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Quo Vadis World Economy – I: White Darkness at Davos

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A gloomy mood marked this year’s meeting at the rich club Davos. Women were told to take care owing to the explosion of “sex tourism” in Davos, and many millionaires who advocated for vegetarianism and gender equality flew private planes to Switzerland.

Nevertheless, the atmosphere there was dark. Annually released around the time of the Davos Summit, the World Economic Forum (WEF) Global Risk Report presented shocking findings. We are expected to witness social and environmental crises; the cost of living is ranked as the most severe crisis, and “biodiversity loss and ecosystem collapse” is viewed as one of the fastest deteriorating global risks.

Inflation could lead to stagflation, the socioeconomic consequences of which could be severe, given an unprecedented interaction with historically high public debt levels. Global economic fragmentation and geopolitical tensions could also contribute to widespread debt distress.

As if that wasn’t bad enough, the report went on to predict that technology would worsen inequality, food and fuel crises exacerbate societal vulnerabilities, and declining investments in human development erode future resilience.

Is there any cause for optimism in this dark scenario? For the WEF, there is.

‘Stakeholder capitalism’

“What kind of capitalism do we want?” was asked by Klaus Schwab, a WEF founder, in his 2019 Davos keynote.

Schwab thinks there are three models/answers to address the crisis.

The first is ‘shareholder capitalism,’ embraced by Western corporations. In this model, a corporation’s primary goal is to maximize its profits.

The second model is “state capitalism,” which entrusts the government with setting the economy’s direction and has risen to prominence in many emerging markets, not least China.

Third, of course, is the way Schwab also proposes, ‘stakeholder capitalism.’ In Schwab’s own words, it is a model he proposed half a century ago, positioning private companies as ‘trustees of society.’

The WEF founder argues that the single-minded focus on profits caused capitalism to become increasingly disconnected from the ‘real economy.’ This form of capitalism is no longer sustainable. Instead, large corporations must cultivate ‘stakeholder capitalism’ along with governments and multilateral organizations.

When discussing the transition from shareholder capitalism to stakeholder capitalism, Schwab emphasized the significance of the ‘Greta Thunberg effect.’ For him, the Swedish climate activist has reminded us that adherence to the current economic system represents a betrayal of future generations. Moreover, Generation Z no longer wants to work for, buy from, or invest in companies that lack values beyond ‘shareholder values.’

Now some facts

The WEF-painted bleak picture and its calls for ‘sustainable’ capitalism are close to the truth.

The 2022 Global Wealth Report by Credit Suisse estimates that global wealth will have increased to $463.6 trillion by the end of 2021. This is almost 4.5 times the total worldwide output.

Furthermore, international wealth climbed by 9.8 percent in 2021, much higher than the average growth rate of 6.8 percent witnessed since the turn of the century.

Behind this enormous jump are rising real estate prices and stock market growth fueled by credit expansion. That is to say, a significant portion of the rise in wealth can be explained by the enrichment of the richer in the world.

Indeed, the report estimates that by 2020, a mere one percent of the global population (56 million individuals) possessed 45.8% of all wealth, while the other 2.9 billion owned just 1.3%. This ratio changed as follows in 2021: What one percent of the population now owns rose to 47.8 percent of all the wealth. The richest 13% has 86 percent of the total wealth.

According to the inequality report by Oxfam, just four cents in every dollar of tax revenue collected globally came from taxes on wealth.

Income tax collection from the wealthiest in OECD countries has decreased from 58 percent (in 1980) to 42 percent now.

This rate drops to 31 percent when the number of countries in the sample is expanded to 100. In the same sampling set, tax on capital income, one of the significant sources of wealth for the top 1%, has an average rate of just 18 percent. Only three countries have a higher tax rate on capital income than on wages.

International institutions are also pessimistic

The warnings of IMF Director Kristalina Georgieva before Davos are worth remembering. According to Georgieva, a third of the world will face a recession in 2023.

The OECD revised down the IMF’s forecast for global GDP growth from 2.7% to 2.2%. Arguing that the growth ‘has lost its momentum,’ the OECD noted that risks are skewed to the downside.

The World Bank went even further, projecting the global growth rate to be at 1.7 percent and growth in per capita income in all regions of the world to be lower than in the pre-COVID decade.

According to the World Bank, by the end of 2024, GDP levels in emerging and developing economies will be roughly 6% below the levels expected before the pandemic.

In the WEF’s Chief Economists Outlook survey, economists are even more pessimistic. 18% of polled chief economists in public and private sectors said that experiencing a global recession this year is ‘extremely likely.’

One-third of economists expect a global recession and anticipate that the United States and Europe will maintain their tight monetary policies.

All surveyed chief economists predict Europe to grow ‘weakly or very weakly’ in 2023. For the US, 91% forecasted ‘weak or very weak growth.’

In last year’s survey, these rates were 86 percent (for Europe) and 64 percent (for the United States).

Nine out of ten respondents agreed that corporations would feel the effects of low demand and high financing costs. At the same time, six out of ten underscored the rising input prices. For these reasons, many chief economists expect multinational corporations to reduce operational costs to cut expenses.

Huge dismissals at tech giants

What the economists polled by the WEF thought about multinational corporations has taken place for a while.

Having seen exorbitant stock rises and announced huge profits during the pandemic, technology giants began to ‘update’ their operational expenses due to the severe drops in their balance sheets last year.

Expanding their workforces in tandem with the growth of online activities during the pandemic period, American multinational monopolies, such as Alphabet (Google), Meta, Amazon, and Microsoft, started laying off employees as a primary measure against the shrinking industry.

The number of layoffs in the IT industry has reportedly reached 200,000 since the beginning of 2022, according to the website layoffs.fyi, which tracks releases in the technology sector.

In 2023, 67,268 people would have lost their jobs in this industry. About 51,000 people have been dismissed in the previous several weeks by Meta, Amazon, Microsoft, and Google alone. The only giant in the industry that has not announced a layoff so far is Apple.

The tech monopolies, on the other hand, are wallowing in money. Recently, Microsoft announced its profit for 2022 Q3 as $16 billion. If federal regulators had not stepped in to block the deal, Microsoft would have acquired the video game producer Activision Blizzard last year for $69 billion.

Meta reported a profit of $4.4 billion in the third quarter of 2022, although reporting a 52% decrease compared to last year.

Amazon also announced a decline in profits, but the company still made almost $3 billion in the latest quarter.

Layoffs spread across all industries

However, Silicon Valley giants are not an exception in dismissals.

Software giant SAP of Germany has announced it would lay off 3,500 staff, while chemical conglomerate Dow will fire 2,000 workers. Executives at Dow have said that they will cut costs by $1 billion this year.

3M, another American multinational giant, will reduce its staff by 2,500 on the pretext of falling customer demand.

The toys company Hasbro will lay off 1,000 workers, equal to 15% of its current workforce.

10% of employees will be dismissed at Salesforce, 6% at Spotify, 11% at Vimeo, 3% at BlackRock, and 7% at Goldman Sachs.

In the following articles, I will focus on the situation in the USA and Europe.

America

Liberals secure victory in Canada, minority government likely

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The Liberal Party, led by Prime Minister Mark Carney, has reportedly won the early general election held in Canada on April 28.

According to CTV and CBS news channels, Carney retained his position as prime minister with this result, but his party is not expected to achieve a majority needed to form a government alone.

Although the final results have not yet been announced, CBS estimates that the Liberals will secure 158 seats in the 343-seat House of Commons.

The main rival Conservative Party is projected to win 148 seats, the Bloc Québécois 25, and the New Democratic Party (NDP) 10 seats. A majority government in Canada requires 172 seats.

The decision for an early election was initiated by the 60-year-old Liberal Party leader Mark Carney, who succeeded Justin Trudeau after his resignation.

In late March, Carney requested an early election from Mary Simon, the Governor General of Canada appointed by the Queen of England.

According to the normal schedule, the elections were planned for October.

In late December last year, the Liberals’ chances of staying in power seemed quite low due to the rapid decline in Trudeau’s popularity, and polls indicated that the Conservatives were leading by more than 20 points.

However, the leadership change in the Liberal Party allowed the party not only to close the gap but also, according to public opinion polls, to pull ahead of their rivals by a few points.

According to research conducted by Abacus, Carney’s public support (46%) was also higher than that of his Conservative rival Pierre Poilievre (39%) before the election.

Unlike his younger rival Poilievre, Carney is a new name in politics. Carney earned a bachelor’s degree in economics from Harvard University in 1988, where he also played on the university’s hockey team.

He continued to play hockey while earning his master’s and doctoral degrees at Oxford. Parallel to his education, Carney began working at Goldman Sachs, where he served for 13 years in the company’s Boston, London, New York, Tokyo, and Toronto branches.

In 2003, Carney left the private sector to become Deputy Governor of the Bank of Canada, and later served as Senior Associate Deputy Minister in the Department of Finance.

He took the helm of the Bank of Canada in 2007, on the eve of the 2008 financial crisis. His successes in this role led to an offer to return to London in 2013, this time as Governor of the Bank of England.

Carney, the first foreigner appointed to this position, witnessed two significant referendums in the history of the United Kingdom: Scotland’s separation from the UK (which failed) and the UK’s departure from the European Union.

The final weeks of his tenure at the Bank of England coincided with the beginning of another sharp crisis, the Covid-19 pandemic. Carney acquired British and Irish citizenship in 2018 (although he announced plans to relinquish them in 2025).

After leaving the Bank of England, Carney advised the Trudeau government on economic matters and returned to the private sector.

In September last year, he was appointed chair of the party’s economic growth working group by then-Prime Minister Trudeau.

Following Trudeau’s resignation in January 2025, Carney entered the party’s leadership race, his first election, and won an overwhelming victory, receiving approximately 86% of the votes. Along with the Liberal Party leadership, he also took the prime minister’s seat.

According to the Abacus poll, relations with the new US President Donald Trump and the response to his tariff policy were among the most important issues for Canadian voters in these elections, after the cost of living crisis.

Carney described the US tariffs as a “direct attack” on Canadians and stated, “There is no going back. As Canada, we will have to build new relations with the United States.”

Carney is focusing on retaliatory tariffs and diversifying trade partners.

In this context, his first foreign visits as prime minister were to France and the UK; however, the New York Times notes that opportunities to increase exports to European markets appear limited for now.

Carney is not rushing to make a trade agreement with the US immediately and argues that Canada has sufficient leverage to adopt a “wait and see” position.

“My government will make the right deal,” Carney promised.

Even before taking office, Trump had threatened to impose tariffs on Canada and Mexico, citing their insufficient efforts to combat illegal immigration and drug trafficking across their shared borders.

On March 4, 25% tariffs on imports from Canada and Mexico came into effect, but products covered by the trilateral trade agreement were later exempted from these tariffs.

On March 12, the Trump administration imposed 25% tariffs on imported steel and aluminum (Canada is a key supplier of both), and on March 26, 25% tariffs on all automobiles imported into the US, including American brands manufactured abroad.

Trump even threatened on April 23 that he might soon increase the rate for cars imported from Canada, stating, “With all due respect, we don’t need your cars. We really want to make our own cars.”

Carney also promised support for Canadian workers affected by the tariffs, funded by revenue from retaliatory tariffs.

According to information on the Liberal Party’s website, the Canadian prime minister also announced tax cuts that will ease the economic burden on 22 million Canadians, particularly those with middle and low incomes.

Carney also pledges to double the pace of housing construction, modernize the healthcare system, and continue the policy of reducing emissions and using alternative energy sources.

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Pentagon ordered to identify transgender soldiers

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The US military and the Pentagon must determine within 30 days how they will find and identify transgender soldiers and what process they will follow to remove them from the military.

This challenging task may depend on soldiers self-reporting or informing on their colleagues.

A memorandum sent to Department of Defense officials on Thursday, following a note submitted by the Pentagon late Wednesday in response to a lawsuit, ordered the military to establish procedures by March 26 to identify soldiers diagnosed with or receiving treatment for “gender dysphoria” (gender identity disorder).

They will then have 30 days to begin removing these soldiers from the military.

This order expands the presidential executive order signed by President Donald Trump shortly after taking office, which outlined steps to ban transgender individuals from serving in the military. That order had been challenged in court.

A senior defense official said Thursday that they believe there are currently about 4,200 soldiers diagnosed with “gender dysphoria” on active duty, in the National Guard, and the Reserve Forces.

The official, who did not want to be named to discuss personnel matters, said the total cost for psychotherapy, gender-affirming hormone therapy, gender-affirming surgeries, and other treatments between 2015 and 2024 was approximately $52 million.

Approximately 2.1 million soldiers serve in the US military.

Trump and Defense Secretary Pete Hegseth are working to eliminate them, arguing that their medical conditions do not meet military standards.

Under Secretary of Personnel Darin Selnick said in the new note, “The medical, surgical, and mental health limitations of individuals diagnosed with, having a history of, or demonstrating symptoms consistent with gender dysphoria are incompatible with the high mental and physical standards required for military service.”

The memorandum claims that the “lethality and integrity of the military” are “incompatible” with what transgender personnel experience during their transition to the gender they identify with, and states that gender is “immutable, fixed throughout a person’s life.”

Lawyers for six transgender soldiers who filed a lawsuit against Trump’s presidential executive order argued in court filings that the order explicitly expressed “hostility” towards transgender people and demeaned them in the eyes of other soldiers and the public by calling them “unequal and unnecessary.”

Sarah Warbelow, legal director for the Human Rights Campaign, said the new policy puts soldiers in a difficult position and forces transgender soldiers to reveal themselves.

Warbelow said, “Suddenly you’re going to have to out yourself. Other people are going to have to out you. If you have a best friend in the military who knows you’re transgender, under this new guidance, that friend, if you’re a transgender woman, is going to have to refer to you as [male pronoun] “he” and “sir” from today.”

Soldiers are “being forced to choose between the safety of their friends and not following direct orders,” Warbelow said, adding that transgender soldiers may feel pressured to reveal themselves because they know they could be punished if they do not.

On Thursday, US officials said that according to initial figures, approximately 600 transgender soldiers in the Navy, 300 to 500 in the Army, and fewer than 50 in the Marine Corps could be quickly identified. Officials acknowledged that individuals could be identified, for example, through documented medical treatments, and that this number would likely increase.

However, officials stated that the initial figures might be lower than the true total because some soldiers may have joined the military after transitioning and may not have undergone medical or surgical procedures that would identify them.

Officials also warned that they might be limited by health privacy laws regarding what they can distinguish from records and what they can report.

An independent study conducted in 2018 by the Palm Center, which researches LGBT issues, estimated that there were approximately 14,000 transgender soldiers among more than 2 million service members.

The Pentagon’s new policy provides for two exceptions: if transgender personnel seeking to enlist can prove on a case-by-case basis that they directly support combat operations, or if an existing soldier diagnosed with gender dysphoria can prove they support a specific combat need and have not transitioned to the gender they identify with, and can prove they have been stable in their biological sex for 36 months “without clinically significant distress.”

Gender dysphoria occurs when a person’s biological sex and gender identity do not align.

If an exemption is granted, the applicant will face situations such as recognition only of their biological sex in restrooms, barracks, and even formal address like “sir” or “ma’am.”

Warbelow said that transgender soldiers should wait for further clarification from the military and their commanders before taking any steps that could affect their military service, and also noted that ongoing lawsuits could affect this policy.

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OpenAI eyes Google’s Chrome browser amid antitrust trial

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Nick Turley, manager of the ChatGPT unit at artificial intelligence giant OpenAI, said in a court hearing on Tuesday, June 18, that OpenAI would be interested in buying Google’s Chrome browser if a federal court decides to separate it.

As reported by Bloomberg, when asked if they would want to buy Google’s browser, Turley replied, “Yes, we would, just like many other parties.”

Turley was called to testify by the Department of Justice as part of a three-week hearing aimed at determining what changes Alphabet Inc.’s Google should be required to make to its business practices after a federal judge ruled last year that the company had monopolized the search market.

Judge Amit Mehta is expected to decide by August what business practices Google must change.

The Department of Justice has requested that Google be forced to divest Chrome.

Currently, OpenAI’s chatbot ChatGPT has an extension available for users to download on Google’s Chrome browser.

However, Turley stated that deeper integration of Chrome with OpenAI would allow them to offer a better product.

“If ChatGPT were integrated into Chrome, you could offer a truly incredible experience. We would have the ability to introduce users to what an AI-centric experience looks like,” Turley added.

Turley said that one of the most difficult problems the company faces today is distribution, noting that the company had reached a deal to integrate ChatGPT into Apple Inc.’s iPhone but had not achieved any success with Android smartphone manufacturers.

Earlier, a Google executive had acknowledged that the company began paying Samsung Electronics Co. in January to pre-install its Gemini AI application on its phones.

That deal is not exclusive, but Turley said OpenAI had made little progress in discussions with the South Korean company due to Google’s ability to spend more than the startup.

“It’s not for lack of trying,” Turley said. “We just never got to a point where we could discuss concrete terms.”

Later in his testimony, Turley said they were “deeply concerned about being shut out” by some of the large companies in the market, such as Google.

“We have powerful competitors who control the access points for how our products are discovered,” Turley stated. “People discover through a browser or an app store. Real choice fosters competition. Users should be able to choose.”

Launched in November 2022, ChatGPT quickly achieved viral success as one of the fastest-growing consumer software products of all time.

In February, OpenAI reported having over 400 million weekly active users.

Turley stated that the company had exceeded its weekly active user targets for 2024 but did not provide a number.

This week, Google began facing off against the Department of Justice and dozens of state attorneys general over what changes Mehta will order to prevent the company from monopolizing the online search market.

The remedies proposed by the Department of Justice include forcing Google to sell its Chrome browser, licensing search data to competitors, and stopping paid agreements for exclusive positions on apps and devices.

Google argues that the government’s proposal would harm consumers by degrading everyday Google products and would damage US leadership in technology.

If the court orders Google to sell its popular web browser, it would mark the first time a major US company has been broken up by court order since the breakup of AT&T in the 1980s.

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