A funny thing happened to the way of the forum, says James Meadway

The annual gathering of the World Economic Forum continued in the luxury Swiss mountain resort of Davos. Discussion amongst the self-proclaimed global elite last week centred on the “polycrisis”, with the familiar handwringing about the world’s problems that has become a feature of Davos since at least the financial crisis of 2008. “Polycrisis” is a word you’re likely to hear more of this year as a way to describe our hideous combination of global afflictions, from the brewing recession to climate change, to the geopolitical tensions that Russia’s invasion of Ukraine made only too apparent.

But how influential is Davos, in any case? Many of the world’s most influential heads of state weren’t there – Joe Biden remained in Washington, China sent a vice premier. Vladimir Putin, unsurprisingly, was not around. Germany’s Olaf Scholz put in an appearance, but otherwise leaders from most of the world’s largest economies were notable by their absence. The World Economic Forum provoked a great deal of chatter online with its call for a “great reset” after Covid, but the truth is that Davos has always functioned as little more than a talking shop: a way of registering the various concerns of the world’s rich and powerful, but with a limited capacity to meaningfully shape events.

And how could it? The fundamental premise of global capitalism is that it is based on competition. It is competition, initially between companies for sales and markets, that shapes the system as a whole: the giant multinational companies who dominate the world economy are typically in direct competition with each other for sales – so Apple competes with Samsung which competes with Huawei for mobile phone sales, for example. They all have a very general interest in making sure profits are generated but, in any specific market, it is typically competition that rules.

This isn’t always the case. Sometimes major producers will get together to try to disrupt that competitive process. The most famous such cartel, globally, is the Organisation of Petroleum Exporting Countries, OPEC. This is made up of some of the largest oil producing countries on the planet, now also including Russia, which meet regularly to try to alter the global price of oil by changing how much oil they will produce. But this kind of overt collaboration is very unusual (and typically illegal, if it takes place inside a country).

What we’ve started seeing more of in recent years, instead, is that governments around the world are looking to offer more direct support to companies based in their territories – or, sometimes, to knock out competitors to their national companies. Take Huawei: years of Chinese government support, helping to, for example, fund research, have seen Huawei grow into one of the largest and most advanced technology companies on the planet. It not only makes mobile phones that can match or better the market-leader, Apple; it also can supply crucial systems for the next generation of 5G communications technology quicker and cheaper than anyone else. It was that threat of competition, far more than security concerns, that drove Donald Trump’s government to ban the company from supplying 5G equipment. As the former head of Britain’s National Cybersecurity Centre, Ciaran Martin, has said, these security concerns were always overblown.

Or take the announcement last week that the European Commission would be looking to relax its very strict rules on “state aid” across the Continent. These are the rules that are supposed to prevent members of the EU giving subsidies to companies, on the grounds that this would create “unfair” competition inside the EU. They came up in the Brexit debates, with the pro-Brexit side arguing that if the EU’s state aid rules were ditched, the UK could, for example, subsidise new, high-technology firms – just as China did with Huawei.

But now the EU is weakening its own rules in response to the US government’s Inflation Reduction Act, which will see billions of dollars of government funding directed into green technologies. The EU doesn’t want to see its own companies lose out in the new markets for renewable energy and “cleantech”, so it is scrambling to find ways to offer subsidy support – matching or, it hopes, beating the US. The drive to decarbonise the world and get to a low-carbon future is feeding directly into a new trade war between the major power blocs – cut-throat competition between companies being backed up by government support.

This all has little to nothing to do with Davos. There was certainly a lot of chatter there about the environment and “net zero”. But when push comes to shove, it’s competition between different firms and, increasingly, different firms backed up by their own governments that determines what happens in the world. Competition, more than conspiracy, is what drives capitalism.

James Meadway is an economist and director of the Progressive Economy Forum, an independent thinktank (progressiveeconomyforum.com)