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Davos: Honey Melons Hang on Bitter Vines

January 23, 2017 by Paul Taylor

Political, corporate, and academic leaders attending Davos this year debate globalization, digitization, income inequality and how to respond to the rise of populism.

This year’s World Economic Forum meeting in Davos will perhaps be most remembered for the impassioned defense of globalization delivered by China’s President Xi in the face of a rising tide of protectionism and populism in the U.S. and Europe.

Meanwhile some U.S. business leaders, expressed cautious optimism that the incoming Trump administration in the U.S. will be good for the U.S. economy and brushed aside concerns that trade and other policies of the new administration may be counterproductive.

In his speech, Xi acknowledged that globalization had become a ‘Pandora’s Box,’ benefiting certain segments of society while harming others. “It was the best of times, it was the worst of times,” Xi said, quoting Charles Dickens.

But the Chinese leader argued forcibly that globalization was not to blame for the global financial crisis, which he attributed to an excessive pursuit of profits. He said: “Voices against globalization have laid bare pitfalls in the process of economic globalization that we need to take seriously…..” But he noted, “As a line in an old Chinese poem goes, ‘Honey melons hang on bitter vines; sweet dates grow on thistles and thorns.’”

“In a philosophical sense, nothing is perfect in the world. One would fail to see the full picture if he claims something is perfect because of its merits, or if he views something as useless just because of its defects. It is true that economic globalization has created new problems, but this is no justification to write economic globalization off completely. Rather, we should adapt to and guide economic globalization, cushion its negative impact, and deliver its benefits to all countries and all nations.”

In his final speech as U.S. Vice President, Joe Biden, urged the global community to “act urgently to defend the liberal international order.” At a time of uncertainty we must double down on the values that made Western democracies great and not allow the ‘liberal world order’ to be torn apart by destructive forces, he said.

Like President Xi, Biden also acknowledged that globalization had “not been an unalloyed good,” but stressed that international trade and greater integration had lifted millions of people out of abject poverty, improving education and access to healthcare in the process.

“I am a free trader and a supporter of globalization, but it has deepened the rift between those racing ahead at the top and those struggling to hang on in the middle, or falling to the bottom,” he said. “Our goal should be a world where everyone’s standard of living can rise together.”

He warned that the mounting pressure on political leaders in liberal democracies reflects the rise in income inequality and the hollowing out of the middle class, as the rich get richer and people in developing nations see their lives gradually improve.

Underscoring mounting concerns in Davos and elsewhere about inequality, he said the top 1 percent is not paying their fair tax share, and as a result we are seeing social instability increase.  Some technology executives agreed privately that the pace of digitization and globalization has left some semi-skilled workers behind exacerbating income inequality and eating into jobs at the lower end of the income ladder.

While acknowledging these concerns, most corporate executives believe that digital transformation will continue because they need to be able to compete across multiple channels, not just with traditional competitors, but with new industry entrants and disruptors. As Bernd Leukert, SAP executive board member, says in the video below: “It’s not that companies suddenly have other core competencies, it’s just that they have to rethink their business models.”

At the same time, several speakers at Davos emphasized that navigating the new and more complex geo-political landscape in the wake of the Brexit vote and victory of Donald Trump in the U.S. general election will take skill, vision and boldness.

“We need to tap into the big heartedness,” Biden said. “This is a moment to lead boldly,” he added in a nod to this year’s Davos official headline theme, ‘Responsive and Responsible Leadership.’

An important element of that leadership is to promote diversity and inclusion, said SAP CEO Bill McDermott at Davos (see video below).

“The idea of diversity and inclusion is so important ….these young talented people really help us driver our purpose to. improve economies, societies and the environment,” McDermott said.

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