The EBRD’s chief economist wants business leaders to push back against ‘the dangers of economic fragmentation’

Beata Javorcik doesn’t like restrictions to trade. The Yale-trained former World Bank economist is a rather conventional trade economist in that sense. So is her organization, the EBRD. But her observations are astute in this era of global AI and green tech competition. She reminded me this week that when the U.S. banned the export of advanced AI chips to China this fall, China responded in kind. It restricted Chinese exports of graphite to the U.S., adding to the bans of gallium and germanium exports Beijing had enacted in the summer. 

China dominates the global production of all three elements, which are critical for the production of electric vehicles. Hence Javorcik’s warning. 

“We looked at these critical raw materials, and the Western block controls relatively little of them,” Javorcik told me, recounting the findings of a recent EBRD study. “So geopolitical tensions and the threat of fragmentation of the global economy are not only costly and risky when it comes to economic growth, they also risk the success of the green transition.”

“If you look at all critical products, 30% are now under some sort of [trade] restriction. In 2015, it was 5%,” she said. It’s difficult to identify new suppliers on short notice. Developing new mines and refining capacity takes time, she noted, while export restrictions can have immediate effect. 

The take-away for executives, she told me, is that “you need to talk about the dangers of economic fragmentation,” as their threat is real and bound to lead to further trade restrictions. In such an extended deglobalization scenario, she warned, no one is set to win.

Separately, the World Economic Forum kicks off next week in Davos, Switzerland. In WEF’s annual risk survey, out this morning, global executives highlighted “increased interstate conflict” among their top five short-term risks for 2024. In the critical election year 2024, “misinformation and disinformation,” and “societal polarization” also made the cut.

Climate-related risks, by contrast, have all but disappeared from the short-term outlook, although they still dominate the list of long-term risks. And also missing at Davos this year are DEI and ESG. Not a single session mentions either acronym, which confirms our—and the WSJ’s—analysis that the latter, at least, has become a “dirty word.” 

More news below.

Peter Vanham
peter.vanham@fortune.com
@petervanham

TOP NEWS

SEC hack

Bitcoin prices swung wildly on Tuesday after someone hacked the Securities and Exchange Commission’s X account and falsely posted that the government body had approved its first Bitcoin ETF. Prices surged to almost $48,000 on the news, only to collapse to $45,100 after SEC Chair Gary Gensler confirmed the post was fake. Still, the SEC is likely to approve the first applications for a Bitcoin ETF as soon as Wednesday. Fortune

The AI wealth gap

Generative AI could widen the wealth gap between Black and white households by $43 billion, estimates McKinsey. The new technology may replace so-called high-mobility jobs, or knowledge-worker roles that often don’t require a college degree yet can still offer a stepping stone to a well-paid position. AI could perform roughly half of those jobs between 2030 and 2060, McKinsey warns. Fortune

Boeing's mistakes

Boeing CEO David Calhoun told employees that the airline manufacturer needs to respond to Friday’s Alaska Air incident by “acknowledging our mistake.” The National Transportation Safety Board said Monday that they discovered missing bolts on the section of fuselage that was ripped off the Boeing 737 Max 9 plane, though admitted it was still too soon to tell whether it was a manufacturing flaw. Airlines are still waiting for clear instructions on how to inspect their grounded Boeing planes. Wall Street Journal

AROUND THE WATERCOOLER

Elon Musk’s X claims it’s now a ‘video-first platform’ as it tries to reverse an advertiser exodus that has cost it billions in value by Kylie Robison

AI isn’t coming for your job, but it’s definitely going to be your new coworker by Jane Thier

Wharton’s Jeremy Siegel says the U.S. economy is at a perfect ‘Goldilocks pace’—neither too strong nor too weak to spook the Fed or markets by Eleanor Pringle

There are plenty of six-figure jobs out there. Just don’t expect them to be hybrid by Paige McGlauflin

The housing market is heading for the affordability of 2 years ago, Morgan Stanley says. Here’s why its home price forecast is unchanged by Alena Botros

2023 was a worse year for corporate bankruptcies than 2020—and the highest since the GFC—after a stunning 72% surge, S&P Global finds by Will Daniel

This edition of CEO Daily was curated by Nicholas Gordon.