This year’s Davos summit is over. For the first time in its history, the World Economic Forum (WEF) was held in a month other than January.
From May 23 to 26, the Swiss town of Davos welcomed state leaders from 50 countries, 300 government officials and approximately 2,500 global business representatives, who met to discuss the present and the future.
Instead of relief and hope for a brighter green future dominated by new technologies, in which growth and development are combined with sustainability, the meeting felt rather gloomy, and the focus of the talks was on the threats facing developing countries. countries today – food, financial and fuel crisis and the shadow of war looming over us.
Against the background of all this, a topic that for the last 3 decades seemed unthinkable, made its way and became a leader among the participants – deglobalization.
Today a guest of lider.bg is Kuzman Iliev – economist, lecturer and business consultant, with whom the publication discusses whether such a scenario is possible today and what are the risks of its implementation.
– Hello, Mr. Iliev. We are glad that you are our guest again. Deglobalization has become a major topic at this year’s Davos Summit? Are we witnessing the beginning of the end of globalization? Is it possible, after 30 years of growing economic, social, technical and cultural ties and relations between countries, to now see a change in direction?
– Definitely yes. De-globalization in the economic sense is a bad and dangerous thing. And it’s already happening. The two camps – eastern and western – are already separating. And as a result, addictions flourish – energy, food and raw materials. This is unfortunate because it means that we will not use the efficiency of others and we will have to produce things in which we have no comparative advantage – climate, deposits, know-how.
A recipe for impoverishing and replacing productive peaceful cooperation in the direction of antagonism, international hostility and militarism.
– We have already witnessed huge investments redirected to production facilities near the home in the semiconductor sector, after the global shortage of chips caused by the pandemic. Does efficiency stay in the background at the expense of reliability?
– That’s right – localization and politicization of the supply chain, this is really happening. In the case of batteries, we have noticed that China, through its companies, de facto holds the extraction and processing of cobalt in the Democratic Republic of the Congo, but is also entering the batteries themselves.
In the United States, we have heard voices calling for the nationalization of the oil and gas industry to make it easier to fit into the geopolitical logic of the energy war. By the way, of the 13 new permits in the United States for gas liquefaction plants in Europe, no investment has been made so far.
It takes 7 years to recoup the losses, 20 to make the business profitable. There is no way for Europeans to respond to this economic logic – they are making an accelerated Green Transition. Even the Old Continent is talking about the end of the internal combustion engine by 2030, which is, to put it mildly, adventurous.
We are experiencing such a lack of economic logic in Ukraine now. There is no way to create infrastructure when the ports in the Black and Azov Seas can open in another month. In the business world, it is not the electorate that matters, but the ownership of shareholders. When someone tries to change this for political purposes, it gets worse for everyone economically. Resources are wasted, and they are always scarce.
– Globalization is directly related to the low inflation that most countries have enjoyed in recent decades. According to Dominique Assam, Chief Financial Officer of Airbus, globalization is a “devastating scenario” with a real risk of rising inflation and a major, protracted recession that must be stopped. Is it true?
– That’s right. But the concepts need to be clarified a bit. High prices are first and foremost a function of the ugly printing of money – Kovid-19, the welfare state.
It was spent as if it were global to consume people, but production was de facto crushed by bans and lockdowns. The major central banks of the United States, the eurozone, China and Britain have inflated their balance sheets from $ 5 trillion to $ 32 trillion in 15 years. Add the bank loan – here’s the inflation.
The fact is that prices also depend on the supply of goods, on whether the circulatory system of the trade network delivers the goods from point A to point B. And the supply chain has undergone several major transformations, again political – Brexit, US-China trade war, pandemic and now the war and sanctions.
For both things – a lot of money and the nationalization of trade, garnished with hysteria in every crisis, we actually have very real political wrongdoing, due to crazy ideas.
– The benefits of globalization are not the same and unambiguous for everyone, and this is not the first time we have heard calls for globalization, especially in recent years. Who will be the big losers and will there be winners from such a scenario?
– In general, everyone loses. Some are more prepared because they still have a chance to survive energy and calories, others are at a disadvantage. Middle East, North Africa – they are at risk of starvation. Literally. The United States has fossil fuels and the dollar, the world’s reserve currency, with about 70 percent of the world’s foreign exchange reserves. China and Russia have raw materials, rare earths and food.
In the strangest position is Europe, which imports from China some 98-99% of its rare earth elements for the batteries with which it will make the Green Transition, for example. However, Europe has strategic raw materials such as precious and industrial metals, which it does not study, mine or develop. In fact, he doesn’t even know exactly how many.
Bulgaria is the third largest producer of industrial copper in Europe, a kind of leader in this, but we do not know exactly how much we have, how much zinc, gold, tungsten, lead… All important things that in the coming decades will be key for the whole continent . I would say that the problem is underestimation, arrogance and refusal to face reality.
So far, problems and proceedings have been easily exported, with “inequality” and “gender”. We are now talking about energy and raw material poverty, about strategic security. We were showered with ice or hail.
– Will deglobalisation slow down the development of new technologies and innovations, or have they made decentralized production and implementation possible on the ground, making expensive and increasingly insecure transport of goods an unattractive option, thus forcing globalization to recede?
– Technology is a recipe. The point is to be able to implement it for mass production. This happens when you have accumulated capital – machines, raw materials, human resources. De-globalization of the economy has another face – political globalization – decisions will be made at the central political level in the respective blocs.
And this inevitably leads to chaos and inefficiency, that is, decapitalization and less economic power. There is no way these processes will not have an extremely negative impact on all of us – locally and globally. The only cure is for good ideas to prevail again, but with the rare exceptions of media like yours, I see a predominance of panic and propaganda, for which we will pay a high price.
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