World Economic Forum in the ‘New Reality’
Anil Kumar Satapathy
This year business leaders, international political leaders, selected intellectuals and journalists will gather at the Swiss town of Davos for the ritual annual meet. This time the theme of the event is ‘Shared Norms for the New Reality’, underlining the increasingly complex and interconnected nature of the world.
Preceding this year’s meet was the a world economy that is yet to come out of the grip of the 2008 financial crisis, a sharp rise in food prices across the globe and most importantly the currency war.
The 2008 financial crisis showed us how each and every country depends on the other. If inflation is plaguing one country at the far west, the eastern ones too come into the grip of it. It doesn’t matter how well one country protects its financials, it cannot totally isolate itself if other countries are falling.
It is one of the biggest realities of today’s world that became amply clear in these last three years. Top 20 economies of the world too underlined this in the G20 finance ministers and central bank chiefs’ meet in June 2010. The top economies arrived at a consensus then not to cut stimulus too soon as it will jeopardise the economic recovery.
Later in November last year’s G20’s Seoul meet the same leaders too agreed on shunning currency devalutions. But much water has passed beneath since. The United States and China are still at loggerheads on the topic, each accusing the other of devaluating its currency to promote export.
The currency war is pushing up the value of other - Yen, Euro etc., adversely affecting the economies of Europe and Japan. Now any recessionary trend is also bound to affect the Asian as well as African countries.
Despite numerous meets, an amicable solution is yet to come out. Another big worry is the global food price rise.
Recently, the Food and Agricultural Organization said that the world faces a "food price shock" after the agency`s benchmark index of farm commodities prices shot up in December, exceeding the levels of the 2007-08 food crisis.
The warning from the UN body comes as inflation is becoming an increasing economic and political challenge in developing countries, including China and India, and is starting to emerge as a potential problem in developed nations.
The recent food crisis came after the 2007-08 crisis that saw riots for food in several, mostly poor, countries.
While India is grappling with food price inflation that rose to more than 18 percent in the year ending December, China has implemented direct controls to limit food price increases and vowed to eliminate speculation in commodity markets.
The rise in food prices is mainly due to floods in Australia, drought in Argentina and Russia and potentially crop damaging frosts in Europe and North America. But what worries analysts are that the protectionist measures that comes with it. Last year, Russia imposed a ban on the export of wheat – pushing of international wheat prices; this year Pakistan imposed a ban on exports of onion to India which is facing an acute shortage of the commodity.
Notably in 2008, at least 13 countries including Argentina, Cambodia, Kazakhstan, China, Ethiopia, Malaysia and Zambia imposed food export bans or export taxes, according to reports.
A lengthy spell of high food prices would result in disaster in the poorer countries. In 2007-08, countries like Haiti, Egypt and Cameroon saw vicious riots for food. These may turn into larger humanitarian issues if not checked at the earliest.
World Economic Forum, which sees intellectuals, journalists, world leaders and businessman’s gathering in a causal environment, is credited with many initiatives in the past. The Global Health Initiative (2002), Global Education Initiative (2003), and the Partnering against Corruption Initiative (PACI) are to name a few. The absence of formal politics in this forum is an ideal place for these persons to come out of their shell and discuss freely the real issues concerning the world today.
Hopefully, this year’s meet would bring something to cheer for.