It reeks of self-importance, but I need to overcome my cynicism about Davos because this year it really matters

I made my own tiny, pointless gesture by not going when I had the opportunity. But with globalisation in retreat and nationalism advancing, there is now more to be said for a global gathering of the great and good

Vince Cable
Tuesday 21 January 2020 09:51 GMT
What is the World Economic Forum in Davos?

Those who go to the World Economic Forum at Davos can expect to have their cards marked as being globalists at a time when globalism has become a term of abuse.

The abuse comes from two directions. The far left has always railed against international capitalism in general and, in particular, against this gathering of big business leaders, billionaires and the politicians who often serve them. Now, the legions of Trump and the nativists of Europe will add their own quota of contempt. Trump will actually be there, but making it clear that he is there in person but not in spirit.

Although I have no brief for the hard left or the populist right, I have always felt negative about Davos ­– at least in its present form as a giant celeb-fest, rather than the more modest and reflective format envisaged at its inception 50 years ago. It reeks of smug self-importance: a platform for the preening, economic glitterati, indulging in the equivalent of Keeping Up with the Kardashians. Overpaid chief executives massage each other’s egos away from carping politicians and journalists back home. And those politicians who do turn up get a break from serious politics.

I made my own tiny, rather pointless, gesture by not going when I had the opportunity. My networks were smaller as a result, but have lasted better.

Now, though, I feel my cynicism may have been overdone. With globalisation in retreat on many fronts, and nationalism advancing, there is rather more to be said for a gathering where the global great and good actually talk to each other. There is a worrying whiff at the moment of 1912 or 1913, just before decades of international economic integration were undone by false moves, misunderstandings and suspicion between national politicians. Uncontrollable conflict followed.

For now the trade war between China and the United States has reached a truce, but with little sign of wider tariff disarmament or deeper understanding. Brexit is passing from the world of speech making and parliamentary manoeuvring to practicalities of decoupling. The Eurozone potentially faces a serious economic downturn; its big structural problems largely unaddressed. A veritable of circus of strong men – in the two superpowers, along with India, Russia, Brazil, Turkey and others – are looking for opportunities to flex their muscles.

It is difficult to see where the leadership required for common action would come from if there were to be a return to the conditions of debt-induced financial crisis and potential depression of a decade ago.

Davos cannot be expected to do more than scratch the surface of these problems. But it can in a small way help, through conversation and interaction, to offset the current collective lack of trust. And trust is essential to tackle problems requiring collective action.

Nowhere is that collective action more urgently needed than in relation to climate change. Greta Thunberg will be on hand to remind everyone, lest they forget. There will be no miracles. Trump is unlikely to become one of her disciples. But there are some moderately encouraging signs.

Outright climate change deniers are a dwindling band. There are fewer political rewards from proclaiming “nothing to do with us”, as Scott Morrison is painfully discovering in Australia. There are even reports of a serious environmental caucus developing among US Republicans. Davos at least helps to bring together, in the same place, big business and governments: problems and solutions.

The key obstacle to getting from the platitudes that “something must be done”, to actually doing it, is a suspicion that everyone else is taking advantage: a classic free rider problem.

Why should the United States give up on coal when the Chinese burn more? Why should China or India curb carbon emissions when per capita consumption is so much less than in the rich world? Why should Exxon or BP stop drilling for oil when Russia’s Gazprom, Saudi’s Aramco, and China’s Sinopec will make up the difference, and when there is unsatisfied demand from willing consumers? Why should elected politicians in Europe antagonise their voters with unpopular taxes on motoring and foreign holidays, when there is no political reward and potentially a lot of grief?

Davos isn’t the place to negotiate burden sharing or emissions targets, but is a place where the big corporates in particular can explain what they can do to make targets set by governments actually deliverable. And if they don’t take a lead business will become – and is becoming – the villain-in-chief.

Companies with large carbon footprints will be picked off by canny consumers, government regulators and protestors – some of whom are turning themselves into investors to exercise shareholder rights. Even if the public relations problems can be managed, it is more difficult to ignore regulatory bodies like the Bank of England, or major institutional investors like Black Rock, who are warning assets are so seriously over-valued in the long-term that they risk big write-downs.

It should be a central message of gatherings of this kind that business is a big part of the solution, as well as a big part of the problem.

Companies seem to be responding. Microsoft’s commitment to become a carbon negative company is very significant, though it is no doubt easier to make than if it were an oil company or an airline. But Repsol among others has also set out a plausible plan for emission reductions by an energy company.

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And I am pleased to say that my former company Shell has set itself metrics to be measured against. When I worked for them 30 years ago, we proposed to the European Commission a pan-European carbon tax before the environmental pressure groups had grasped that there was a problem. But the proposal was too ambitious and too difficult for the politicians. The company lost interest and in due course reverted to climate unfriendly businesses like Canadian heavy oils. What was thought premature then is overdue now.

It is easy to be cynical about corporate declarations. However, these companies are now setting themselves up to be monitored and for their customers and investors to hold them to account. Davos could just end as a ritual event confirming the prejudices of its detractors. But if the corporates impress governments and each other with a genuine ambition to tackle the biggest issue of our age, then all the foie gras, lobster and vintage wine will not have been consumed in vein.

Sir Vince Cable is a former leader of the Liberal Democrats and a former secretary of state for business

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