The theme of the World Economic Forum, which opened in Davos on January 26, is Shared Norms for the New Reality. It will address the problems that led to the global financial and economic crisis of 2008 and 2009, but it is unlikely that any solutions to global risks will be found during the five-day meeting. Nor should we expect the international community to find solutions after Davos.
The global economy is running a high fever, but the economic doctors only seem able to treat the symptoms, not cure the disease. And now that the crisis is all but over, why reopen old wounds?
History repeats itself
No binding decisions are ever made at Davos. Rather, the forum offers a chance for global economic and political leaders to coordinate their actions. But the opinions expressed there often lead to important international economic and political decisions.
However, the elite club's influence on the global economy has become diluted since it opened its door to other nations. The global economic powers, eager to share responsibility during the crisis, invited in countries whose role in the global economy is insignificant.
But this is only one problem, and not even the biggest one.
The biggest problem, according to the forum's report entitled Global Risks 2011, Sixth Edition, is that "macroeconomic imbalances, fiscal crises in the developed economies, massive unfunded social liabilities and weak financial markets" are inherent to the global economy, and the only way to solve these problems is by dismantling the system.
This is obviously out of the question, and so global leaders continue to search for new ways to maintain the status quo, while shifting burdens onto future generations.
This is why problems seem to appear out of the blue, even though they were years if not decades in the making. The Global Risks 2011 report (http://riskreport.weforum.org) highlights five "risks to watch," including "demographic challenges adding to fiscal pressures in advanced economies and creating severe risks to social stability in emerging economies."
But these problems were already thoroughly examined in The Limits to Growth, a 1972 book by Donella Meadows, Dennis Meadows, Jorgen Randers, and William Behrens III, which models the consequences of a rapidly growing world population and finite resources.
That book shook up the world, prompting researchers, politicians and economists to join the debate on how the economy can overcome possible environmental, resource and other limitations.
Bubbles vs. Limits
Economists do not know how to overcome the limits to growth, but they have found a way to compensate for the depletion of mineral, labor and other resources in developed countries. The solution is simple: shift the problems (and benefits) of production from one part of the world to another, from the West to Asia. This is what globalization is all about.
However, globalization has not spared the world new problems. Moving production far away from consumers has created the need for massive transportation infrastructure, while the extended commodity chains have accelerated the monetization of the global economy.
This has resulted in the formation of a financial superstructure that is seen by many as one of the main risk factors. Indeed, the more liquidity financial institutions have, the bigger the fluctuations in the financial market. The money accumulated in a financial bubble exceeds the money in the non-financial sector many times over.
This is a thorn in the side for many people, but what can they do if it is inherent to the modern economy? This is probably why the authors of this year's Davos report agree that the capacity of the global economy has been exhausted, yet warn against turning away from globalization, which many economists view not as a means to increase wealth but as the main virtue of modern society.
Ten more years of petro-prosperity
The Davos forum will likely only identify these global problems, focusing instead on more manageable issues.
Andrei Ostrovsky, deputy director of the Institute of the Far East at the Russian Academy of Sciences, believes that one problem that is sure to come up at Davos is the revaluation of the Chinese yuan, or renminbi (RMB) - something the United States, suffering from a huge trade deficit, has long been advocating.
China does not want the RMB to appreciate because this will reduce its exports. Ostrovsky also said this would attract speculative capital to China, creating additional problems for the country.
No one would benefit from more problems in the Chinese economy, especially the United States, which depends on Chinese imports. Attempts to replace cheap Chinese imports would send prices sky-high and provoke public discontent.
Meanwhile, Russia needs the Chinese economy to continue to grow rapidly. China, which started importing oil in the mid-1990s, greatly contributed to the rise in oil prices since then. Hydrocarbon exports are the foundation of the Russian economy, and so Russia's economic prosperity depends on China.
Russian leaders have made speeches about ending the country's dependence on petrodollars more than once. Foreign experts usually applaud their rhetorical support for a new, knowledge-based economy, but Russian analysts remain wary.
"So far we have done nothing to reach this goal," said Leonid Grigoryev, a professor at the Moscow Higher School of Economics. "A program, a speech, one new factory - these are not evidence that we are overcoming our dependence on oil. Evidence of this would be the creation of a large number of jobs for skilled professionals."
Unfortunately, little progress has been made on this front.
So that's the bad news. The good news is that the Chinese economy will continue to grow by 8% to 10% annually for the next ten years, so Russia can expect to live comfortably off its oil and gas for at least another decade.
The views expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
