Leadership in Transformation

The Economy of the Next Decade

Governments are inevitably forced to make swift choices. After all, they were not successful in the epidemic. Six million people died worldwide and many more had to grapple with the consequences of the disease. There were also intense fears, anxieties, and desperation. International Money Fund (IMF) remedies suggest “raising rates” but things will go wrong if the supply chain doesn’t improve. If the Ukraine–Russia war continues, there will be global inflation and a crisis in which developing countries will suffer. Now, developments are happening very quickly and at an enormous volume. It is necessary to be prudent and practice “reverse thinking.” Of course, current developments hinder trade, investment decreases, and the possibility of a recession looms. The Chinese economy grew 10 percent for ten years, then 7 percent, then 5 percent, and then growth fell to 2 percent, so will China plunge into a crisis? Despite being authoritarian, China’s success is due to its lack of statist manipulations in the economy. It gives importance to individual initiatives. However, with COVID-19, statist practices came to the fore in China; if they switch to statist approaches in the economy instead of the free market, there will be a crisis. Of course, in this process, China clashed with itself. Chinese elites are skeptical of statist practices. It is the first time. A one-person regime naturally brings prejudice. This is the case all over the world, and Putin’s approach is no different.

It was interesting what Professor Stiglitz discussed at the dinner. He said our figures are based on inaccurate numbers. He gave an example as follows:

In the United States, 60 percent of people live in their own home but there are house rents in subsistence figures. For this reason, he warned that if there is a big difference in such figures between economies, take it into account; otherwise, do not look. He asked why rising interest rates would affect the supply chain. We need to invest in the supply chain but how will investments be made if we raise interest rates? Why are we raising US children in poverty? Because not everyone pays for themselves. I fear recession, not inflation. There should be proper taxation, multinational companies should be taxed and environmental taxation should be made.

Some notes from other speakers: Social economies, green transformation, and green investment are essential. The greenhouse gas effect in 54 countries in Africa is 4 percent; jobs and employment should increase in these countries. They will need additional energy in the next 20 years. Here the numbers are not the same and the problems are not the same. Countries in the global north said in 2009 that they would help Africa with $100 billion. They’ve given $1 billion to date. Africa says we don’t trust you. Europeans had a surplus of vaccines, and they couldn’t send them to Africa, so they went in the garbage. Action is required multi-directionally and at every level. Where will low-income countries find resources? Will the IMF give, and what will the geopolitical problems be?

Below, I summarize the other panels I attended, based on my notes, and I give my views on them. Yes, there were many sessions, many topics, and many panelists but the keywords used were very similar to each other. The vast majority of the panelists had studied their lessons well. Besides, everyone was aware of what needed to be done but there is still a significant lack of knowing how to do it and there are those who openly accept this. Most panelists said they were hopeful about the future but failed to adequately state the basis for that hope; maybe there wasn’t enough time. It is evident that the crises experiences have also differentiated the mentality of developed and developing countries. A serious reckoning has begun with globalization but a complete analysis of the mistakes of globalization cannot be made; the majority do not want to give up on globalization. Everyone is aware that there must be a transformation, and they also know that this transformation will be painful. Yet the problems are not swept under the rug, which is heartwarming; but the leaders seem to realize that there will be a lot of dust in cleaning up these problems. It will be seen that whichever countries’ representatives cough more in Davos next year, are those most affected by the rising dust. Let me add that, with some issues that need to be corrected, I am in favor of globalization.

The Future of Globalization

Economics, technology, and demographics are positive forces that support globalization. Globalization reduces poverty; 50 percent of investors in Hong Kong are from different countries. It is crucial to create an ecosystem where the West and East unite and clearly define the tasks. Globalization will increase as the use of biofuels and hydrogen increases because these new types of energy are disruptive. Currently, logistics prices are rising; this is a problem area of globalization because it is a difficult period for small and medium-sized enterprises (SMEs). We will see how a solution is produced. What is happening today is a “transformation” process, not a comeback from globalization.

The participation of developing countries brings great labor potential to the markets. In Southeast Asia and Africa, government-driven innovations are not helping anyone; on the contrary they waste resources. We must pull governments out of innovation leadership. Procter&Gamble (P&G) Europe President, Loic Tassel, said: “We are reaching 5 billion consumers. This is one of the advantages of globalization. All consumers want the same quality at a low cost. All consumers deserve better products and sustainable solutions. For this, as business leaders, we have to train, communicate and provide incentives to realize economies of scale.” There will be localization, not globalization, in the supply chain and it is essential to have production where there is consumption. Call centers, software developers, e-commerce and services will get their share from localization.

Preventing the Global Food Crisis

Food security and supply need to be transformed in an inclusive, long-term, and sustainable structure. This requires investment in smart farming systems. One-third of agricultural product in Africa is wasted. This brings a huge burden for both the farmer and the state. To prevent this, all the countries of the world must work together.

There are certain foods which can only be obtained from certain parts of the world. For example, bananas are grown in certain climatic regions and sent to other areas by creating a supply chain. A shipping company picks the product up and takes it to other parts of the world. In products other than this, for example, pineapple and coconut, the global consumer is analyzed in the same way, thinking how they would buy it, and a reverse supply chain is established; if large companies are created for this, there will be a solution. Today, this is not done; such actions that will benefit the whole world are sacrificed to lobbies. For this reason, there should be a World Agriculture Organization, like the World Health Organization, that will make effective policies globally, and world agricultural resources should be used with wise policies, starting from demand, in a way that will benefit the whole of humanity. Global agricultural organizations that exist today are trying to solve problems starting with the supply.

Economic Outlook of the Middle East and North Africa

The first shock in this session was to realize that the Middle East and North Africa (MENA), which we perceive as an area with the same characteristics, is a mosaic and includes different regions. There are the rich and the poor; there are those who have ethnic problems; there are nationalists; some countries export foods and some import them. There is inflation in Egypt, wealth in Saudi … You see, trying to unite the region under the name MENA and manage it like a single country is complete nonsense. So, what is the problem in the Middle East and North Africa? Why are these countries not developing rapidly? There is a problem in understanding …

There is absolutism, there is nationalism, there is no logic of free enterprise and there is no established democracy. These countries lower and subsidize electricity bills for the convenience of the people but they do not motivate people to be entrepreneurs. The Saudis are pegging a barrel of oil at US$70. This is a good thing but what will be produced and how will the saved money be invested—no idea! However, if everyone produces for their own benefit, then income increases and welfare increases. In these countries, you cannot start an initiative without public permission. Türkiye is about to reach this point; I think Türkiye will struggle if we continue like this. There is a similar situation in Europe. They raise the thresholds to prevent new capital inflows, make the legislation harder, and tell people not to come.

Those in MENA want to invest in the service and digital sectors. If you do not have a production backbone in your economy, what service do you provide to whom, although you do not produce? It is impossible to develop unless you first produce something with added value. Okay, you are investing in tourism; it used to be called a chimney-less industry; if you don’t produce anything, what will you sell to the visitors? Governments establish state development funds with the people’s money, carrying out large projects. The result is inefficiency and frustration because there is nothing behind encouraging the will to free enterprise. That’s why it’s disappointing. However, if they distribute this money directly to the nation and “teach them how to fish” they would benefit much more.

If these are realized, it is possible for the region to reach its full potential. Economic reform is a must in this region; governments create new business areas, but it is not enough. The procedures should be simplified quickly for investors, strategic projects should be accelerated, and the whole world will benefit more from this region if priority sectors are focused.

The Future of Democracy

The growing gap between the East and the West poses a threat to the future of democracy, and underdeveloped/developing countries need to be supported in order to achieve a genuinely democratic society. At the same time, emerging social networks are influential in shaping/manipulating people’s opinions, leading to populism. Thanks to the social network, everyone lives in their own aquarium; people live in a structure that thinks more rigidly, does not give up on these thoughts, and creates ghettos around these thoughts. When something is a trend topic on Twitter, it is considered the truth. In the past, it was said that “the people in the West use cannabis and heroin, they will be destroyed in 5–10 years.” What happened next … They were already living like that; they came to the point of liberation. Now we say, “We will take the technology of the West but not take away its immorality.” But virtual social ghettos are global now; you are how you live.

The fact that most people living now are not acquainted with “true democracy” weakens the existing belief in the future and reduces democracy to a more fragile point. The keywords used to solve these problems were described as “inclusiveness” and “people and value orientation.” It was also said that the Ukraine–Russia war is a war of democracy and freedom and must be won. However, I look at it from another perspective: if the standard of development does not bring countries to a certain level of development that will make them “compassionate,” an undemocratic, uncontrolled power can drag countries into war.

Re-Imagining the Global Tax System

Establishing a more equitable and inclusive taxation system is undoubtedly necessary for sustainable growth and development. This new system is not an attempt to help but is thought to be primarily about justice. Of course, the issue of justice is also a topic that needs to be examined here. “Who wins, who loses? And how fair is this transformation?” These are the questions on which time should definitely be spent.

The main issue is not to collect “more” taxes but to collect taxes “through an improved system.” It’s not more taxing; it’s taxing usefully. It’s not a job to collect taxes from the rich. Taxes should be everybody’s problem and everybody should be worried. Why do we need a global tax understanding? Money cannot be used when it goes somewhere. However, money needs to be transparent. In Africa, we say that that there is not enough tax collection in this country. However, there is a transfer of wealth here; money flees to other countries. It does not support the local financial system and cannot turn into production. If there was a minimum global tax, if there was a general consensus … Overtaxing the rich seems reasonable to the “citizen” mind but if you think in terms of economic development, it is necessary to encourage them to spend their money and invest. Then there is an added value. In societies that are not fully digitalized and unrecorded, the solution that benefits everyone is to switch to a per capita tax system according to socio-economic status. At the source and so on, taxes stay where they are collected.

Relieving Commodity Shock

We have all the factors for a devastating storm, looking at the situation today. Today’s commodity crisis is extraordinarily complex, and the era of cheap commodities is over. However, every crisis has the potential to be evaluated as an opportunity. But today, we have a huge problem sustaining the world supply. Panelists from countries in the global north state that fragmentation will bring problems in the long run; panelists from developing countries think this separation will benefit them.

And in this session, it is clear that free trade is being hindered, especially food trade. However, this blocking is very dangerous. Everyone should produce everything and there should be diversity. The rising prices are not that much of a problem. Thus, prices are equalized all over the world. For example, paper and packaging prices have increased by 400 percent in Türkiye, but they have become equal to the rest of the world. Ship freights first rose and then fell but the carriers wanted to maintain the level to which they’d risen.

In fact, there is an oligopolistic structure in the world commodity markets. The markets for every commodity (oil, paper, gas, mine, etc.) are oligopolistic markets dominated by a few companies known as the “seven sisters.” They come together and control the market with a common mind. For example, suppose several factories undergo into maintenance simultaneously. In that case, if the demand in that sector has decreased, the price will not fall or rather, it will not be allowed to decrease since the supply will also decrease.

How can such a thing happen? Because countries have their own antitrust laws or the European Union has antitrust laws, but globally, there is no antitrust law that controls companies. Only if everyone produces everything, will these structures be broken. Middle-income countries should make value-added commodity analyses and enter these markets to break the oligopolistic systems.

Opportunity comes out of a crisis. Look at the coronavirus crisis and what innovative products came out of urgency. Both investment and technology transfer are required to take advantage of the opportunities. For example, there is a tremendous amount of waste in electronics, where products cannot be recycled.

It is necessary first to clearly define the crisis in a global crisis. The fluctuation of prices is not a crisis. The real problem begins if the price goes up and the item cannot be found. For example, if food is not available, it will be a very serious problem because food is necessary for human life.