Davos 2026 has become a kind of extraordinary session of the world's elite to confront two simultaneous, ultimately related threats. One is Donald Trump, who is attending the summit, and his incitement to a trade war. The other, far more complex, which threatens to destabilize the world order, is known as the K-shaped economy (ed. note: the growing gap between the increasingly rich and the increasingly poor).
The term, popularized by economist Peter Atwater, refers to the growing divide, starting in 2020, between the haves and have-nots. While the pandemic hit everyone at once, the recovery from this shock has taken two different paths, with the rich getting richer and the poor getting poorer, writes CNN.
Want to understand the K-shaped economy?
Nearly 6 years later, the gap between the top and bottom of the K is still widening. The stock market, while volatile, is trading near record highs. Luxury hotel bookings are holding strong even as fewer Americans are vacationing. What looks like a housing affordability crisis at one end of the economy feels like a windfall at the other, as the shortage pushes up home prices.
The Davos group understands intellectually that there is a problem. Larry Fink, the CEO of BlackRock and de facto “mayor” at the summit, diagnosed this fundamental problem in his opening remarks on Monday.
“Many of the people most affected by what we're talking about here will never come to this conference,” Fink said in his opening remarks on Monday. Davos is an elite gathering trying to shape a world that belongs to everyone.
“Davos is consistently wrong about where the world is headed“, Semafor senior business editor Liz Hoffman wrote on Tuesday. “The mid-2010s group raved about Brexit, MAGA and the populist wave that followed. In 2020, delegates dipped into communal fondue fountains as COVID-19 circulated. Davos briefly focuses on the metaverse.
The omission of MAGA and the forces that shaped it brings us back to the problem of the K-shaped economy, which is far from unique to America.
Severe inequality is inherently destabilizing. History is full of examples, though one only needs to look at the headlines from Iran in recent weeks to see the risks playing out in real time. Years of high inflation and financial mismanagement have eroded the wealth of the middle class, while high-level corruption has enabled a handful of businessmen to enrich themselves. Anger over this inequality erupted in late December when the national currency fell to a record low, sparking mass protests and a violent crackdown by Tehran.
If Davos attendees are to learn from the ghosts of Davos past, they would be wise to do more than just dwell on the accelerating divisions in the capital, K.
“You“ “cannot sustain this level of open wealth without consequences,“ Atwater notes. “I think those at the top are missing the point that any additional burden of vulnerability could easily be the tipping point... We are one straw away from something being unleashed.“