Francine Lacqua: Hi everyone, and welcome to our panel on the global economic outlook. Now the global economy was certainly tested in 2023, as it rarely has been before. Inflation and the most aggressive monetary tightening campaign in decades; wars in Europe and in the Middle East; the festering real estate crisis in China and the deepening rivalry between Washington and Beijing. Which is really forcing companies also to rethink supply chains and security. Now, despite these pain points, the post pandemic global recovery has actually managed to roll on. In the US, consumers defied expectations and kept spending, prompting many economists to ditch their downside scenarios and forecasts on rare, soft landing. In China, the booming electric vehicle industry, along with a healthy dose of fiscal stimulus helped leaders stick close to their growth targets. And the world's economy great new hope India also took up some of the slack. But overall, according to the World Bank, the global economy is dragging along that growth rates slower than previous decades. And this is as a post-pandemic rebound is weighing down by high interest rates. So we're looking at sluggish trade, geopolitical tensions that will hit developing countries hardest. So without giving you a pessimist guide to 2024, we want to look at some of the main pressure points and some of the growth foundations for the future. And of course, there are many elections and expectations on the future trajectory. For your social media you can also do #WEF24. So this is our all-star panel: Christine Lagarde, President of the European Central Bank; Christian Lindner, Federal Minister of Finance of Germany; Mohammed Al-Jadaan, Minister of Finance of Saudi Arabia; President Tharman Shanmugaratnam, the President of Singapore; Dr Ngozi Okonjo-Iweala, Director General of the World Trade Organisation; and David Rubenstein, co-founder and co-chairman of The Carlyle. So thank you all, for joining us.

Francine Lacqua: Mr President, let me start off with you. 2023 really surprised. Expectations to the upside? Is the global economy really now as resilient as we think?

President Tharman: We have to think about resilience not on a year-to-year basis, because the largest challenges we face are the underlying, slow-moving changes that will threaten us in far more fundamental way in the years to come. We know what they are. We know what’s happening in the shift in the global ecological balance. We know what’s happening in terms of the ageing of societies, which we are by and large, not prepared for internationally. We know what is happening in the gradual drift towards polarisation. These are the real threats to resilience, and to human security. And I'm not even talking about the wars, including the stupid wars that we see.

Francine Lacqua: Thank you so much for that. Madam Lagarde, can you talk to us about what you saw in 2023 that gives you hope for economies in the future.

ECB President Lagarde: Well, good morning to everyone first, and thank you for having me on the panel. Because I'm a strange panellist actually, because I cannot talk about the things that I spend 100% of my time on. I'm the President for the European Central Bank. We have a monetary policy meeting coming up on Wednesday and Thursday, and during one week before that, I can't talk about what I do, what I hope for, what the analysis supporting our conclusions is. So I thought long and hard. And I tried to identify a few of the trends that we have seen in 2023 that will have no impact on our decision next week. And what we should sort of anticipate for the future and I came around to something that I called normalisation. That's what we are beginning to see, specially in the end of 2023, but towards something that is not going to be normality. So from normalisation to non-normality. So what do I mean by that? The period before 2023 was strange, extraordinary, difficult to analyse by many accounts. And 2023 we have seen the beginning of normalisation. When you look at consumption, for instance, around the world - I'm not talking just about the euro area - consumption is still a driving force for growth. But the tailwind that we had the benefit of are gradually fading. This very strange, extremely tight labour market, still tight, but a little less, and some of the indices that we use to identify the relationship particularly between vacancies and unemployment, are changing gradually. So let's tighten this on the job on the job market. When we look at savings around the world, there was plenty of it. Excess saving. With that excess saving pretty much in all advanced economies in particular, is coming down. And from this 10 per cent excess saving we're getting close to virtually zero. So if you combine these two - jobs less tight, savings diminishing, clearly consumption is not as strong force as it used to be. That's one thing. The second thing which is also beginning to normalise, and I hope, and Ngozi will talk a lot about that is trade. Trade went down and was massively disrupted by this goods versus services versus goods over the course of the last two years preceding 2023. But it is beginning now to really pick up. In October, we had global trade numbers that for the first time in many months was up, and the pattern of trade is changing. But I will leave it to my friend and Ngozi to describe that better. And the third normalisation, and I have to say that is that around the world, not including the euro area, around the world, inflation is coming down. And we have seen it yet again in November - both headline inflation and core inflation. So that's what I call the normalisation that we have observed in 2023. And maybe you will give me the floor another time to talk about how it is not normality that we're heading to.

Francine Lacqua: We'll certainly talk about that. Dr. Ngozi, could you talk to us a bit about the resilience that you've seen in global supply chains and trade?

WTO DG Ngozi: Well, thank you. I think Christine has set me up nicely. Let's see if I can move on that. It is true that in 2023 trade was considerably down. Actually for goods trade, we had to revise our forecast down from 1.7 per cent for the year to 0.8 per cent. In the last quarter, as you said, we saw an uptick in the numbers and trade showed the recovery led by automobiles and components and parts. But all in all when we look at the first three quarters and the last quarter, we still think we'll come in at about the number we projected or slightly less than that. We had been more optimistic about 2024. And we are forecasting with a considerable recovery to 3.3 per cent. So like Christine said, maybe moving towards normalisation or how you put it, but not normal. Because trade growth is still below trend, it is still trending below GDP growth. But the problem that I have is the geopolitical conflicts that we now see - the problem in the Red Sea and the Suez Canal. We also have problems in the Panama Canal because of climate change. There's so many uncertainties and of course, all the elections that we see around the world and what that may bring. I think there are a lot of uncertainties that made forecasting difficult. However, I'll take a bit of a risk and say I think it will be better than 2023. We may not come in at 3.3 per cent - below that, but much better than what we saw in 2023. Unless a major war breaks out, then all bets are off.

Francine Lacqua: Thank you Dr Ngozi. Minister Lindner, Germany has prospered in parts for many years from buying energy from Russia and selling cars to China. All of that is changing also because China is making so many EVs. How do you marry the two?

Minister Lindner: Given the historic shocks we have seen in the last year, the global economy has shown remarkable resilience and the German economy has shown resilience as well. Think about the energy situation you have mentioned. We had to re-invent the German energy infrastructure and supply in the last 18 months. And so we have not the growth perspective we are expecting, but our economy has shown this resilience. Looking to what will come over the next years, Christine said ok, we are in the process of normalisation, I would say we are witnessing a new normal and 2023 marks this new normal. Think about the rise of artificial intelligence you all have been discussing here in Davos. Think about the geopolitical tension and the threat of fragmentation you will have to deal with over the next years, as the higher debt levels after the pandemic and energy price hikes, which have shrunk our fiscal space to finance transformation. And given the very little growth perspective of the global economy, we have to answer the question how we will be able in the future to finance transition by the private capital markets, and how to fight poverty around the world.

So, for me, it's not normalisation; it is a new normal, which we have to be prepared for. Has 2023 given me hope, you ask. I would put it this way - it was a call for action, because we have to rearrange some policies and probably will see a new need for structural reforms. Probably we are at the beginning of an era of new structural reforms.

Francine Lacqua: Minister Al-Jadaan, what do you see as the main risks, you know, compared to maybe the resilience that we saw last year?

Minister Al-Jadaan: There are a few things I think I would just put possibly from what I’ve heard a little bit of context. Obviously there are the immediate risks that you know will be obvious, which is geopolitics, fragmentation and obviously, the debt situation particularly in low income countries. And we are talking about them, and we realise that they actually pose risks that will add to inflation and monetary tightening. But these are the immediate ones we need to attend to them, but then I think we need to make sure that we also attend to the medium term. The projections that we have seen from the World Bank, or the IMF clearly suggest that this decade would be the lowest growth potential for the world economy, compared to the first decade of the century and the second decade. And yesterday, Ajay Banga said in one of the panels, a very nice statement that we've gotten, he said these are projections, they are not our destiny. And therefore, we should actually see what can we do to form our destiny by actually changing the way we do things by adopting policies that will actually fuel growth. These are very important and, again, in relation to low-income countries. Low-income countries are actually coming under serious crunch of debt. And for them to be able to grow, they need to invest and for them to invest, we need to restructure their debt and allow them access to money that they can then fuel their own growth, which will help rest of the world.

Francine Lacqua: Thank you so much, David Rubenstein, what do you worry about the most in 2024? There are many things to worry about.

David M. Rubenstein: Well, I worry about everything. But I would say the most important thing I want to convey is that predictions made in January about what's going to happen in the remainder of the year is generally wrong. Last year at this time of the year and other forums around the world, people were predicting the US would likely have a hard landing, if not a hard landing a soft landing, but a soft landing implies very low growth. As it turns out, while the numbers aren't really in yet, the US will have grown probably around two and a half percent for 2023 which is much better than anybody really projected at the time. The US has its challenges for sure, but inflation is coming down. And as a result of that the Federal Reserve is likely to reduce interest rates relatively in the near future. In our country, we have a presidential election. I think everybody probably recognises that. And as a result, the Federal Reserve wants to get its, I think, wants to get its rate cuts out of the way before the presidential election is in full steam, because if you have president, if you have rate cuts in right before a presidential election, it will be seen as helping the candidate who's in the White House because it will gin up the economy is the theory and so the Republican nominee would not be happy with that. So, the Fed is going to get three rate cuts in and or more this year as I expect it will. It will have to get those done relatively in the first quarter, certainly the first half so you can expect to see rate cuts and that will probably drive the US economy during presidential election years. The US economy is generally does pretty well. We tend not to be in recessions in presidential election years because Congress spends a lot of money, and the Fed tends to be relatively easy on monetary policy during presidential election years. The biggest risk for the US economy is the usual risk everybody has, are we going to be in a war somewhere or something like that, or is there going to be a pandemic, but it's really like we look in the mirror and the enemy is us because the biggest risk we really have is the dysfunction of the US government. Our inability to pass appropriation bills that fund that government on time, the inability to deal with the debt limit issues on time. Those are the biggest things that worry me whether they at some point the US government just can't get these issues done because of the political problems we have in the country. And as a result, I worry more about that than other things in terms of the US economy going forward. We will have a presidential election year and almost everything every candidate will say it will probably not be true about what will happen in the future as they probably won't be able to get done what they say they're gonna get done. But it'll be interesting to watch.

Francine Lacqua: David, a number of leaders have expressed concern of what Donald Trump in the White House means for fragmentation, for foreign policy. Is there any way that the rest of the world can Trump-proof their economies?

David M. Rubenstein: If somebody has a way to do that, I think they should patent it and probably sell it to somebody else, but it'd be very difficult to do. Clearly, the biggest political change that occurred in the United States last year, also was unpredictable, or unpredicted, I should say. I don't think anybody outside of the Trump family would have predicted that Donald Trump would be indicted four times 91 counts on various indictments and that his popularity would soar to the point where he has a reasonably good chance of locking up the Republican nomination by March, which is earlier than almost any contested presidential candidate has been able to lock up the Republican nomination. If he is nominated, it would be the first time ever that a Republican Party has nominated the same person three times in a row. He clearly has a following that many of the analysts missed. And I don't think any of the court cases are likely to change his momentum. So, I think people should recognise that he's a serious political force and should not discount the fact that he could well be elected again despite the fact that many people in Europe, where we are now, are not really his biggest fans. And so, I wouldn't rule out his possibly getting elected again. Joe Biden shouldn't be discounted. He, obviously, we have two older candidates. People have suggested to me that I should run for president. I say I'm only 74 and you need to be older to run. But I do think to be very serious, it’ll be a relatively close election. The final comment is in our country in the last two presidential elections, 45 states out of the 50 voted exactly the same way in each of those two elections. Only five states voted differently. Those five states are Arizona, Georgia, Minnesota, Michigan, Pennsylvania, and Wisconsin. Those five states are the only ones that voted differently in those two elections. Right now, Donald Trump is ahead in five of those states. He lost all five of those states last time. Hillary Clinton lost those five states as well. Biden won last time. So, if that everything will get down to those five states and right now, if the election were held today, it'd be difficult to see how Trump would lose that election today, but it's a long way away. And the most important thing I can say about presidential elections in our country is things change all the time and we won't know for sure probably until about a month before the election where it's really going to go.

Francine Lacqua: Minister Lindner, how should Europe prepare and again, how difficult is it as a finance minister to look at models? This is for Minister Lindner you know, how difficult is it to look at models to forecast given all the crises, given the elections and actually you don't really know what you’re left with in 12 months.

Minister Lindner: I think we are talking too much about Donald Trump in Europe, and we should prepare ourselves for a possible second term for Donald Trump by fostering our European competitiveness. Doing our homework is the best preparation for possible second term of Donald Trump and this includes our capabilities to defend ourselves. Being an attractive partner on eye level when it comes to the economic situation and when it comes to a fair burden sharing and as a group of NATO is the best we can do to be a good partnership with the United States. And then it doesn't matter which administration, if we are attractive, if you do not have to ask us because we have capabilities ourselves the best way to cooperate and just as completely for both possible outcomes of the election in the United States. Doing our homework.

Francine Lacqua: Madam Lagarde.

ECB President Lagarde: I would like to follow up on what Christian is saying. I think the best defense if that's the way we want to look at it, is attack and to attack properly you need to be strong at home. So being strong means having a strong deep market, having a real single market. We should be expecting some suggestions by Enrico Letta, former prime minister of Italy who is in charge of producing this report on how we can deepen and improve the functioning of that single market, which is a huge economic zone in the world, but which is not completely a single market as many CEOs I'm sure experience on a daily basis, and we should more importantly make sure that the money that is saved in Europe, all the money that is associated with pension is actually invested in a capital market union that actually functions efficiently to rally the investment that we badly need for the transition towards a greener economy which relies suddenly for a period of time on fossil fuel, but less so as was indicated in the last COP 28 and moves towards renewable where investment is badly needed.

Minister Lindner: Just one little aspect because I am grateful that Christine mentioned the Capital Markets Union. And I'm concerned that some policymakers in the European Union that tend to follow the United States to subsidise almost everything. But we have to avoid a subsidy raise. We cannot afford and couriers of the next US administration can continue to raise a support as an economy. I wonder if it's sustainable to pay so high subsidies. What we have to do is to improve our framework conditions for our economies and to make further progress and Capital Markets Union. Our competitive disadvantage compared to the US is not subsidies. It's a function of our private capital markets.

Francine Lacqua: Mr President, Singapore is of course a country that does well when the world is working well together less well, when China and the US are falling apart. So, what's your take on this US China stress?

President Tharman: The US China relationship is the central axis of tension. But when you look at the largest problems we face in the world, it has to be refashioned into the central axis of partnership. They look at each other fundamentally as adversaries today, and then they look for opportunities to cooperate within that framework. It has to be flipped around. Fundamentally, they have to be partners, because the challenges that they each face are the same – climate change, a loss of global order, a breaking up of the global trading system. Both of them will suffer from the same.

And the relationship between the two is absolutely essential to any solution to climate, to peace, and to an open global trading system. Within that, you can argue you can badger, you can ensure fair competition; you can ensure that there is a way of dealing with each other that is consistent with the principles of openness and fair play. But we have to flip things around from being fundamentally adversaries to being fundamentally partners, who then argue and negotiate over specifics. That is the fundamental repositioning that's required. So, it's more than a pause in the relationship, it really has to be a repositioning in the relationship.

Francine Lacqua: Dr Ngozi, if we move it forward, there are three, four pillars that we need to put in place to foster growth. And I don't know whether this year there will be a lot of distractions that keep us further away from that goal, but what would you focus on to bring back longer sustainable growth?

WTO DG Ngozi: Thank you and I just want to say that I strongly support what Christian and Christine said, I think the best way to be prepared for any eventuality is to focus on those things you need to do anyway. For me at the WTO, I don’t fret about who is going to come or what is happening. Maybe that's an overstatement. But in a way, it's focusing on what do we need to do to strengthen and reform the organisation so that whatever the circumstances it will be able to deliver what is supposed to deliver for people. So if we keep doing that, I think that's a strong answer, a bit of offense, in that regard. But with respect to what are the pillars we should look at for restoring growth, I think that's a very good conversation, because we focus a lot on the pessimistic things that might happen. But there are some bright shoots that kind of want to talk about on the trade side. First, I want to mention that in spite of all the uncertainties that we talked about, and I pointed to in the beginning, trade has been largely resilient. It is because of trade, that Europe was able to find other sources of energy from the US and the Gulf and elsewhere to make up for the, you know, withdrawal of energy from Russia. It's because of trade that 35 countries dependent on the Black Sea region from Africa, were able to find alternative sources of green fertilizer. So trade has been a force for resilience. And there are some bright spots in trade that we need to be conscious of. There is digital trade and services trade as is growing fast, especially digitally delivered services stream, growing at 8 per cent per annum and that is a very, very interesting thing because now we're all talking of digital platforms, AI, and this is a positive sign. And we should be preparing ourselves to say how do we support such trade? How do we make sure that it benefits Small and Medium Enterprises, women, those at the margin. Green trade has tripled, from 2000 to now, tripled in value to $1.9 trillion. That's another opportunity. And finally, I want to say that the reshaping of supply chains, I see that as an opportunity and not a challenge. And when you see it as an opportunity, it could help us look at other sources of growth. If you take just one supply chain that we talked about yet the critical minerals and critical raw material supply chain, we have the possibility that these critical raw materials are found in many developing countries who did not benefit as much from the first phase of integration into the global economy. There is now a chance to bring them in through developing these supply chains in place because they have two advantages, not only the raw materials, but also green energy. So combining those two, and I'm glad to say that Chancellor Scholz and Europe has caught on to this. You can go to Africa, Latin America and develop these supply chains. Bringing new sources of growth, create new employment, lift people up from poverty in these countries. So those are some good opportunities that are out there and some hope.

Francine Lacqua: David.

David M. Rubenstein: On trade, whoever is elected president is not likely to enter into a lot of trade agreements. The word trade in the United States or trade agreements is almost a curse word. Now, the man, somebody who's in the audience here, Mike Froman who negotiated the TPP agreement under President Obama that couldn't even get a vote in this in the United States Congress. And I don't think any major trade agreement could be approved by our current Congress, and I don't think that's going to change for a while, no matter who the president is. Unfortunately, because trade is often seen by certain constituencies in the United States as favouring jobs offshore, and not really is very, not popular at all. Even Hillary Clinton when she was running for president was against the TPP even though it had been negotiated by a Democratic administration in which she had served. On US, China, US China is the most important bilateral relationship in the world. There's no doubt about it. But there is no political benefit in the United States about saying anything beneficial or good about China or in a presidential election year. So President Biden and President Trump, I don't think or either one are going to say we need to have closer ties with China, and I'm going to be nicer to China than I was before. It's just not going to happen during a presidential election year. Hopefully after the elections are over, the progress that’s been made recently at the APEC meeting, can see some something blossom. But I don't think you'll see anything blossom before that. Hopefully the Chinese will provide some pandas again to the United States which we desperately would like to have.

Francine Lacqua: Minister Al-Jadaan, what are some of the policies that you think we need to put in place now to make sure that there’s success in four or five years that we're maybe not thinking about as much as we should.

Minister Al-Jadaan: First of all, I would like just to follow up and say was talking to a US friend yesterday about almost the same subject and I asked him whether he is optimistic, and he said well, at least it is only four years and someone is forthcoming. So it would be interesting to see what is going to happen in the next four years. But more seriously, I think what needs to be done is looking at how can you actually mobilise your own resources? How can you do structural reform? I can tell you from experience, and I'm not here, really to promote what Saudi is doing but from experience, what we have done in the last seven years, actually helped us significantly and our resilience to deal with multiple shots that we are facing, including what the current situation geopolitical tension. So structural reforms are critically important. Local revenue mobilisation is actually very important for countries and obviously, the support of multilateral development institutions to catalyse private sector investments in developing nations and particularly low-income countries is very critical. Catalysing that is I think will be, and I'm actually very optimistic with the reform that the World Bank is doing and actually bringing MIGA, IFC and their own IBRD and IDA together to make sure that they provide that support and catalyse more private investments in low-income countries. I think this is promising and would love to see some results actually this year.

Francine Lacqua: Mr President, you worry about something that we don't, we're not really talking about. And this is fiscal spending. Are we sowing now the seeds to have an even bigger crisis four or five, six years from now?

President Tharman: I believe the most important and most neglected area of public policy is fiscal reform. Christian Lindtner spoke about the already very high debt levels. So, we're unfortunately starting from the wrong place in many countries, because we're going to have to address challenges in the future that will require greater fiscal investments.

We're neglecting fiscal reform because it's never pleasant to talk about raising revenues or raising taxes. It's never pleasant to talk about redirecting subsidies or redirecting spending. So, we’re merrily gliding into the future, tinkering at the edges. And even the most major international tax reform of recent years through the G20 - to do with rearranging and reallocating corporate taxes - was really about something very small compared to the challenges we really face. The big issues are, how do we address the climate transition? How do we address the needs of ageing societies, and broken social security systems? And how do we address the challenge of an AI era, of ensuring that populations can cope with it and benefit from it? It’s going to require the public sector to invest, working with the private sector.

If I take the first issue. There is no realistic solution to the climate transition that will not involve a globally coordinated system of carbon taxes. There's no realistic or fair solution that does not involve a globally coordinated system of carbon taxes, and Ngozi at the WTO is coordinating this work with several other international organisations. It's still early days. There's a perception that carbon taxes will be unjust, it's unfair, it'll lead to inflation. In fact, quite the contrary. If we don't do this, the countries that will suffer most ultimately, are the developing countries, they're going to be the worst affected by climate change. If we don't do this, it's ordinary, vulnerable communities that will suffer the most. What we need is a system of carbon taxes, coupled with subsidies for vulnerable households, and a stream of funding for the developing world to allow them to engage in investments in climate mitigation and adaptation that allows them to keep growing and developing. And that's a real opportunity. It's a fair solution and is the only realistic solution. And we can't keep ducking it.

Second, we have a huge opportunity of redirecting subsidies. The IMF has estimated that about $1.3 trillion is spent each year on fuel subsidies. That's at least five times more than the amount of subsidies that goes into green energy. We've got to redirect those fuel subsidies to helping vulnerable households, helping firms to adjust and to spurring renewables and other green technologies. That's a major redirection. It's fair, and helps us move to a sustainable state of the world. It has to be achieved.

The third issue, maybe the most neglected, is reforming fiscal policy so we prepare for an ageing society with confidence. It means rejigging in significant ways our social security systems and healthcare financing systems. It's not sustainable today. Too many people who don't need support are getting disproportionate support in many countries. And too many people who need support the most in health care systems are not getting enough support. So there has to be a reshaping of subsidies within healthcare, to benefit those who need it the most. And there has to be more spending on preventive or preemptive health care to help people stay healthy, for as long as for as long as they can, rather than wait for the very expensive occasions when they end up in hospital, particularly for acute care.

Social security can also be reformed to reduce spending, by reforming labour markets to allow people to stay engaged at work if they wish for as long as possible.

These are very important shifts in social policy. We have to get real, the challenges we face are different from the past. We're not going to address them by just tinkering around the edges. It requires raising taxes to take on the climate transition. It requires redirecting subsidies, to be fair, and to ensure that as we age, no one is vulnerable. And we can actually sustain high quality healthcare systems and social security systems.

We discuss this rarely at international fora. We have here five current and former finance ministers who have gone through years of discussion at the G20, at the IMF. We spend a lot of time talking about monetary policy, we spend very little time talking about fiscal policy reforms for a more secure future.

David M. Rubenstein: Can I just say on that point on fiscal reform - in the United States it’s very difficult to do, we now have $34 trillion of debt. $34 trillion of debt. The interest on it is approaching our defence budget. And if we don't resolve this in the near future, something's going to happen to the dollar, the dollar has been the only reserve currency for quite some time. But if the United States can't get its fiscal act together, at some point, people are going to do what they did to the British pound and the Dutch guilder years ago, when too much money was borrowed by those countries, and that their currency didn't become as valuable and therefore lost its reserve status. The US doesn't have any real challenge or right now to reserve currency status for the dollar. But it will if it keeps doing what it's doing. We have 122% of our GDP in debt. And we are each year our budget deficit is probably about 25% of our spending. And we just can't keep doing that. But there is nobody in the United States government that I see is really seriously addressing that problem. But it will be a big problem in the not too distant future.

Francine Lacqua: Thank you Dr. Ngozi?

WTO DG Ngozi: well, maybe you're pointing to me, because I was nodding so much when Tharman was talking. And that's why he's a favourite. I mean, we have to look at what we need to do on the fiscal side to finance the green transition. The money isn't coming. The amounts are huge, in the trillions needed. You know, you take Africa, for instance, it needs $190 billion to finance per year, up to 2030 to finance the green transition. What is it getting now? Minute amounts. How is it going to be raised? So we have to think of sensible things like, how do we raise that money, so that's one.

The second is business. They are facing a lot of regulatory fragmentation. There are 73 different carbon, taxing and pricing regimes in the world today. They are confused. When they go from one country to the other. They have to think about a different way and a different system. So how do we bring this together? So if we have a common methodology or framework for a global carbon pricing regime, I think that will help. And then we can use some of those resources that would be raised to help finance the green transition in those vulnerable countries that don't have the resources. So that was why I was nodding so vigorously, and I think developing countries need to get behind it.

We've now, the international financial institutions have all been working on this in parallel. The IMF, the World Bank, the WTO, the OECD. And finally we are coming together in one taskforce to try to see if we can put all our energies together and develop a common methodology or framework. We know that not every country is going to have a carbon price or tax, the US will never do it. They have, they will approach it through regulation and subsidies and other means. But once we have a common framework, we can all measure what we're doing against that. And more importantly, we can transfer some of the resources raised to help finance the green transition. So thank you for raising that, Tharman.

Francine Lacqua: I know you have to leave in a couple of minutes because you have an important meeting. So very quick question to you. Why has it been so slow? Is it because we're distracted with other crises? And are you confident that actually all of this is going in the right direction?

WTO DG Ngozi: Well, it's so slow, because I mean, when you talk about raising taxes of price, it's never a popular subject anywhere. As Tharman said, you have so many former, present finance ministers on the panel, we know what this means it's politically difficult to talk about raising taxes. It's also politically difficult to phase out subsidies. We tried it when I was a finance minister in Nigeria. And we wanted to phase out subsidies. We went halfway but it was very politically sensitive. So that is why you don't hear great enthusiasm when you talk about raising taxes or phasing out subsidies. But I think the world, we need to take some hard decisions. You cannot have a situation in which you have $1.2 trillion in fossil fuel subsidies, a lot of it is in developed countries, by the way, not developing. And then we are trying to look for peanuts for a loss and damaged fund. You have over 600 billion in trade distorting agricultural subsidies. And we are looking for peanuts for a loss and damaged fund. When we get 200 million we're all happy. We need to take those hard decisions. But they're not being done because it's politically difficult. And politicians will look at the short term horizons - they want to be reelected. Right? That's the problem.

Francine Lacqua: Thank you so much Dr Ngozi. You have to you have to go. Minister Al-Jadaan.

Minister Al-Jadaan: I think a few points. I listened to Mr. President and we spoke briefly before we came on stage. I would like, first of all, I think let’s just agree that climate change is real, risks from climate change are real and we should work all together to find solutions that would help the planet and the livelihoods of people. I think we are all in agreement. I remember in 2014, when Paris agreement was reached, developing, developed nations have committed a hundred billion dollars annually for developed countries to deal with climate change and for them to transition out of carbon intensive energy. What have we seen so far? almost zero, almost zero. And I can understand Mr. President's enthusiasm about carbon tax and how it may change the equation. But then he linked it to two things: subsidies to those who are in need. I agree. Whenever you raise cost on your community or others, you need to look out for the less fortunate and provide social safety net. Agreed.

The second caveat, Mr. President said is we need to find a way that we channel part of that to low income countries. We tried that and it's failed. Now, so trying something else. Similar to what you have tried before and expect different results. It's very difficult. There are a lot of political resistance from developed nations. Politically, internally, I mean, we have heard just now some of the comments. So to say that we will waive the tax but then we will direct some of it to low income, low income countries is going to be very difficult, politically extremely difficult. So I would just remind ourselves that while we are enjoying the heated conference place here, there are over 600 million people in Africa that have no basic electricity, not intermitted, basic, absolutely no electricity. So to say to them, go and eat cake, why are you looking for or bread is hypocrisy, in my opinion. They have their own endowment, we should help them get that endowment from under their feet. Gas for example. Let them fuel their own transition, allow them to use their own endowment help them to use their youth, empower their youth rescale their youth train their youth, that is really what is going to change Africa and other low income countries. Thank you very much.

Francine Lacqua: Thank you so much. Minister Lindner.

Minister Lindner: I hope nobody tells my coalition partners and colleagues in cabinet that we are here considering raising taxes […] would cause serious problems for me domestically. (But) Seriously, I would like to widen the perspective a bit, I completely share the idea of fighting a global warming by ambitious action, but it should think about the right methodology. I think there is an alternative to carbon tax. And the alternative is a carbon market. In Germany, it is extremely costly to avoid further emissions. And I wonder if the same amount of money we have to spend in Germany would have an even better effect on other places of the world. For example, to invest in electricity production in Africa is the renewable energy as part of a compensation of the German steel industry and for their emissions could have globally better effect with lower investment. And it doesn't matter where carbon dioxide is emitted, it is a global challenge. So probably should ask OECD to work on a common framework for a global carbon markets as they did successfully on the global minimum taxation.

If I'm allowed to, I would like to add a second remark. To finance all our needs from transition fighting poverty and to prepare for the ageing society – I think there’s one solution. Given the demographics, given the investment needs, I think we have to foster our productivity. And this is why I'm advocating for structural reforms in the labour markets, in technology, cutting red tape being more competitive when it comes to corporate taxation. And obviously, I'm talking about the reform agenda of Germany. But I think others have to face similar challenges. We in Germany, we have to do our homework. And probably we are part of a model because others have similar challenges. We had to solve our debt and deficit issues, which has made me becoming the loneliest Minister in Cabinet. But we succeeded to solve our debt issues. And now we have to strengthen the supply sides. And I know what some of you are thinking Germany probably is a sick man. Germany is not a sick man, Germany is, after a very successful period since 2012, and these years of crisis that, Germany is a tired man after a short night and the low growth. Expectations are partly a wakeup call. And now we have a good cup of coffee, which means structural reforms, and then we will be continuing to succeed economically.

Francine Lacqua: Thank you so much, Minister. We only have five minutes left. So I'm going to call on Mdm Lagarde and David and Mr President and Minister.

ECB President Lagarde: Thank you very much. I would like to flag a couple of areas where I think there can be hope, and there can be trust, if we deliver. And I'd like to start with two observations as a follow up to Tharman. Your point is well taken about taxation, Tharman. But you haven’t, in this panel, the discussion we're having a good example of how difficult it is. Because tax issues present a huge heterogeneity. Whether you're sitting in one country or the other, you're can have a tax burden of 50% of GDP, or 10% of GDP, and you are starting from a completely different picture. So that should be taken into account.

Second, there are currently instruments that have been laboriously negotiated at the OECD level to put in place those two pillars, one that institutes a minimum corporate taxation, and the other one that proposes to allocate profits of large corporates around the world on the basis of where the activity is generated. These agreements have been approved at the OECD level, they just need to be ratified. So it's there, let's get on with it and move because otherwise, we will move to more fragmentation of tax.

And we are seeing it with the carbon tax border adjustment here and there. And that would be more cacophony added to the risk that we see. And that takes me to my second area where I think there is hope. I'm sorry that Ngozi had to go because it touches on trade. Everybody will agree no matter how much we talk about deglobalisation that globalisation had massive, positive impact in pulling people out of poverty, hundreds of millions. If we listen to Ajay Banga from the World Bank, this virtuous path on which we were heading is not best stable, at worst, declining more poverty than less poverty. Well, if we look at trade, and the decoupling, or the de-risking, however we want to call it, it implies two things.

One, there will be different and new sources of supply and new patterns of trade, number one, number two, because there is more vulnerability associated with supply, it may well be that the cost will be higher in the long term. And maybe that's not such a bad thing. Maybe we've been relying on this principle of efficiency, over security, a little bit too much, assuming that everything had virtually no cost, assuming that labour cost had to be minimal and reduced over the course of time. Well, this can change and maybe can change for the better to bring those people who had the benefit of globalisation and were taken out of poverty, also out of this, recessing poverty that is at risk of bringing some of them back down again. So I see a lot of positives on those two fronts. I had a few other items, but I'll save them for next year.

David M. Rubenstein: To paraphrase Mr President, my country asked not what the World Economic Forum can do for you, but what you could do for the World Economic Forum. Now, what do I mean by that? The purpose of the forum, and I can't speak for it, because Klaus is the person who is really the most responsible, be able to speak for it. But I can say that the purpose is to inspire people. What we've tried to do in this panel, and in other panels around the World Economic Forum is inspire people and educate people. And hopefully, when you go back to your country, you'll educate yourself about some of the things that we've talked about here that you might be inspired to learn more about. And try to pick one issue of the ones we talked about where you make yourself, not only well educated about it, better educated than now, but try to make some difference in your own country to try to bring some forward some of these ideas, because the only way we're really going to be effective in the World Economic Forum is, we have people that come to the sessions, and those people are watching on streaming, they are going to take these ideas and do something useful with them by working in their own countries to kind of educate people about these things. And that's when I really hope all of you will do is take something away from this session, and say, I'm now inspired to learn more about this issue or that issue. And I'm going to try to do something in my country to make it more likely that that will happen. Thank you.

Francine Lacqua: Thank you, in 30 seconds or one minute, Mr. President, what are you positive about?

President Tharman: I agree entirely that we need carbon markets. That itself is a complex endeavour. But we must develop it, and we need to make it global. But it's not a substitute for carbon taxes, for a very simple reason. Governments are going to have to invest significantly more than they've invested before. We want the private sector to fund most of the transition. But about a third of the investment is going to have to come from government, because of externalities involved in the projects like new grids, and for other reasons.

It has to be funded, and we can't have magical thinking here. Funding government requires taxes of one form or another. The alternative is more and more borrowing, which Christian will be the first to agree is not sustainable. So let's not duck the issues.

Our real challenge is political. It is unpopular to raise any taxes. But we have to design taxes together with subsidies so as to make them acceptable and fair. And that's the real task of finance ministers. And we've got to coordinate this as much as possible globally, so they are no leakages of carbon-emitting activities from places with carbon taxes to others without.

We can and must design taxes and subsidies so that we can get ahead of this, invest at a higher level, and make it fair for ordinary people and help finance the developing world.

I quite agree with both Al-Jadaan and Christine on the opportunity in the developing world. We have the opportunity, in fact, of growing green energy powered industry in parts of the world which have lots of sun and wind. We have the opportunity of shaping growth strategies that are sustainable. But it's going to require investment, and support from the advanced world, including through a much enhanced role for the international financial institutions. We must work to achieve this.

Our political antennae have gotten too short. We are looking at the next elections in a whole range of countries. And the consequences if we carry on that way are going to be much more pain in future and a much higher hurdle that future politicians will need to cross. So let's start moving now. Phase things in realistically, make sure that it's fair and just, and avoid piling up a large problem for the future.

Francine Lacqua: Thank you so much Mr President. You’ve got the optimistic Guide to 2024 and the pessimistic Guide to 2024 and beyond. Thank you so much to all of our panelists, and I would love if the audience could also stay in their seats. Also the panelists because it’s my great pleasure to welcome on the stage the President of the World Economic Forum, Børge Brende, for the closing remarks of this 54th World Economic Forum.