Policy Alert #181 | January 29, 2019

The 2019 World Economic Forum (WEF) opened in the Swiss town of Davos last week to muted response. Many western media outlets, such as CNN, Forbes, The Guardian, and The Independent, focused on the absent parties. United States President Donald Trump canceled his planned trip and eventually pulled the plug on a US delegation led by Secretary of State Mike Pompeo and Treasury Secretary Steven Mnuchin amidst the partial government shutdown (Pompeo later delivered a video address to the Forum). British Prime Minister Theresa May and French President Emmanuel Macron similarly skipped the event to deal with domestic issues. Even the Rising Powers seemed content to sit it out: Chinese President Xi Jinping, Indian Prime Minister Narendra Modi, and Russian President Vladimir Putin focused their attention elsewhere.

Despite lacking star power, Davos was hardly devoid of drama. Brazilian President Jair Bolsonaro attended in his international debut following his election in October 2018. Chinese delegate Fang Xinghai’s comments about democracy sparked buzz abroad as American billionaire George Soros sharply criticized China in a speech during a private dinner on the sidelines of the WEF. Japanese Prime Minister Shinzo Abe, meanwhile, did his best to champion the benefits of globalization. In this RPI Policy Alert, we examine the stories you may have missed from this year’s WEF.

CHINA
Chinese Vice-President Wang Qishan offered a special address to the WEF that defended globalization and free trade while also acknowledging the difficulty in balancing “efficiency” with “equity”: “What we need to do is make the pie bigger while looking for ways to share it in a more equitable way. The last thing we should do is to stop making the pie and just engage in a futile debate on how to divide it. Shifting blame for one’s own problems onto others will not resolve the problems.”  Fang Xinghai, Vice-Chairman of China Securities Regulatory Commission, participated in a panel entitled “When Global Orders Fail” in a personal capacity. Fang’s comment, “Democracy isn’t working very well,” made waves in western media coverage. It should be noted, however, that the context was in reference to co-panelist and Columbia University Professor Adam Tooze’s earlier comments and moderator Martin Wolf’s question about China’s rise. Wang’s full comment was: “In Western countries, you’re experiencing tremendous domestic difficulties, and democracy–as you [Tooze] described–isn’t working very well. You have to realize this and you need political reforms in your countries. I say that in all sincerity. You cannot just turn your attention to other countries to paper over all the difficulties you’re experiencing” (21:05-26:09). Both Wang and Fang addressed the news of China’s lower than expected growth rate for the last year, which was announced by China’s National Bureau of Statistics (NBS) just two days prior to the WEF. Following the scathing criticism of China by George Soros at a sideline event, the Chinese Ministry of Foreign Affairs responded: “It is meaningless and worthless to refute these words made by [a] certain individual that call white black and confuse right and wrong.”

• In an editorial, the state-directed China Daily praised Vice-President Wang’s speech as “[r]eaffirming the pro-globalization, pro-multilateralism stance that President Xi Jinping put forward” in his Davos address in 2017, but also quipped: “Since the US delegation didn’t attend this year’s forum due to that country’s government shutdown, it is to be hoped that the message does not get distorted in relaying.” Trade negotiations between the two countries are scheduled later this week.
• Ahead of the WEF, nationalist Global Times focused its energies on reassuring its readers that despite the NBS report, “China’s economy and future are promising.” “The China-US trade war in 2018 obviously had negative effects on China’s economy, but the effects would have been much more serious if this had happened 10 years ago. China today can bear the consequences of the trade war. It would be nice if the two countries could ease trade tensions, but China can also get by if they fail,” the Times claimed.
• Cissy Zhou, a contributor to the independent South China Morning Post, examined the effect of Vice-President Wang’s reassuring comments on the rate of China’s economic growth on foreign market watchers.

JAPAN
Prime Minister Shinzo Abe gave a speech entitled “Defeatism about Japan Is Now Defeated,” to the Forum that touted the improvements his administration has made to both the Japanese and international economy: “Japan is determined to preserve and committed to enhancing the free, open, and rules-based international order. […] Japan, now reinvigorated and revitalized, with your embrace, will continue to be one of the foremost open, democratic, and law-abiding contributors to peace and growth in the world.” Abe’s speech referenced need for better data management practices worldwide, which was indubitably included due to the recent data management scandal in the Ministry of Health, Labor and Welfare. On the sidelines of the Forum, the mood was less optimistic. In an interview with Reuters, chief executive officer of Suntory Holdings Ltd. and senior economic adviser to the prime minister Takeshi Niinami, argued that the scheduled increase in Japan’s consumption tax to ten percent was necessary as the current spending plan was “unsustainable,” and that he did not anticipate Japan hitting its two percent inflation target: “We’re not in deflation…but there is still inertia. There’s still a deflationary mindset.” Hiroshige Seko, Minister of Economy, Trade, and Industry (METI), and Hiroaki Nakanishi, Chairman of Hitachi, meanwhile met tough questions on recent news of flailing nuclear energy projects in Turkey and the United Kingdom, respectively.

• The progressive Asahi Shimbun offered a scathing overview of the data management scandal in the Ministry of Health, Labor, and Welfare the day after Abe’s speech: “The findings of such a lax investigation and the disciplinary action based on them do not justify bringing an end to efforts to uncover the facts.”
• The Japan Times featured a political cartoon mocking Abe’s promotion of responsible data management in his speech at the WEF against the data scandal. In the cartoon, Abe is depicted tumbling down a ski slope of “public trust.”
• Kenji Kawase, chief business correspondent for the business-focused Nikkei Asian Review, noted in his coverage of the Forum that China sent its largest delegation to date to Davos in a show of force, and noted that, “With US President Donald Trump a no-show, the spotlight was China’s to take.”

INDIA
An interview with Chief Minister of the state of Madhya Pradesh Kamal Nath demonstrated that the campaign cycle in India is well underway. On the sidelines of the WEF, Chief Minister Nath met with members of the Indian press and accused the opposition Bharatiya Janata Party (BJP) of participating in horse-trading tactics as well as boasting that BJP legislative assembly members were asking to join his party. Gopal Bhargava, leader of the BJP in Madhya Pradesh, responded: “It is highly objectionable to misuse an international platform against the BJP. Chief Minister Kamal Nath is trying to malign the image of the country and the state. He is also violating international visa norms by raising political issues during an international summit.”

• The liberal Hindustan Times took advocacy organization Oxfam to task for its global report on inequality, which it publishes to coincide with the lavish WEF every year: “Privatisation of social sector services are making people poorer and eating into their chances of upward mobility. Rise of finance compared to green field economic activity has made economic growth more skewed. The solution to these problems requires coordinated, long-term policy actions and not Robin Hood-type solutions which a cursory reading of Oxfam’s drastic conclusions might suggest.”
• In the business-oriented Economic Times, Namrata Rana, director of customer experience company Futurescape, and Dr. Utkarsh Majmudar, a columnist for the Times, called for the global elites at WEF to protect consumers from misuse of their personal data and the spread of fake news: “Recent events have shown that the promise of a technology driven world may not be goodness and bright, happy, shining people but something far darker and disturbing. Can we come together to create a better future or will forever be victims who did nothing when it was time to end the game? Can Davos create the language of balance?”
• The Press Trust of India’s coverage of Davos included interviews with foreign business leaders at the WEF regarding their reactions to India’s new regulations on e-commerce in the country.

 

RUSSIA
Russian Minister for Economic Development Maksim Oreshkin dismissed US billionaire George Soros’s comments on China as symptomatic of “trouble at home”: “The problems are within the US. An external enemy, which impedes them and causes all the trouble in the US – whether Russia or China – is just substitution of concepts.” In a speech at the WEF, head of state-owned Sberbank German Gref addressed the issue of economic sanctions: “I don’t think that we can see the positive consequences of these sanctions. What has changed? The introduction of these sanctions, especially against large countries, leads to the fact that these problems become chronic, and the country against which sanctions were imposed simply cannot give way. This becomes not a matter of rational behavior, but a matter of dignity.”

• Lyuba Lulko, a contributor for the nationalist Pravda Report, asserted that Russia’s lower profile at the Forum was due to a mix of hostility from organizers and ambivalence about the venue: “Russia is not interested in the Davos forum from the point of view of strategic prospects, because the forum is devoted to outdated economic models, which Russia should leave behind.”
• In his coverage of the WEF, Denis Bolotsky of state-owned Sputnik News claimed the event was “facing a transformation, with more nationalist politicians bring their ‘country first’ agenda to the venue, angering the mainstream media and NGOs, but making these leaders even more popular at home.” One such case was Brazilian President Bolsonaro’s first speech at the Forum, which Bolotsky characterized as a “baptism by fire.”

 

BRAZIL
The WEF was the first international commitment of Brazilian President Jair Messias Bolsonaro, who was sworn in on January 1, 2019. Accompanied by a robust delegation of officials, Bolsonaro went to Davos to present his administration’s liberal and pro-growth agenda to world leaders and to make clear the new position of Brazil on the world stage. The absence of prominent leaders increased the expectations surrounding Bolsonaro’s debut, which culminated in a short address to the Forum, even though he was the first head of state to address the audience.

• The left-wing newspaper El Pais reported that President Bolsonaro’s short speech disappointed the international community. Although he had a thirty minute period reserved for him, he barely used fifteen minutes, including his speech and the question and answer session. Bolsonaro repeated a general discourse to stimulate investors to expect a completely different Brazil, free of corruption and committed to economic and trade liberalization. El Pais emphasized that the lack of details on concrete measures to be implemented by the government, especially regarding key promised reforms, such as the social security and the tax reform, and frustrated analysts who have been paying great attention to the biggest Latin America economy under this new leadership.
• The right-oriented magazine Veja lamented the cancelation of the delegation’s scheduled press conference on January 23. Despite the reason for the cancelation being Bolsonaro’s fatigue, none of the three other ministers scheduled to attend came either. Veja classified the last-minute cancelation as a serious break in protocol, even though Bolsonaro has experienced delicate health since he was victim of a life-threatening knife attack during a campaign event in the State of Minas Gerais.
• The Folha de Sao Paulo newspaper reported that in a parallel meeting during the Davos summit, Brazil’s Minister of Economy, Paulo Guedes, delivered an enthusiastic and optimistic message to over a hundred attendees, among which there were businessmen, investors and bankers. He reassured the audience about the government’s the reformist agenda and its commitment to privatize state-owned enterprises as a source of revenue to tackle Brazil’s fiscal deficit.
• The online portal Poder 360 published Minister of Justice Sergio Moro’s statement regarding corruption allegations involving Bolsonaro’s eldest child, Flavio Bolsonaro, who was elected a Federal Senator in last October’s general elections. Moro affirmed that the investigations are still at a preliminary stage and that there is nothing conclusive at this point. He also emphasized that the case is under the state prosecutors’ jurisdiction and their work will proceed at a normal pace and is safe from interference from the federal government.

 

RPI acknowledges support from the MacArthur Foundation and the Carnegie Corporation of New York for its activities.