Carney says the old world order 'is not coming back' in Davos speech
Mark Carney Says the Old World Order 'Is Not Coming Back' in Pivotal Davos Speech
The annual gathering of the World Economic Forum (WEF) in Davos often serves as a barometer for global elite anxiety. This year, the air was thick with questions about stability, trade fracturing, and the relentless pressure of climate change. Amidst the uncertainty, former Bank of England Governor Mark Carney delivered a speech that didn't just analyze the instability—it cemented the fact that the golden age of hyper-globalization is over.
Carney, currently the UN Special Envoy on Climate Action and Finance, did not offer comfort. His central thesis, delivered to a room packed with policymakers and global CEOs, was uncompromising: The old world order defined by predictable multilateralism and rapidly expanding global trade "is not coming back."
This pronouncement marks a critical shift in mainstream financial thought. It moves the conversation from debating a temporary downturn back towards a permanent structural change driven by two immense forces: geopolitical fragmentation and the inescapable demand for rapid economic transition towards net-zero.
The speech acts as a roadmap for what comes next, forcing corporations and governments to accept that the principles that guided success for the last three decades—low inflation, open borders, and stable supply chains—are now relics. The focus must now shift entirely to resilience, security, and sustainable systems.
Carney's authority stems from his unique position spanning central banking, international finance, and climate advocacy. He stressed that treating current geopolitical and economic shocks as cyclical noise is a dangerous mistake; they are systemic signals demanding radical changes in investment patterns and governance.
The Definitive Erosion of the Post-Cold War Consensus
Carney detailed precisely why a return to the integrated, rules-based system of the 1990s and 2000s is impossible. That system relied heavily on the belief that economic interdependence would naturally foster political harmony. Recent conflicts, trade wars, and the weaponization of finance have conclusively proven this assumption faulty.
The former Bank of Canada Governor highlighted the profound impact of this fracturing on global supply chains. Where companies once prioritized cost efficiency above all else, the new imperative is supply security. This shift alone has massive implications for inflation, investment location, and overall economic structure.
The fragmentation is not merely political; it is geo-economic. Nations are increasingly aligning along shared values and strategic interests, leading to the creation of distinct trading blocs. This "de-risking" or selective decoupling is resulting in slower overall growth in global trade, counteracting the primary engine of prosperity seen in the late 20th century.
Key indicators Carney pointed to regarding the end of the old paradigm include:
- The End of Cheap Capital: The era of ultra-low interest rates, which fueled asset expansion and financial globalization, is structurally over due to persistent inflation pressures and demand for resilient, localized infrastructure.
- Regulatory Divergence: Increasing use of tariffs, subsidies, and domestic content requirements, reversing decades of effort towards trade liberalization under the WTO framework.
- The Scarcity of Trust: Multilateral institutions, once the bedrock of global cooperation, are struggling to function effectively due to fundamental disagreements between major powers.
- Shift in Corporate Strategy: Companies are aggressively reshoring or nearshoring critical production capabilities, sacrificing margin for stability in the face of persistent geopolitical risks.
Carney underscored that this shift is profoundly inflationary. Moving production closer to home, duplicating supply lines for resilience, and prioritizing security over cost optimization inherently raises prices across the board. Central banks must now navigate this new reality where inflation is structural, not purely monetary.
Geopolitical Fragmentation Meets the Climate Imperative
The most compelling element of Carney's speech was his insistence that the two defining challenges of our time—geopolitical instability and the climate emergency—are inextricably linked. They are not competing priorities but rather two sides of the same transition coin.
The transition to a net-zero economy requires trillions of dollars in upfront investment, predominantly in infrastructure, energy grids, and green technology innovation. Fragmentation makes this coordination exponentially harder, but failure to invest compounds global systemic risk.
Carney noted that climate instability is itself a potent geopolitical destabilizer. Extreme weather events displace populations, disrupt food systems, and create resource conflicts, further straining international relations already hampered by trade disputes and territorial concerns.
Furthermore, the global supply chains for the very technologies needed for the climate transition—batteries, solar panels, critical minerals—are highly concentrated. This concentration creates new areas of vulnerability and geo-economic competition, particularly between major trading partners.
The urgency here is paramount. Carney reminded the audience that the window for effective climate action is closing rapidly. If governments remain distracted by short-term political skirmishes, they risk locking in catastrophic climate pathways that will completely overshadow any gains from successful trade negotiations.
The interplay between these two forces demands an entirely new model of international cooperation, one focused on practical, sectoral transitions rather than broad, idealistic consensus. This requires the G7 and emerging economies to align quickly on standards for transition finance and carbon pricing.
A New Blueprint: Transition Finance and the Shift from Risk to Resilience
If the old order is dissolving, what must rise in its place? Carney's prescription is a decisive move toward "Transition Finance"—the rapid mobilization of private capital to fund the decarbonization of hard-to-abate sectors like steel, cement, and shipping.
He argued forcefully that the financial sector has moved beyond mere acknowledgment of climate risk. It must now actively execute credible, comprehensive transition plans. The future economic competitive advantage will belong to nations and companies that lead in building resilient, sustainable infrastructure.
This requires a fundamental rethink of value. Investors must look beyond immediate quarterly returns and measure success based on long-term value creation anchored in environmental and social performance. Carney sees this as the only viable hedge against the twin threats of fragmentation and climate chaos.
To facilitate this massive reallocation of capital, Carney urged stronger regulatory clarity and standardization:
- Harmonized Disclosure Standards: Global adoption of standardized reporting frameworks to ensure transparency and prevent greenwashing, thereby directing funds efficiently.
- De-risking Mechanisms: The use of public sector guarantees and blended finance models to reduce the perceived risk of large, long-term climate infrastructure projects, especially in the Global South.
- Central Bank Mandates: Integrating climate risk and resource security into the stress tests and stability mandates of major central banks and financial regulators globally.
- Focus on Adaptation: Alongside mitigation, immediate investment is required for adaptation infrastructure (sea walls, resilient grids, flood defenses) to manage the unavoidable impacts of global warming.
Carney's closing challenge was clear: the world has entered an irreversible economic transition. Leaders who cling to the norms of the past will find their economies increasingly fragile and uncompetitive. The new world order may be less globally integrated and more strategically localized, but it must be fundamentally built on sustainability and resilience.
The message from Davos is resounding: the era of geopolitical stability underwriting open markets is over. The challenge now is to manage the economic transition responsibly, recognizing that climate action is not an optional environmental luxury, but the core foundation of future economic security.
The decisions made today regarding 'transition finance' will determine whether this period of structural change descends into costly disorder or ascends into a new era of sustainable and secure global systems.
Carney says the old world order 'is not coming back' in Davos speech
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