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2017-01-14 16:12:09
Will a ‘Slap in the Face’ From Voters Revive Davos Agenda, or Daze It?

NEW YORK — In the battle for global economic supremacy, is Davos Man any match for Donald J. Trump?

Coined by the political scientist Samuel P. Huntington, the term “Davos Man” refers to an economic elite who built unheard-of fortunes on the seemingly high-minded notions of free trade, low taxes and low regulation that they championed. And they were not the only beneficiaries, according to their reasoning. What benefited them would benefit men and women on the lower rungs of economic life around the globe.

But the Great Recession, and the years of slow growth that followed, put an end to that kind of blue-sky optimism across the economic spectrum.

Indeed, the populist surge of 2016 is seen by many as a repudiation of the economic policies advocated for decades by global executives at the World Economic Forum in Davos, Switzerland, and by political leaders from both sides of the aisle, including George W. Bush and Barack Obama in the United States, and David Cameron and Tony Blair in Britain.

It is an issue that is sure to be front and center as the 2017 conference begins on Tuesday.

“A slap in the face, a wake-up call — whatever you want to call it — the people left behind by globalization feel abandoned by the political elite,” said Nariman Behravesh, chief economist at the research firm IHS Markit.

In terms of real economics, however, things are more complicated. Despite dire warnings of the financial panic a Trump victory would bring and the economic fallout that could attend Britain’s decision to exit the European Union, neither has come to pass — at least not yet.

Wall Street rallied 6 percent after Mr. Trump’s victory in November, and the Dow Jones industrial average is flirting with a record 20,000. Consumer confidence is high in the United States, and other economic signals, like hiring and retail sales, are also pointing in the right direction.

In the meantime, after initially predicting a steep drop in growth after the “Brexit” vote in June, the Bank of England reversed course in November and raised its outlook for the British economy in 2017. London’s FTSE 100 has risen 14 percent since the vote.

Even in Mexico, a prime target of Mr. Trump’s, the stock market has recovered some of its losses since Election Day. And Japan’s Nikkei index has jumped 13 percent since then.

Of course, positive investor reaction does not mean that Mr. Trump’s agenda is smart policy, or that the Brexit vote was the right call. Wall Street has a long history of assuming that the worst will never come to pass, as anyone who worked at Lehman Brothers can attest.

But the resilience of the economy in the United States and abroad suggests that there is more underlying strength than many may believe.

“The most recent era of globalization has hit a brick wall, but the wall is political, not economic,” said Josh Green, chief executive of Panjiva, a data analysis firm that tracks global trade. “This isn’t the end of global trade.”

Instead, Mr. Green said, the task for policy makers and Davos types alike is to see to it that the benefits of globalization and free trade spread more widely.

“I have to say I continue to be an optimist,” he said. “Despite the volatility, we will look back on this as the beginning of a new era of politically and economically sustainable globalization.”

“There’s a disconnect between how people are voting and how people are shopping,” he added. “The holiday season was strong, and people are going to the mall or online and buying products from all over the world.”

Whether or not Mr. Green is right, it is true that when Mr. Trump takes over from President Obama on Friday — the final day of the Davos conference — he will inherit an economy that is fundamentally solid.

If anything, the outlook for the American economy is better than it was at this time last year. Most experts expect growth to surpass 2 percent on an annual basis this quarter, more than twice as fast as the pace in the first quarter of 2016.

While a stronger dollar and the interest rate increases that the Federal Reserve has signaled will come in 2017 could be a drag, both result from more economic strength, not less.

“In terms of how to evaluate the global economy, we reserve a special place for the business cycle in the U.S.,” said Ben Mandel, global strategist with J. P. Morgan’s Multi-Asset Solutions unit. “And we’re fairly comfortable with the outlook.”

Sentiment is high among businesses and consumers in the United States, he said, and if Mr. Trump follows through on his plans to raise infrastructure spending, that could serve as an important stimulus after years of slow growth.

Mr. Behravesh, who will attend the Davos conference this year, said the fallout from the voter backlash against globalization would depend on just what kind of populist policies were implemented in its wake.

“It all depends on whether it’s pro-growth populism or more protectionist populism,” Mr. Behravesh said.

The protectionist variety would mean stiff tariffs on goods imported into the United States, and retaliatory action by major trading partners like Mexico and China. That would hold down growth throughout the global economy, he said.

Pro-growth populism would amount to moderate tax cuts and deregulation, along with an infrastructure investment plan big enough to actually move the economic needle.

That combination — minus the tariffs and trade wars — could boost estimated annual economic growth to 2.6 percent or more in 2018 from 2.3 percent this year and 1.6 percent in 2016.

Over the long term, there is more to worry about economically, especially if other nations in Europe follow Britain’s lead in moving away from a common market, or if the Trump administration prompts a global re-evaluation of the benefits of free trade.

“It feels good to rebel when things are going badly, but Europeans and Americans are going to be worse off for the destruction of trade,” said Nicholas Bloom, a professor of economics at Stanford. “But Brexit is even more worrying than Trump. Brexit is permanent, but Trump could be out in four years.”

Still, Professor Bloom said, he understands why the Davos economic agenda has fallen so far out of favor. “I was astounded that for so long rising inequality hadn’t affected politics,” he said. “Then, much like the Arab Spring, things suddenly snapped.”