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Davos 2017

For CEOs, globalization's thrill fades

Kim Hjelmgaard
USA TODAY
Yahoo CEO Marissa Mayer at the World Economic Forum's annual meeting in Davos, Switzerland, on Jan. 22, 2014.

DAVOS, Switzerland — Globalization took another knock Monday with the publication of a report that showed corporate titans around the world have become more skeptical about the benefits of integrating people, companies and governments.

Still, the CEOs surveyed said they are more confident about the growth prospects for their own firms and the global economy over the next year.

The annual survey of chief executives by PricewaterhouseCoopers found that while for the past 20 years business leaders have been largely positive about an increasingly integrated global economy marked by free trade and frictionless capital flows, they are increasingly skeptical about its impact in some areas.

Forty-four percent of business leaders firmly believe globalization has done virtually nothing, for example, to help close the gap between the rich and poor.

The conclusions from the tax-consulting firm were released on the eve of the World Economic Forum's annual meeting in Davos, a gathering attended by some of globalization's biggest cheerleaders.

"CEOs used to be very positive about the ability and benefits of globalization," Bob E. Mortiz, PwC's global chairman, said in an interview. "They saw the world transforming with a few mega-trends: Shifting demographics, a bigger consumer base around the world. There wasn't as much knowledge or focus on the implications of that downstream."

"Today," he added, "(CEOs) are much more articulate about globalization's benefits but also cognizant of where it doesn't do as much."

The report, based on interviews with nearly 1,400 CEOs from 79 countries, revealed that just 13% of corporate leaders feel globalization has "to a large extent" helped solve the problem of income inequality.

PwC's survey comes as new estimates released Monday by anti-poverty organization Oxfam showed that just eight people own the same wealth as the poorest half of the world — more than 3.6 billion people. Oxfam used data from Forbes' billionaires list and Credit Suisse's 2016 Global Wealth report to illustrate the growing gap between rich and poor. )

There was similar recognition of climate- and resource-related downsides in PwC's survey. Only 15% of CEOs strongly felt globalization has helped avert those risks.

Moritz said the findings were in stark contrast to the first PwC CEO survey in 1998, when globalization concerns were absent. The last time the survey included direct questions about globalization was 10 years ago, when 73% of CEOs thought it was good for both developed and developing markets.

The majority of CEOs (60%) in the latest survey still believe that globalization makes it easier to move capital, people, goods and information across borders, enabling more connectivity and creating a skilled and educated workforce. However, worries about protectionism are growing, with 59% of CEOs concerned about restrictive trade policies.

More broadly, the survey found that while CEOs from around the world have plenty to fret over in the year ahead — economic uncertainty, over-regulation, availability of key worker skills and worries about protectionism top the list. They are extremely confident about their companies' growth prospects for the next 12 months. And nearly 3 of 10 (29%), up from 27% last year, believe global growth will accelerate in 2017. Thirty-nine percent of U.S. corporate bosses, versus 33% last year, are confident about revenue growth.

"Over the last few years (American) CEOs have focused on getting their companies more competitive, on ways to get to customers faster, better, cheaper. They have buckled down and done a pretty good job," said PwC's U.S. CEO Tim Ryan, in an interview. "(With the incoming administration of Donald Trump) there's clearly an excitement level that U.S. CEOs have about the anticipation for tax reform. There's also expectations about potential regulation changes and infrastructure spending and job creation. (However) that enthusiasm is tempered by some concerns around trade and what it means if we see some of our trade agreements significantly restructured."

IHS Markit, an international economics consultancy, forecast Monday that global growth will increase from 2.5% in 2016 to 2.8% in 2017 and 3.1% in 2018.

In its economic assessment, IHS Markit said the political earthquakes of 2016 — Britain's shock decision to vote to leave the European Union, the surprise election of Trump, and the steady advance of nationalist movements — have upended conventional thinking about the global economy and have, ironically, brightened the outlook.

"The expectation that the incoming Trump administration will enact sizable fiscal stimulus has increased optimism about the U.S. and the global economies. U.S. stock indexes are at record highs and interest rates and the dollar are rising," said Nariman Behravesh, chief economist at IHS Markit.

"Compared with 2016, the mood in Davos this year can best be characterized as a mixture of anticipation and anxiety," says Behravesh. "On the one hand, the global economic outlook is a little brighter. On the other hand, the rise of anti-establishment, populist sentiment in both the United States and Europe is a huge challenge for global leaders."

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