I’m off to the World Economic Forum in Davos next week, and in case you think I’m dropping names, I should mention that the WEF has an unfathomable hierarchy of participation and my ranking is one step above bottle-washer.

The “system”, I think, is based on random selection, whether you are German, and who pays the most to attend. 

Anyway, unlike a whole subset of my journalistic colleagues, I think the forum generally does good work and, at the very least, its intentions are good. 

The popularity of the forum – 50 heads of state will be attending this year as well as something like 300 CEOs of international companies – is in some ways its own justification. At its best, what the forum does is leverage the splendiferousness and depth of knowledge of its participants.  

But I have to say one of the best things about the WEF is how fabulously it demonstrates how wrong elites – intellectual, corporate and political – can be about the state of the world, and this is especially true when they are pretty certain. And this time last year, there was a strong consensus that 2023 would be economically extremely tough. 

In fact, globally, it was kinda boomy. 

They were not alone of course. This time last year, the World Bank was projecting global economic growth of 1.7%, but it’s likely to come in a little less than double that.

The forecasts concerning the world’s largest and most watched economy, the US, were so wrong that if economists were house builders, the roof would have caved in.

Economist Tyler Cowan points out in a recent Bloomberg column that at this time last year, 85% of economists in one poll predicted a recession in 2023. That was an optimistic view compared with the 100% probability of a recession forecast two months earlier. In fact, the US will probably come in at around 2.5% growth.

Annual risk report

Just to come back to the WEF for a moment – one of the most revealing surveys is the annual risk report (which is not confined to WEF participants). To be honest, it is revealing and not revealing simultaneously.

The idea is wonderfully simple: ask experts to list what in their minds are the biggest risks facing the world over the next two years, and separately the next 10 years. The latest edition of the report was released on Wednesday.

Although it seems like a great idea, to say that this is a lampooned report would be to understate. Critics tend to come from two quarters: the extremes of left and right. The latter feel the WEF is some kind of lobby group for neoliberalism – it is most definitely not. And the right feels it often strays into quasi-wokeness, which, if we are being honest, it often does.

If you have never heard someone effortlessly string together a long list of right-on cliches in a single sentence without taking a breath, you have not listened to some WEF speeches.

One of the problems, I think, with the Global Risks Report, is that if you are forced to identify and isolate global risks, there is a kind of aggregation effect. There are some things you just can’t leave out. 

Take climate change, for example. Climate change is an obvious global risk, particularly in the longer term. But is it really the primary global risk over the next two years, higher than wars, immigration, global fragmentation, economic decline and so on? 

And yet environmental issues have been at the top of the list for years now, in both short and longer-term outlooks – sometimes not at the very top, but always pretty close.

Anyway, it was with this in mind that I took a look at the report to discover something truly astounding. The top five global longer-term risks are all about climate change – appropriately I think. They are extreme weather events, critical changes to Earth systems, biodiversity loss and ecosystem collapse, and natural resource shortages. 

Misinformation, disinformation

But the shocker was on the other side: Misinformation and disinformation came out top. This is a real change.

Extreme weather events were shunted into second place and societal polarisation came third. Inflation was way down in 7th place and economic decline came in ninth.

Misinformation came in higher than interstate armed conflict, which, frankly, I would have put at the top in a heartbeat. (The survey was taken in September, so before the Gaza conflict broke out.)

I think the sudden rise in concern about misinformation is interesting: it’s obviously linked to other issues, like societal polarisation, technology changes and global conflicts. In some ways, it’s the intersection point. 

The report also reflects a kind of global gloominess: overall confidence about the risks in general over the next two years gets larger in the 10-year assessment. In some ways, that’s understandable I suppose. 

The report’s authors say that the combined risks are “stretching the world’s adaptive capacity to its limit”. Is that true? To me, it has touches of slightly overdone urgency for effect: the kind of call to arms that might concentrate minds just before a meeting of global leaders, for example. 

But generally, I do think the world is much more resilient than we tend to believe. 

Which brings us to the question: why were the economic predictions so wrong this year? I don’t know the answer to that, but I suspect it has to do with rational expectations.

The Economist magazine makes the point that although rational expectation models have gone out of favour recently, these models allow for the possibility that inflation can fall rapidly without a recession, “exactly the scenario that caught out forecasters in 2023”. 

The dismal science should be a little less so, the magazine suggests. Perhaps we could all take a lesson there. DM