Davos sees a turbulent horizon between wars and AI disruption

The World Economic Forum (WEF) meets starting tomorrow for its traditional annual meeting in the Alpine town of Davos, Switzerland, with its eyes set on a turbulent horizon. Two factors stand out above the rest as the great agitators of our time, projecting uncertainty about the economic prospects. The geopolitical one, with two brutal wars—Ukraine and Gaza—of enormous global significance; and the technological one, with the revolution of generative artificial intelligence, in full development, full of promises and threats of disruption. In this context, a majority of the chief economists consulted in a study published this Monday by the FEM predicts for this year a slowdown in the global economy (56%) and a deterioration in advanced economies in both the labor markets (77%) and the financial environment (70%).

This year's Davos event promises a high-level debate with very prominent leaders on each of these two major fronts. On the geopolitical front, the presence of Chinese Prime Minister Li Qiang stands out along with a significant delegation from his country; from the US Secretary of State, Antony Blinken; the president of Ukraine, Volodymyr Zelensky; from several leaders of the EU bloc—Ursula von der Leyen, Emmanuel Macron, Pedro Sánchez, among others—or from the Middle East. In technology, there is great interest in listening to Sam Altman (Open AI), Satya Nadella (Microsoft), Arvind Krishna (IBM) or Pat Gelsinger (Intel).

Davos shows with crystal clear evidence how both factors are intertwined, in the strategic competition between the United States and China, which has microchips as great points of friction, and great career avenues in AI and quantum computing.

Below are some of the notable elements of the event in Davos, a special laboratory of reflection on a time of change with an intensity unparalleled in a long time.

Wars

The impact of the conflicts in Ukraine and Gaza is obviously a central variable. The one in Ukraine has caused strong shocks in the energy and food markets. Now, Gaza casts thick clouds over trade, with difficulties for maritime transport in one of the most important global routes, the one that runs through the Red Sea, due to attacks by the Yemeni Shiite militia of the Houthis.

If not resolved, this implies a disruption in supplies, with possible consequences for chain efficiency and upward inflationary pressures. This Monday, QatarEnergy, the second largest exporter of liquefied gas, announced that it will no longer use the Red Sea as a transport route. Europe, which has abruptly cut its dependence on Russian gas transported by pipeline, now relies heavily on liquefied gas, with Qatar as a major supplier. A commercial ship owned by an American company was hit this afternoon by a Houthi missile.

On Sunday, a meeting was held in Davos at the level of security advisors promoted by Ukraine to address solutions to the conflict it suffers and which brought together representatives from 84 countries (among which China was not included). The Israeli-Palestinian conflict and its regional derivatives will undoubtedly be addressed in multiple circumstances in the Alpine resort. But no factors are detected that invite optimism on either front, and therefore the majority feeling is that the economy will continue to be exposed to the uncertainty caused on that side.

In this context, the chief economists consulted in the WEF study predict by 2024 an acceleration of geoeconomic fragmentation (69%) and a new push for the localization of economic activities (86%). Although the data do not reflect a profound deglobalization movement, it does seem to advance a pattern of reconfiguration of globalization.

Generative artificial intelligence

The pre-eminence of generative artificial intelligence in the official WEF program and collateral activities is impressive. An authentic revolution with immense potential that concentrates the attention of business, political and technological leaders.

A report published by the IMF on the eve of the start of the WEF suggests that, on a global scale, 40% of jobs will be affected by AI. In advanced economies, this percentage rises to 60%, due to the prevalence of jobs with high cognitive activities. Of them, the study indicates, half will be negatively affected.

Along with the promise of huge productivity gains comes the threat of major labor market disruption, of destroyed jobs. The ones they create new ones will not necessarily appear at the same time, and above all they will not be for the same people. There are therefore prospects for a difficult transition ahead.

Inequality

The IMF report also points out the considerable risks that the AI ​​revolution will increase inequality, by especially rewarding the elites who will be able to take advantage of the positive potential of AI, widening the social gap.

In this matter, Oxfam Intermón has also published its traditional report on inequality on the eve of the WEF. Among its conclusions, the NGO reports that the five richest people in the world have more than doubled their wealth since 2020 (adding a total of about 870,000 million dollars), while the poorest 60% in the world, -about 5,000 million people – have seen their position deteriorate.

Electoral processes

An extraordinary electoral cycle will take place in 2024, with some 70 countries comprising almost half of the world's population planning to hold presidential or legislative elections. In Davos, concern is perceived about the risks that extreme polarization and misinformation, enhanced today by the instrument of AI, pose to democratic health. This is therefore another factor of possible agitation.

Green transition

It is, of course, another of the central axes of our time, and the WEF program continues to reflect it as in previous years with notable programming on the subject. In this matter, the fundamental objective – stopping climate change – is intertwined with other aspects, such as the struggle between powers and between companies for primacy in key technologies, which is reflected in protectionist frictions, among other elements. In this key, the presence of the strong Chinese delegation will also be interesting.

Financial environment

It is of course another of the key scenarios. The interest rate increases adopted after the inflationary flare caused largely by the war in Ukraine have altered the scenario. So far, the feared strong turbulence in terms of debt sustainability has not occurred, in many cases increased by the expansionary policies used to overcome the shock of the pandemic. But this does not prevent there from being a state of alert in this regard, so much so that an unusual meeting of more than hundreds of presidents and CEOs of banks, insurance companies and asset management firms is planned in Davos, outside the official program.

Argentina

The presence in Davos of the recently elected new president of Argentina, Javier Milei, and an important delegation from his Government will undoubtedly focus attention on the ultraliberal experiment of brutal cuts in public service benefits that the president seeks to promote.

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