WEF Thinks the Sky Is Falling and That We Need a New Growth Model

WEF should articulate a global productivity agenda to make a meaningful contribution, because the kind of capitalism we have today is not the reason for slow growth in many developing economies.

If the World Economic Forum is noted for one thing, it is the kind of groupthink one hears at cocktail parties of left-of-center elites. Yes, capitalism is okay, they concede, but we apparently need a new kind of it.

The Global Future Council on the Future of Growth—part of WEF’s 2023-2024 Network of Global Future Councils, which convened senior economists and thought leaders from academia, business, and government to provide “intellectual guidance on new approaches to growth”—released a report arguing that the world must “shift gears,” move out of the “slow growth lane,” and pursue a “better quality of economic growth.”

Ah, who could possibly be against that? What are you, some kind of anti-growth heathen?

The report starts by decrying that “economic growth has been uneven… leading to significant inequalities.” Well, according to the World Bank, the number of high inequality countries fell from 77 in 2000 to just 52 in 2022, the latest year with comparable data. In other words, recent global growth appears to be reducing inequality, not worsening it.

Of course, no cocktail party report can get away without the requisite hand-wringing about climate change. The WEF report criticizes the fact that only 50 countries have reduced CO₂ emissions. But it blithely ignores the fact that most countries, and the world as a whole, have moved to become significantly more carbon-efficient, with global GDP increasing much faster than CO₂ emissions.

The only way to achieve sustained declines in global greenhouse gas emissions—short of embracing “degrowth,” which would consign billions to crushing poverty—is to significantly increase government support for clean energy R&D that will reduce the cost of clean energy to at or below that of dirty fossil fuels. (Bizarrely, WEF can’t seem to make up its mind whether it considers degrowth an evil notion or a serious policy option.)

Fusion energy looks extremely promising if it works. But the idea that some new form of capitalism can solve climate change, or that countries will willingly pay more for energy to save the planet, is wishful thinking.

Even more bizarre, the Global Future Council suggests that this new capitalism would involve rich countries pouring hundreds of billions of dollars into poorer countries to help them afford expensive clean energy. All in the name of getting the entire world to embrace “green growth.” This borders on Orwellian logic. You do not get growth from spending more on something when you could spend less. That is called degrowth…

The report also calls for “bringing countries that have been left behind back onto the growth ladder,” particularly in Africa. But the kind of capitalism we have today is not the reason for slow growth in Africa, India, and many other developing economies. The causes are largely twofold.

First, China’s dominance in low-wage manufacturing has absorbed many of the opportunities these kinds of countries historically relied on to industrialize. Yet the last thing WEF will do is criticize Beijing.

Second, in most of these nations, corruption and insufficient economic governance are the primary drivers of stagnation. And let’s not forget the European Union’s ban on GMO crops, which effectively consigns large portions of African agriculture to persistently low levels of productivity.

If capitalism were truly the problem, why have certain well-governed African economies such as Botswana and Mauritius enjoyed strong productivity growth?

And, like anything “green,” any report today also has to include AI. Don’t worry, WEF does not disappoint. Artificial intelligence, we are told, is harmful because it will be used more in high-income nations, given that wages are lower in developing economies. But why is AI different from any other efficiency-enhancing process technology introduced over the past century? It is not.

While expensive automation may make less sense in low-income countries, these economies have far more low-hanging fruit available by adopting efficiency practices already common in advanced economies. These countries could reduce regulatory protection for small, informal producers, eliminate labor regulations that discourage firms from scaling, and improve logistics and infrastructure. None of this is rocket science. The barriers are corruption and bureaucracy.

Rather than focus on these problems—after all, we certainly wouldn’t want to blame the “victim” for its own policy failures—the Global Future Council report focuses on… skills. The supposed solution to everything.

But not just any skills. Get ready for it: green skills. Skills so workers can produce expensive green energy that will likely account for about 5 percent of these nations’ GDP, at most.

And of course, like any good Davos Man manifesto, the report recoils in horror from “geoeconomic fragmentation,” even though China is almost entirely to blame for it through systematic violations of both the rules and the spirit of the global trading system under the World Trade Organization.

The report closes with the following optimistic statement: “Global economic growth may have had several problems so far this century, but with not even a quarter of the 2000s behind us, we have a unique opportunity to transform it into a century of solutions.”

I disagree, but not with the notion that we have an opportunity to accelerate economic growth. Rather, I disagree with the claim that global growth has had “several problems” this century. It has not had multiple problems. It has had just one central problem: Productivity growth has been, and continues to be, too low.

That is because almost no country has a serious national productivity strategy. Instead, many nations, particularly in the EU and within the WEF policy orbit, have turned away from policies that prioritize capitalist growth. Meanwhile, many developing countries remain trapped in corruption, weak institutions, and business environments conducive to stagnation or even outright regression.

This report demonstrates the type of thinking produced when a temporary council of global elites convenes to advance “cutting-edge insights and disruptive ideas toward a balanced growth agenda.” If WEF wants to make a truly meaningful contribution, rather than attempt to rethink capitalism, it should start by articulating a serious global productivity growth agenda. What we do not need are calls for warmed-over socialism dressed up as a “cutting-edge” growth model.