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From Davos, a View on the State of Globalization

Attendees at Davos will strive to restate the case for free trade and investment
Davos, Switzerland, on Jan. 13
Davos, Switzerland, on Jan. 13Photograph by Gianluca Colla/Bloomberg

If globalization has a spiritual home, it’s Davos, the Swiss ski resort that will play host to a who’s who of the planet’s decision-makers from Jan. 22 to 25. The annual meeting of the World Economic Forum is devoted to “improving the state of the world,” with the ever-present subtext that more integration is better. Davos Man’s abiding belief that those two goals are compatible has taken a beating in recent years. The financial crisis that struck in 2008 raised serious questions about whether globalization had become more of a threat than a boon. We learned the hard way that the world financial system had become like an electrical grid in which a single tree falling across a high-tension line could cause blackouts of homes and businesses hundreds of miles away.

Today, even as the Great Recession recedes from memory, its ravages are visible. Prior to the crisis, global commerce was growing twice as fast as global economic output, says Bhanu Baweja, who heads emerging-market cross-asset strategy at UBS. Trade plummeted after the crisis and is only now regaining momentum. Cross-border capital flows are 60 percent of what they were before the meltdown, according to the McKinsey Global Institute. Charles Collyns, who was assistant U.S. Treasury secretary for international finance until joining the Institute of International Finance as chief economist last year, puts it bluntly: “Globalization has stalled.”