The world was looking forward to putting the pandemic behind it thanks to the vaccines, and with the economy rebounding sharply, there was little doubt that things would return to normal. Equity markets were reaching new highs, seemingly oblivious to the post-Covid supply chain disruptions and the mounting tension on prices.
Within a few months, though, a series of crises have dented that confidence. Stoked by the war in Ukraine, inflation has surged to new records and the threat of recession looms over Europe. Increased geopolitical tension is compounding existing conflicts which, along with extreme climate events, are causing food and fertilizer costs to skyrocket. This is raising fears of a devastating food crisis in the more vulnerable developing countries, at the same time as the energy crisis rages on. Meanwhile, renewed complacency towards populism and nationalism is jeopardising the delicate balance of democracy in many countries. As for the pandemic, it’s picking up again as subvariants spread and fresh concern emerges around China’s growth. Faced with all these uncertainties, stock and bond markets alike have been contending with violent corrections since the start of the year.
But concluding that the world as we know it has been turned upside down in the space of just six months would be ignoring the fact that these cyclical flare-ups are symptoms of deeper structural changes that have been at play for several years. Environmental commitments, emission-reduction policies, the technological revolution and the movement towards a more inclusive growth model are all issues that our economies have been grappling with as cracks have started to show in the development model that has served us for thirty years.
The age of globalisation – triggered by the fall of the Berlin Wall and the subsequent end of the Cold War, and then amplified by China stepping onto the international relations stage by joining the WTO at the end of 2001 – has generated phenomenal growth, largely driven by the financial system. But the broad-based drop in poverty has come, in many cases, with a rise in inequality. At the same time, climate change and biodiversity loss have brought to light the pressing need to better address the effects of our activities on the environment and rethink our growth model.
This urgent requirement to simultaneously deal with cyclical upheavals and tackle structural reforms while advancing in a fog of uncertainty is unprecedented in human history. But while we may recognise our model’s limitations, doubts are multiplying as to the international system’s ability to establish new common rules, as evidenced by the difficulties in implementing the Paris Accord and by the deadlock between the members of the UN’s Security Council.
With world governance weakened, this search for solutions is highly likely to descend into a disorderly de-globalisation. A trend towards decoupling strategies and state intervention to wind back an overdependency causing vulnerability is spreading to more and more ‘sensitive’ sectors. While some of these approaches may be justified, the risk is a fragmentation of this connected world, which could undermine its capacity to mount a united front in tackling issues that call for cooperation in order to make it more resilient.
As a hub of international relations with Geneva a centre for global governance, Switzerland has the means to withstand shocks. This privileged position is largely responsible for its stock market’s strong performances compared to other markets in recent months, and for the strength of the franc. Moreover, since 2011 the country has consistently been at the top of WIPO’s Global Innovation Index, a testament to its success in maximising human capital in relation to the use of new technology. Switzerland is also a leader in data science through its Lausanne and Zurich federal polytechnic universities and is a step ahead in asset tokenisation. Its strong currency and qualified workforce have stimulated research and innovation in its national corporations. Not to mention the fact that Switzerland, being a historical trading centre, is in a unique position to analyse and better anticipate developments in the commodity and shipping markets.
And of course its financial sector has proven its solidity, having repeatedly demonstrated its ability to grow in spite of tighter regulations, digital transformations and the health crisis. Swiss banks are indeed determined to contribute to reducing economies’ carbon intensity, as shown by the boom in responsible investment confirmed by Swiss Sustainable Finance in its latest report. They have faced increased pressure on their margins but they are prepared for adversity and have the resources to handle it. Blending tradition and modernity, Switzerland, and in particular its banking sector, will undoubtedly be ready for the challenges thrown up by the transition to a new world order, able to rely on the stability of its institutions and society, on its strong environmental and humanistic values, and on its trailblazing spirit.
Nadège Lesueur-Pène
Head of Wealth Management Developing Markets & Europe
View her Linkedin profile