The past year brought war in Europe, surging inflation and an energy crisis, all while the world is still fighting the Covid-19 pandemic and related disruptions. Company executives are evaluating global supply chains and considering what they could make closer to home.
The Wall Street Journal’s editor in chief, Matt Murray, and Journal reporter Thomas Gryta sat down with World Economic Forum founder
in November as he prepared for his 53rd annual confab in Davos, Switzerland this month. Mr. Schwab, age 84, launched the WEF as a young academic in 1971, but it is now an independent international organization under the Swiss government, similar to the Red Cross. Edited excerpts of the conversation follow.
WSJ: When you think about the state of the world and the themes of this year, what stands out to you, and what are you focusing on?
MR. SCHWAB: When we look at the crisis we are in, I see it less as a crisis in the usual sense. I see it as a whole transformation of our global system.
Let’s just take the economic and the political side of this transformation process. If we take the economic side, I would say we will go through a very difficult three-, four-, five-year transformation period. And the forces behind this?: Of course, the war in Ukraine. And even if we solve the war, it will be reconstruction. You have the energy transformation or transition. You have the reshaping of the global supply chains. You have the post-Covid effects, which some people say are lower productivity and of course, the need to invest more into resilience.
If you take all those economic forces, they bite into the purchasing power of people because, at the moment, there are costs. I’m very optimistic about the energy transformation to provide access to cheaper energy and electricity, but short term it means investments. If you take the war, it means costs. If you take relocation of supply chains, it means costs…because you don’t buy anymore from the most efficient and cheapest source. You buy from the most reliable source.
So, if you take all those factors together, I haven’t any scientific base, but I would say it’s probably 1% to 3% of our global GDP.
If you are a company, you write it off in your balance sheet, and the shareholders are those who suffer. If you do it with an economy, it bites into, say, purchasing power of people. You could say inflation is a fever curve of this transformation process.
We have to address this transformation, not with a crisis mentality, to have simple solutions for very complex problems, but we have to look long term.
WSJ: Do you see the world becoming more about more regionalized blocs that cooperate in some areas and compete in other areas?
MR. SCHWAB: Yeah, if I would look at the political dimension of this transformation, I would argue we are going into a multipower world.
Of course, you have two superpowers, but then you have the emerging superpower like India. You have the blocs like Europe, which, in my opinion, has become stronger despite Brexit in the last three years. We should not underestimate other Asian countries. Then you have the rogue states like North Korea and Iran. Then you have what I would call the fast fish, small countries moving fast and being some kind of role models for other countries, like Singapore, and to a certain extent, Israel.
Then you have the corporate powers, which play a substantial role, and I would even add the social communities. It will be a very complex, messy world.
WSJ: Do you think, when you talk about models beyond country models, is it time for new multinational institutions and new models?
MR. SCHWAB: Our existing institutions do not suffice in the world of today. One missing element is, for example, to integrate the other important stakeholders like business, media and so on into the discussions. In Davos, you will see a presentation of what we call the global collaboration village. We have created a supporting community of over 70 companies and international organizations like the International Monetary Fund or World Trade Organization to create a kind of Davos in the metaverse, in the virtual world, to have a possibility to continue the dialogue but to widen the dialogue to integrate more stakeholders.
I think what is needed is a trusted informal platform where you can speak much more in open ways and really address the issues, not in a political way, but with a will to find a solution.
WSJ: Why has it become so hard for so many governments around the world to say, “We could agree here, and we can civilly disagree here?” It seems small disagreements get blown up into big battles, big offenses, lots of pride. What’s happened, and why does that keep happening?
MR. SCHWAB: I think a lot is a lack of dialogue, and I wouldn’t neglect the impact of Covid. Many of the international dialogues, at least in person, were stalled. Videoconferencing is not an ideal means to create a trust space.
And you had people more put into isolation. You see the increase in mental-health issues around the world.
When you are faced with a crisis, you become more egoistic because, instead of asking, “How can I solve a problem?” you ask first, “How can I protect my situation?” So, what we have seen during the last two years is much higher egoism on a personal level, but also it translates into a national level.
WSJ: Do you have any thoughts on when and how this Russia-Ukraine war ends, or where it might go?
MR. SCHWAB: No. We all are suffering from the war. You see certain, let’s say, positive signs on the horizon, so at least we may come to a standstill. And then it will be a very difficult process to turn the standstill of hostilities into a long-term sustainable solution, because we made a big mistake with the Minsk process to put faith into Russia after the Kremlin action [earlier in the separatist regions of Ukraine].
WSJ: You said you were not surprised that there’s been a backlash on some of the globalization trends. But do you think that we’re in a period where we’re fundamentally resetting some of the precepts? Or do you think it’s a passing reaction?
MR. SCHWAB: I call it reglobalization. The world is becoming more interdependent, but on the other hand, we will have relations much more on the basis of trust, because we are not able to create the necessary norms, as the necessary rules, which we can share. The future of the world could be a kind of patchwork of coalitions which are trust-based.
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