The rise of nationalism may have threatened the ‘Davos man’ – but that doesn’t mean globalisation is in retreat

It is Davos time again. This week, the world’s finance, business and political leaders – plus a sprinkling of pop stars – will gather as they do each year in the Swiss ski resort to meet and ponder the state of the global economy. It is easy to mock the event, the upcoming one particularly so, since on a count done by Bloomberg at least 119 billionaires from all around the world are flying there, and one of the main appearances will be by Greta Thunberg. Hypocrisy is alive and strong among the uber-wealthy.

Ripe for ridicule indeed, but to do so misses the key point. It is actually very efficient for business leaders to be able to meet their key customers in one place at one time. Allow for that and maybe the event’s carbon footprint is not so dreadful after all.

The environment is the most upfront single theme this year. Last week Larry Fink, chairman of BlackRock, the world’s largest asset manager, warned that the entire global financial system would be fundamentally reshaped by climate change. His message was chilling in that he warned of huge risks to the world economy, to cities, to food production and so on. But on a broader perspective, it is also encouraging. If global finance is mobilised to combat climate change, then huge resources will be thrown at the problem. Global finance is more powerful and more unified than individual national governments.

Underlying this specific (if huge) issue is a more general one. It is whether globalisation itself is reaching a peak, and is about to decline. The Davos meeting is the ultimate symbol of the integrated global economy. It is a gathering of the winners from it. The expression “Davos Man” was coined by the late Samuel Huntington, the American political scientist, to describe the global elites, who “have little need for national loyalty, view national boundaries as obstacles that thankfully are vanishing, and see national governments as residues from the past”.

He was writing in 2007, and for another decade, the Davos Man continued to advance, if you take the size of global trade relative to global output as a proxy. But now it has stalled. Merchandise trade slowed sharply last year according to the World Trade Organization, partly because of the tensions between the US and China. It is estimated to have risen by only 1.2 per cent, much slower than the growth of the world economy as a whole. But even before that, it had been growing at only about the same speed as the world economy, rather than much more swiftly. In other words, pushback against globalisation predates Donald Trump’s election to US president. Indeed, to some extent at least, his election was a response to those anti-globalisation forces.

So are we seeing the twilight of Davos Man?

Well, there is certainly a powerful coalition ranged against globalisation, for it is under attack from left and right – the left railing against multinationals and the right against shipping jobs to other countries. But I think it is probably better to see globalisation as changing its nature, rather than going into retreat. Though growth in merchandise trade is stalling, growth in trade in services is still climbing.

One way of looking at this is to say that instead of moving goods around the world, we are moving the ideas of how to make those goods around – or rather you make the profit from the ideas, not the actual fabrication. In simple terms, moving towards practices making something is less important than where it is created and marketed. Another way of explaining the shift is to note that there are some international service industries that continue to boom: foreign students flock abroad to get their university degrees, with the US, UK and Australia top destinations. No pushback there. Still, another is to point to the fact that investment funds flow ever more freely around the world, even if goods don’t.

My guess is that Davos Man will continue to be disparaged for many years to come. The revival of nationalism is running hot and strong, not just in the US but maybe more importantly in China and India. In more muted form, it is running in the UK, and not just since the last general election. It was Theresa May who observed back in 2016: “If you believe you are a citizen of the world, you are a citizen of nowhere.”

But if trade in goods remains reasonably open, and trade in services continues to boom, maybe things will be OK. We may well get the benefits of globalisation in terms of rising living standards, with less of the downside of threatened national identities and loss of local jobs. And if global money gets behind the fight against climate change, then globalisation will be even more valuable and important for all our futures.