MainStreet Macro: Shaking off the gloom in Davos

The annual World Economic Forum gathering in the mountainside retreat of Davos, Switzerland, is most commonly described with a single word: elite. 

After attending the meetings last week, I’d like to offer three more words that perhaps more constructively capture the ethos of Davos this year: Optimism, dealmaking, and hope.

Here’s what I learned from a week of attending meetings, participating in panels, and hobnobbing in the snow.

Optimism is making a comeback

There was deep pessimism leading up to Davos as anticipation of an imminent global recession loomed large. But by the confab’s end, some of the gloom shadowing the economic outlook had lifted, to be replaced by a partly-sunny, cautious optimism. 

The key reason for the shift was China’s reemergence. In December, the world’s second-largest economy said it would shed its immensely restrictive zero-covid policy, which has kept the country on the sidelines of growth for the better part of three years.

China’s return to full-scale economic activity could help the world sidestep a recession or keep a global downturn, if it comes, short and shallow.

But the reopening comes with risks to the global economy. As a massive energy consumer, China’s swift return to business as usual could trigger a new round of inflation in commodities, goods, and services, just as price growth is starting to moderate worldwide.

Business is rallying

When I attended Davos meetings in May, the shock of Russia’s invasion of Ukraine was still fresh. The gravity of war dominated the event and rallied a palpable solidarity among its participants in support of Ukraine.

While that support remains, and horror of the continuing war was fully present in Davos again this month, business and the economy had returned to center stage. Nearly 600 chief executives were in attendance, and dealmaking was back.

The meaty side of Davos isn’t found in the live-streamed panel discussions on social issues, economics, and geopolitics. The work happens offstage, in small-group meetups between C-suite executives, clients, and would-be partners.

An after-six social network of dinners and night caps runs well into the wee hours, making Davos the world’s most efficient forum for dealmaking. In a single week, executives can get facetime with more people than they could schedule in months back home.

Business was back in full force in Davos, warming this economist’s heart.

There’s hope

Though business is front and center in the streets and on the stages of Davos, the role of civil society, its future, and its challenges continued to dominate forum panels.

The theme of this year’s event was Cooperation in a Fragmented World, with forum organizers seeking to address the global challenges of climate change, economic development, gender parity, our digital transformation, and civil unrest.

I participated in the forum’s economic briefing and moderated a panel on living wages.

The cost-of-living crisis, the digital economy, hybrid work, climate, and the care economy – which had its first panel appearance this year – also were big components of my week-long agenda.

The mountains surrounding Davos can be seen as a metaphor for the steep policy and political climb that will be required to fix our global problems. But I came away from Switzerland with a new sense of optimism that those peaks can be scaled if we work together.

For more, here are some of my take-aways in detail from last week.

• Video: 2023 Explained. I and other economists discussed the precarious economic landscape and the decisions that lie ahead for policymakers.

• Radio: Davos 2023 Day 2. Can humanity learn to cooperate to solve the big issues?

• Video: A Living Wage for All. A globally implemented living wage could generate $4.6 trillion in additional GDP each year. What would it take to achieve?