalization and the breakthroughs in science and technology

As noted in our previous publications, the overall assessment of these processes and their consequences was made in the new iteration of the National Intelligence Strategy of the United States. In turn, their economic component became the main theme of the World Economic Forum in Davos, which took place on January 22–25, 2019.

The Forum was held under the slogan “Globalization 4.0: Shaping a Global Architecture in the Age of the Fourth Industrial Revolution” and sought to find solutions to global problems in the modern world, caused by the increased social inequality in the world, spread of isolationism and trade and economic wars, worsening of the situation in some countries and regions, climate changes, etc.

In 2018, the billionaires' wealth have grown by 900 billion US dollars, while the resources of the poorest half of humanity decreased by 11 %
In 2018, the billionaires' wealth have grown by
900 billion US dollars, while the resources of the poorest half of humanity decreased by 11 %

The above- mentioned problems were specified in the speeches of the participants of the Forum. At this, emphasis was placed on the ambiguity for the mankind of the consequences of globalization and the breakthroughs in science and technology. Thus, according to a report by the non-profit organization Oxfam, since the financial crisis of 2007–2008, the number of billionaires in the world has doubled to about 2 thousand people. Of these, 26 richest people have a total wealth of 1.4 trillion US dollars, which equals the total income of 3.8 billion ordinary people. In 2018, the billionaires' wealth have grown by 900 billion US dollars, while the resources of the poorest half of humanity decreased by 11 %.

According to world experts, this is the main reason for the spread of protest sentiments among a large part of the population of the globe, developed countries included. In turn, this forces their governments to take measures to improve the protection of their producers and markets, which leads to the growing of isolationism and anti-globalization and creates barriers to the development of the world trade and economy.

Given the danger of the situation, most representatives of the world's establishment called to join forces in addressing these issues. At this, among the main ways to increase the stability of the world economy, they named: ensuring trade freedom; introduction of innovations; improving international supervision over the work of the world financial sector; stimulating labor markets and investment; deepening international co-operation; creating new opportunities for women and youth; stepping up efforts to overcome corruption, tax evasion and environmental challenges.

At the same time, experts of international financial institutions expressed doubts about the possibility of practical implementation of the above-mentioned approaches, which are mostly only public declarations. In reality, preference is given to national values, not to human values and interests. Moreover, this trend is gaining ground, as evidenced by the selfish policy of the United States and a number of European countries.

At the same time, the Forum in Davos showed different attitudes of the countries of the world to globalization. Thus, the most active position in supporting the process of integration of the world in all spheres was traditionally demonstrated by China. In turn, Italy and Austria emphasized the negative aspects of enhancing the openness of the world, first of all from the point of view of the uncontrolled increase of migration to Europe.

 

Based on the above-mentioned circumstances, the International Monetary Fund (IMF) has revised downward its Economic Outlook for 2019–2020. According to the IMF's estimates, in comparison with previous years, the growth of the global economy will slow down more than expected, generating new risks. Even more negative forecasts were provided by a number of other international institutions that did not exclude the possibility of a new financial and economic crisis in the world.

The International Monetary Fund has revised downward its Economic Outlook for 2019–2020
The International Monetary Fund has revised downward
its Economic Outlook for 2019–2020

This is largely different from the estimates and forecasts made by the IMF during last year's World Economic Forum in Davos. In particular, at that time, the growth rate of the world economy was expected at 3.9 %, which should have become the highest indicator since 2010. Thus, today's realities have shown the groundlessness of expectations for maintaining a positive dynamics in the work of the world economy, despite the growing isolationism and protectionism in economic relations between different countries.

 

Hence, illustrative was the refusal of the main world leaders to participate in the Forum due to the sharpening of contradictions between the leading centers of power and because of internal problems. Thus, the reason for the absence of US President D. Trump was the critical worsening of the situation around the adoption of the state budget, which had led to the suspension of the work of the American government (the so-called shutdown). Chinese President Xi Jinping obviously did not come to Davos because of the unresolved issues in the China-US relations. French President E. Macron was unable to come to the Forum because of the further intensification of protests in the country. And the head of the British government T. May — was busy with resolving the issues of the UK's exit from the EU, which cause a sharp debate in the society, parliament and government of the country.

In recent years, Russian President V. Putin has traditionally refused to attend the Forum, having represented Russia for the last time in 2011, which is the result of the confrontation between Russia and the West due to Russia's aggression against Ukraine. At this, Moscow for the first time openly demonstrated the futility of all its efforts to restore normal relations with Western countries and international organizations, including in the economic sphere. This was evidenced by both, the decrease in the level of the Russian delegation at the Forum (the head of the delegation was Minister of Economic Development of the RF M. Oreshkin, while last year — Vice Prime Minister A. Dvorkovich), and public statements of Russian politicians and businessmen.

Illustrative was the refusal of the main world leaders to participate in the Davos Forum
Illustrative was the refusal of the main world leaders
to participate in the Davos Forum

In particular, according to one of the members of the Russian delegation, B. Titov (Commissioner for the RF President for Entrepreneurs' Rights), while in the past Russian representatives travelled to Davos with an attacking position and tried to gain economic space, now this position is defensive. And Russia mostly visits the Forum not so much as a significant global player, but as a poor relative. In his turn, the chairman of the VTB Bank, A. Kostin, pointed out the trend to growing difficulties in Moscow's finding mutual understanding with other countries. According to his forecast, this trend will last at least until the new US elections. At the same time, the Russian delegation still tried to impose the ideas of “the West's and Russia's being mutually needed" and “the harmful effects of anti-Russian sanctions on all sides”.

According to world experts, the absence of world leaders at the Davos Forum once again clearly demonstrates the crisis of liberalism and democracy, as well as the flourishing of populism, nationalism and nationalist isolationism.

 

Against this background, noticeable is the participation in the Davos Forum of the leaders of new centres of power that are emerging in the Asia-Pacific, South America and other Third World regions. In particular, for the first time in five years, the Forum was visited by the Prime Minister of Japan S. Abe, who expressed his intentions to promote a free and open world order. In this regard, he attached great importance to the implementation of the Trans-Pacific Partnership Agreement and the Agreement on Economic Cooperation between Japan and the European Union. Similar intent was also expressed by the newly-elected President of Brazil J. Bolsonaro. According to him, the government will make efforts to strengthen the Brazilian economy and bring it to the list of 50 states with the best investment climate, which will be achieved through deepening Brazil's integration into the world economy.

Japanese Prime Minister Shinzo Abe Brazil's newly-elected President Jair Bolsonaro
Noticeable is the participation in the Davos Forum of the leaders of new centres of power

The growing attention of the countries of the above-mentioned group to the Forum in Davos while it was ignored by main Western leaders confirms the trend of gradual shift of centers of the world economy from the “North” and “West” to “South” and “East”, where more dynamic societies are being formed.

 

The World Economic Forum in Davos was also important for Ukraine, which was able to once again demonstrate to the world its positions both in terms of European and Euro-Atlantic integration of our state and in its confrontation with Russia. At this, was confirmed the United Nations, the EU, NATO, the IMF and the leading Western countries' support for Ukraine.

As a result of Ukraine's participation in the Forum, a number of practical results in the economic sphere were achieved, including: an investment agreement was concluded between the Norwegian company NBT, the French company Total and the European Bank for Reconstruction and Development regarding the construction of the “Sivash” wind power complex in the South of Ukraine (with total investments about 450 million US dollars); a protocol was signed between the Government of Ukraine and the Swiss Federal Council on the avoidance of double taxation; an agreement was reached on the continuation of the development of trade and economic and investment cooperation between Ukraine and China.

An investment agreement was concluded on the construction of the “Sivash” wind power complex A protocol was signed between the Government of Ukraine and the Swiss Federal Council on the avoidance of double taxation
As a result of Ukraine's participation in the Davos Forum,
a number of practical results in the economic sphere were achieved

All this showed foreign investors' credibility in Ukraine, despite the continuation of its confrontation with Russia. At this, especially indicative is the fact of investments into the implementation of infrastructure projects in the southern regions of Ukraine, which are mostly under the threat of the Russian aggression.

At the same time, the peculiarities of the development of the situation in the world that were identified at the Forum, also show the increasing level of challenges and threats to Ukraine. In the near future our country's partners and allies will not leave it to the farthest point. At the same time, worsening of their own problems may reduce the level of their attention to the Ukrainian issue.