One of the most iconic images of our time shows a polar bear marooned and adrift on an ice floe. Few other images capture the reality of climate change so viscerally. And now, ironically, Davos Man finds himself in a similar metaphorical position. His natural habitat, the hyper-globalized world of the past half-century, is shrinking, and he has gone from skiing in the Swiss Alps to skating on thin ice.
Of course, globalization — the integration of national and regional economies through cross-border trade and investment — long predates Davos Man. Ever since the dawn of industrialization in the 1800s, technological progress (steamships, railroads, the telegraph, automobiles, airplanes) and financial innovations (like the gold standard) have led to an increasingly interconnected global economy.
But this process has not been continuous. An earlier wave of globalization came to an abrupt halt in the early 1900s with the rise of nationalism and protectionism, culminating in the Great Depression and fascism. Yet since the end of World War II, and especially following the Cold War, the international order has been deliberately geared toward American-led globalization, with the Bretton Woods Institutions (the International Monetary Fund, the World Bank, and the World Trade Organization) providing the basic architecture.
Conceived by the World Economic Forum in 1971 (but unnamed until 2004), Davos Man became the avatar of this process. Each year since, the WEF has staged its flagship gathering in the Swiss Alps to extol the virtues of free trade and capital-market liberalization as instruments for underwriting peace and prosperity.
But now, many fear that globalization is in retreat for the first time since 1945. The United States and China are undergoing a large-scale ‘decoupling’. And the rise of populist movements in advanced economies — epitomized by Trumpism and Brexit — has placed the Global North’s right-wing nationalists on the same page as the Global South’s left-wing anti-colonialists. Both are deeply suspicious of multinational economic arrangements that are seen to undermine national sovereignty.
Against this backdrop, Davos attendees spent this year’s gathering fretting over matters of taxonomy (‘Re-Globalization or De-Globalization’?), while The Economist ran a cover story on the new threats to globalization emanating from its erstwhile champion, the US. Morgan Stanley, meanwhile, has warned clients about globalization going into ‘reverse’.
But the change we are witnessing is about much more than supply chains and semiconductors. More fundamentally, what the economic sociologist Karl Polanyi called the ‘disembedding’ of economic systems from social ones appears to be hitting its limits.
In strictly economic terms, the case for globalization will always be compelling: the logic of comparative advantage dictates that if countries leverage their own strengths — their unique combination of resource endowments, geography, humancapital, and so on — and then trade with the rest of the world, everyone will end up with more in the aggregate. Economic studies show that almost every country in the world has grown richer as a result of globalization. Globally, poverty and inequality (at least between countries) have declined markedly.
But economic actors are real people with ‘sticky’ psychological traits. They have personal and social identities, and deeply held values. They are not ‘commodities’ or mere factors of production that gravitate like atoms toward their most productive use. Whether they are workers displaced from their jobs by outsourcing or farmers unable to sell their produce because of international agreements, they have understandable objections to globalization’s race-to-the-bottom dynamics.
The popular resistance to globalization is not cognitive but affective, born of an anger over feeling ‘left behind’ or ‘swept up’. According to Pew Research, a sense of belonging (or not belonging) to a ‘community’ is the key factor determining whether people’s sentiment toward globalization is positive (or negative). Globalization is currently running into the wall of identity, which the prevailing institutions have failed to reconfigure or even acknowledge.
Though its influence runs deep, the Bretton Woods order rests on the thinnest possible political foundation. It is constituted by multinational corporations, a handful of international organizations that are famous for their lack of accountability to the public, and a thicket of extraordinarily complex and highly technical trade agreements. None has any direct relationship with ordinary people or their communities.
Unsurprisingly, the consensus on globalization began to fray with the backlash against top down trade talks and the punitive, procedural mechanisms of the WTO. These mechanisms stand in stark contrast to the bottom-up climate movement. The climate movement reminds us that if we want to reap the economic benefits of a globalized economy, we need genuine global governance, both to distribute the gains from trade more fairly and to forge a new social contract that offers a sense of global community.
As I have argued previously, this vision of global governance is less utopian than it sounds. The challenges that globalization is facing reflect the true nature of markets and economies as fundamentally social phenomena. In an age of ‘polycrisis’ and ‘permacrisis’, to borrow Davos Man’s lingo, we need to shift the paradigm of globalization to focus not only on goods, capital, and services but also on people.
Ultimately, it is impossible to sustain global markets without global governance based on a broadly shared moral consensus. If Davos Man wants to avoid becoming completely obsolete, he will need to acquire some social skills.
Associate Professor of Empirical Legal Studies at the University of Cambridge.
Copyright: Project Syndicate, 2022.