World Economic Forum, Davos. February 2019

THE MANTRA
Committed to improving the State of the World

THE THEME – GLOBALISATION 4.0
Shaping the new Architecture in the Age of the
Fourth Industrial Revolution
Creating a shared Future in a Fractured World

COMMENTARY
Several unwelcome messages have emanated from Forum 2019. The Global Risks Report produced by the President records the World is ‘sleeping walking’ into a crisis at a time when the World needs more than ever multilateral cooperation to solve complicated global challenges as divisions in and between nations are hardening.
(SMH, National Opinion, 20 January, 2019)
Commentators used the phrase ‘sleep walking into war (crisis) in the 1930s as European nations watched events unfold into WWII.

Seminal moments that illustrate impending problems were:
*The meeting between Prince William and Sir David Attenborough where the latest IPCC report was discussed.
*The release by Bloomberg of information indicating that since the 2018 Forum, the poorest half of the world has seen its wealth fall by 11%.
*An address to the Forum by Dutch historian Rutger Bregman urged the wealthy to stop talking philanthropy and pay more taxes. There was an adverse response from the assembled elite.

Business leaders and Government officials had gathered in Davos to discuss and solve global issues, particularly the increasing inequality which is manifest by increasing global social instability. There is now comment that the World Economic Forum is becoming a symbol of ongoing global problems rather than a solution to them.
(ABC News, 23 January 2019)

In layman’s terms this year’s Forum agenda reads “The next phase of globalisation will occur in a society that has become increasingly disenfranchised and divided due to rapidly evolving technology advances and competition”. According to Professor Wesley Widmaler. Department of International Political Economy, ANU, the Forum is not addressing the neoliberal global framework which is central to global economic problems today. The Forum is trying to solve poverty and rising inequality by modifying failed concepts that have caused the problems in the first place. Since the 2008 GFC, the neoliberal system – ie free market capitalism – has proved to be unstable and unsustainable.

In an address to the Forum, George Soros has warned of a problem which is currently submerged beneath the ‘Trade War” chatter across the Pacific. Soros warned of the weaponisation of data technology against individual liberty. China is now the wealthiest, the strongest and the most developed nation in machine learning: AI and 5G technology. The hype over trade wars is obscuring the unrecognised threat – the future control of the internet is at stake – enter Huawei. (SMH, National Opinion, 26 January 2019)

There is recognition that the Forum is deliberating in a fractured world characterised by the breakdown of international institutions which were established after WWII in 1945. ( Professor Richard Holden, Department of Economics, ANU. The Conversation, 26 January 2019) Decisions at Davos have been taken on the assumption that the IFC, WB, WTO and others are as relevant now as they have been over the past 70 years. This is no longer true.

AUSTRALIA
Australia was present in force at the Forum. Finance Minister Corman, Trade Minister Ciobo and assorted industry leaders comprised the delegation that had hoped to promote investment and export opportunities for Australia.. The Ministers sought to attract big business to our shores to generate growth in the economy. Problems for investors will be Australia’s small domestic market, its requirement to develop export markets, high labour costs, power supply reliability, transport infrastructure and the 30% corporate tax rate, the third highest in the OECD.

In early February 2016, ’17 and ’18 Australia hosted lavish seminars dubbed the A50 Economic Forum for international fund managers – no seminar appears to have been arranged for 2019. No follow up reports on major investments resulting from these meetings have been sighted.

TAKE AWAY MESSAGE
There is unease that the World Economic Forum will have difficulty fostering social and economic improvements in the global labour market or in encouraging trust between nations considering the range of global pressures. Globally the industrial-military behemoth is in the ascendent. (The Economist/SIPRI, August 2018)

THE STING
George Soros may have picked up vibes from the Five Eyes meeting in Nova Scotia in July 2018. Discussions there were on the creeping Chinese dominance of global communications. The Five Eyes plus Japan are now blocking the sale of Huawei and ZTE Corporation technology to their respective countries. The cause for concern is that in 2017 China passed the the National Intelligence Law which gives the State power to force Chinese firms to obey State directives. These firms are poised to export their technology across the globe. Chinese preparation for 5G has resulted in the regime outspending the US by some $24 billion over the past several years. (Deloitte)

The problem for America is it cannot force companies such as Nokia, Samsung and Ericsson to cooperate whereas Huawei can provide hardware, chips and user devices which are equivalent to Ericsson, Intel and Apple rolled into one.

There has been a decade long race between China and America to construct the 5G infrastructure. The prize is not only financial – successful companies will control entities that use the new technology. Critically, 5G will be vital for military and intelligence applications. Currently, the US Military depend on commercial telecom networks. The fear is that China could turn off the networks leaving the the US virtually ‘blind’.

The bottom line is that China is poised to export 5G technology more quickly and cheaply and with more diplomatic support than Western firms. The dilemma for the Five Eyes is that, if they are unwilling to run military logistics networks without 5G technology, it will impact on their ability to sustain military partnerships abroad.
(Orchard, P. 30 January, 2019. 5G, China and the race to dominate High Tech. Geopolitical Futures) In a surprise move it Britain and New Zealand, Five Eyes members, and Germany are reviewing perceived threats posed by Huawei. These are significant cracks in the Five Eyes stance which has the possibility of placing Australia in an invidious position with respect to its major trading and security partners. (Geopolitical Futures, 20 February, 2019)

The advent of 5G will tend to push the world into the American and Chinese spheres of influence – Treaty of Tordesillas reincarnate!! The big question is – will the World Economic Forum be able to stride this divide and can it continue with current economic philosophy?

JOHN HUGH HILL
Current Affairs Flash Points, towardsthefinalhour.com
lurgashall@westnet.com.au

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