Weathering the storm with stones in their hands

Kim Byung-yeon
The author is a chair professor of economics at Seoul National University.

The World Economic Forum setting in Davos, Switzerland, annually poses as a prestigious contest of orations and debates by the world’s most elite and powerful. This year brought together 380 leaders and senior policymakers, 200 intellectuals and scholars, and nearly 3,000 businessmen and journalists from around the world. I attended the addresses and lectures of global leaders and senior officials and sessions on geopolitics and economy to seek insight and answers to the myriad of challenges engulfing the global community.

With the growing prospect of the Russia-Ukraine war drawing out beyond this year, European leaders stood firm. French President Emmanuel Macron reiterated “Russian cannot and will not win in Ukraine.” Ukrainian President Volodymyr Zelensky, speaking in person in Davos for the first time since Russia launched a full-scale invasion nearly two years ago, made a passionate plea for weaponry support to protect Europe from Russia. Censures on Russia dominated the skull sessions. When a former British diplomat questioned whether the West’s non-engagement policy had emboldened Russia to start a war, a minister from an East European government shook his head to retort it as a naïve thought. Neighboring governments think they could be next if Russia is not stopped in Ukraine.

The outcome of the Ukraine war could hinge on the results of the U.S. presidential election and developments in Russia. If Donald Trump wins a second term, he would wish to end the war as soon as possible. The change in Washington’s approach under Trump could seriously impair the U.S. relationship with Europe as well as the military alliance NATO.

Some practical political pundits in the United States advise Washington not to waste its resources on Europe or the Middle East, as its priority should be dealing with China. Changes within Russia also could play as a crucial factor to the war outcome. Russians are growing weary of the war and increasing death toll and battered economy from the interest rate running at 16 percent and exodus of foreign capital. According to a survey by a private organization, the respondents wishing the war to end at the current occupation level soared to 28 percent in September 2023 from 11 percent in the summer of 2022.

U.S.-China rivalry will neither deepen nor improve this year. Experts agree that both governments cannot afford worsened tensions as China is busy tending to its economic troubles while the United States is preoccupied with the presidential election in November. U.S. and Chinese leaders agreed on a truce during a summit meeting in San Francisco last November. Chinese Premier Li Qiang — the highest-level Chinese official to speak at Davos since President Xi Jinping in 2017 — proposed cooperation with Western societies in five core areas — macroeconomic policy coordination, supply chains, science and technology, green development, and an inclusive world economy. He reminded that China managed to grow 5.2 percent last year without stimuli measures and assured the economy could grow steadily to provide impetus to global economy to invite foreign investment. He delivered “answers” rather than facts in a careful yet rowdy tone. A Chinese attendee said Li’s words could not be trusted.

How the cooling Chinese economy can gain traction is uncertain. But former Australian Prime Minister Kevin Rudd disagreed with the assumption that the Chinese economy has hit its peak. “The peak China narrative is intellectually and analytically flawed,” he said, as he saw “untapped potential” in the consumer market that can drive long-term growth for China.

His argument was met with some skepticism as one attendee questioned how consumption could increase when Chinese do not have faith in government policy and the country’s future. I asked if restructuring of state enterprises and banks, which is pivotal for China’s long-term growth, was possible, and an ambiguous answer came. A Chinese economist said that green growth translated into a structural reform. But migration to green and clean energy will not help much to accelerate growth though it can help the wellbeing of the people. It could be safe to say that the days of staggering growth are gone for China.

What effect can the geopolitical developments have on North Korea? The protracted Russia-Ukraine War has both the upside and downside for North Korea. Beijing is expected to contain Pyongyang from nuclear or other dangerous provocations so as not to worsen its ties with Washington. In my previous column, I bet against the odds of North Korean leader Kim Jong-un attempting a risky provocation this year, given his domestic complexities and external conditions. The biggest challenge for us will come when the three axes of China, Russia and North Korea make a simultaneous movement. A geopolitical storm can hit us at any time as long as the structural dangers from the three countries and the hegemonic rivalry persist.

Despite the looming storm at sea, no one at the steer seems reliable to navigate us to a safe harbor. The Davos forum pins hopes on advances in science and technology, macroeconomic maneuvering, and private power. Will the three wheels be strong enough to weather the storm? Who is driving the carriage? Captains of each country these days actually pose as the source of turmoil. How ready are we for geopolitical storms? We can hardly be hopeful as our politicians only seem to have stones in their hands.

Translation by the Korea JoongAng Daily staff.