Davos – in avalanche country – conceals an overriding fragility | Larry Elliott

There are more beautiful towns in Switzerland than Davos but the high alps that ring the valley in which it sits are picture-postcard perfect, especially when the rising sun kisses the mountain tops at dawn. But appearances can be deceptive and the snow defences that girdle the slopes are a reminder that this is avalanche country, stunning yet fragile.

This is something members of the 1% would do well to remember as they gather in for the annual meeting of the World Economic Forum this week.

A synchronised upturn in the global economy has dispelled the pessimism that has been around ever since the financial crisis of a decade ago. Booming stock markets mean the billionaires who will spend the next few days emoting about inequality are considerably richer than they were a year ago.

Last January, the fear was that the world would never shake off the 2008 banking meltdown blues. Now there is talk of a return to the Great Moderation, the period in the late 1990s and early 2000s when growth was robust and inflation was low.

Yet, the Great Moderation was always shakier than it looked at first glance, built as it was on foundations of debt, speculation, rising asset prices and a world divided between countries running trade surpluses and those deficits. As the WEF noted in its Global Risks report last week: “The global economy faces a mix of long-standing vulnerabilities and newer threats that have emerged or evolved in the years since the crisis.” Talk of a new Great Moderation looks premature. The Great Fragility would be closer to the truth.

Let’s start with the financial markets, where new records are being set for share prices on an almost daily basis even though investors know deep down that a serious correction is coming. All recent evidence suggests that financial markets are going to get more bullish, which increases the chances of the serious correction becoming a crash.

The bulls are not really interested in anything that questions their rosy view of the world: a rising US budget deficit, higher bond yields, faster than expected increases in interest rates from central banks. Why be worried about a shutdown of the US government when the International Monetary Fund is becoming more optimistic about growth in America, Japan and the eurozone? Isn’t it likely that Beijing will slow down the Chinese economy without a crash? Aren’t inflationary pressures so muted that central banks are under no real pressure to raise interest rates rapidly? Tax cuts are coming. All of which means share prices have only one way to go: up. We have been here before: in 2006 and early 2007.

The same recklessness applies to the environment, only more so. Global leaders gave themselves a big pat on the back when they signed the Paris climate-change accord in late 2015 but the commitments won’t be enough to prevent a catastrophic rise in global temperatures even in the unlikely event that they are adhered to. The warning signs – the hottest non-El Niño year on record, a devastating hurricane season and the first rise in CO2 emissions in four years – are flashing red. Noting that biodiversity is being lost as mass-extinction rates rise and that air and sea pollution were posing an increasing threat to human health, the WEF made this simple but frightening comment: “We have been pushing our planet to the brink and the damage is becoming increasingly clear.” There will be much talk in Davos this week of creating a carbon-free economy, but the rhetoric that doesn’t really square with an estimated 1,000 flights by private jet into and out of Switzerland for the five-day event.

Davos is like a giant gated community where the 1% can mingle with each other and pretend that they care about the other 99%. Life looks and feels different on the other side of the security cordon, where for many living standards have stagnated or grown only very modestly over the past decade. Mass migration and the revolt against elites suggest that the 99% are fed up waiting for the 1% to come up with a plan to make the world fairer. Business leaders will insist in Davos this week that more investment in education and training is needed so workforces are ready to face the challenge posed by artificial intelligence. There will be no suggestion that their companies could help pay for this if they stopped avoiding tax.

Rallies organised by the Fight Inequality Alliance, which has brought together social movements, women’s rights groups, trade unions, and NGOs from 30 countries, will be taking place this week on mountains of a different sort: mountains of garbage and the mounds gouged out of open pit mines. Mass migration is both an expression of, and a factor behind, a growing social fragility that in turn has bred distrust of politics, politicians and political institutions.

In the 18 years since Bill Clinton addressed Davos – he the last US president to do so – the idea that globalisation would prove to be a unifying force has died a slow death. The world was a different place in 2000 from what it is today: that was before 9/11, before the Iraq War, before the financial crisis and before the collapse of the Doha round of trade talks.

As it has become clear multilateral organisations and institutions cannot be relied upon to deliver the good life, electorates have sought protection from their own governments. From state-sponsored cyberattacks to threats of trade wars, nationalism is on the rise.

So that’s the Davos reality this year: economic fragility, environmental fragility, social fragility and political fragility. And it’s worth remembering that when there’s a threat of an avalanche, one rifle shot or even an untimely bellow can bring the whole mountain down.

Why? Because Donald Trump comes to Davos on Friday.