* Political and business leaders meet in Swiss Alps Jan. 17-20
* Toxic politics take shine off stronger economy, markets
* Chinese president fills global gap as U.S. turns insular
* Pace of change erodes power of leaders to shape events
By Noah Barkin
DAVOS, Switzerland, Jan 15 (Reuters) - The global economy is in better shape than it’s been in years. Stock markets are booming, oil prices are on the rise again and the risks of a rapid economic slowdown in China, a major source of concern a year ago, have eased.
And yet, as political leaders, CEOs and top bankers make their annual trek up the Swiss Alps to the World Economic Forum in Davos, the mood is anything but celebratory.
Beneath the veneer of optimism over the economic outlook lurks acute anxiety about an increasingly toxic political climate and a deep sense of uncertainty surrounding the U.S. presidency of Donald Trump, who will be inaugurated on the final day of the forum.
Last year, the consensus here was that Trump had no chance of being elected. His victory, less than half a year after Britain voted to leave the European Union, was a slap at the principles that elites in Davos have long held dear, from globalisation and free trade to multilateralism.
Trump is the poster child for a new strain of populism that is spreading across the developed world and threatening the post-war liberal democratic order. With elections looming in the Netherlands, France, Germany, and possibly Italy, this year, the nervousness among Davos attendees is palpable.
“Regardless of how you view Trump and his positions, his election has led to a deep, deep sense of uncertainty and that will cast a long shadow over Davos,” said Jean-Marie Guehenno, CEO of International Crisis Group, a conflict resolution think-tank.
Moises Naim of the Carnegie Endowment for International Peace was even more blunt: “There is a consensus that something huge is going on, global and in many respects unprecedented. But we don’t know what the causes are, nor how to deal with it.”
The titles of the discussion panels at the WEF, which runs from Jan. 17-20, evoke the unsettling new landscape. Among them are “Squeezed and Angry: How to Fix the Middle Class Crisis”, “Politics of Fear or Rebellion of the Forgotten?”, “Tolerance at the Tipping Point?” and “The Post-EU Era”.
The list of leaders attending this year is also telling. The star attraction will be Xi Jinping, the first Chinese president ever to attend Davos. His presence is being seen as a sign of Beijing’s growing weight in the world at a time when Trump is promising a more insular, “America first” approach and Europe is pre-occupied with its own troubles, from Brexit to terrorism.
British Prime Minister Theresa May, who has the thorny task of taking her country out of the EU, will also be there. But Germany’s Angela Merkel, a Davos regular whose reputation for steady, principled leadership would have fit well with the WEF’s main theme of “Responsive and Responsible Leadership”, will not.
‘REJOICING IN THE ELEVATORS’
Perhaps the central question in Davos, a four-day affair of panel discussions, lunches and cocktail parties that delve into subjects as diverse as terrorism, artificial intelligence and wellness, is whether leaders can agree on the root causes of public anger and begin to articulate a response.
A WEF report on global risks released before Davos highlighted “diminishing public trust in institutions” and noted that rebuilding faith in the political process and leaders would be a “difficult task”.
Guy Standing, the author of several books on the new “precariat”, a class of people who lack job security and reliable earnings, believes more people are coming around to the idea that free-market capitalism needs to be overhauled, including those that have benefited most from it.
“The mainstream corporate types don’t want Trump and far-right authoritarians,” said Standing, who has been invited to Davos for the first time. “They want a sustainable global economy in which they can do business. More and more of them are sensible enough to realise that they have overreached.”
But Ian Bremmer, president of U.S.-based political risk consultancy Eurasia Group, is not so sure.
He recounted a recent trip to Goldman Sachs headquarters in New York where he saw bankers “rejoicing in the elevators” at the surge in stock markets and the prospect of tax cuts and deregulation under Trump. Both Goldman CEO Lloyd Blankfein and his JP Morgan counterpart Jamie Dimon will be in Davos.
“If you want to find people who are going to rally together and say capitalism is fundamentally broken, Davos is not the place to go,” Bremmer said.
PACE OF CHANGE
Suma Chakrabarti, president of the European Bank for Reconstruction and Development (EBRD), believes a “modern version of globalisation” is possible but acknowledges it will take time to emerge.
“It is going to be a long haul in persuading a lot of people that there is a different approach. But you don’t have to throw the baby out with the bath water,” he told Reuters.
Still, some attendees worry that the pace of technological change and the integrated, complex nature of the global economy have made it more difficult for leaders to shape and control events, let alone reconfigure the global system.
The global financial crisis of 2008/9 and the migrant crisis of 2015/16 exposed the impotence of politicians, deepening public disillusion and pushing people towards populists who offered simple explanations and solutions.
The problem, says Ian Goldin, an expert on globalisation and development at the University of Oxford, is that on many of the most important issues, from climate change to financial regulation, only multilateral cooperation can deliver results. And this is precisely what the populists reject.
“The state of global politics is worse than it’s been in a long time,” said Goldin. “At a time when we need more coordination to tackle issues like climate change and other systemic risks, we are getting more and more insular.” (Additional reporting by Ben Hirschler; Editing by Pravin Char)