Eswar Prasad, Professor of Economics at Cornell University, issued stark warnings about the deteriorating state of global economic and political systems during his appearance at the World Economic Forum in Davos. Speaking to CNBC-TV18, Prasad painted a concerning picture of an increasingly fragmented international landscape where traditional cooperation mechanisms are breaking down.

Fragmentation of Global Order

Prasad emphasized that the global economic and political order appears increasingly fragile, with institutions that once commanded respect and authority now facing significant credibility challenges. He noted a visible crumbling of the established world order, attributing this decline to rising geopolitical and economic tensions that have strained international relationships.

The Cornell economist highlighted a fundamental shift in how globalisation is perceived, moving from a framework of mutual benefit to one increasingly viewed as a zero-sum game. This transformation represents a significant departure from decades of international economic cooperation and integration.

Institutional Legitimacy Crisis

According to Prasad, institutions historically responsible for establishing and maintaining global rules are experiencing a crisis of legitimacy. These organizations, which previously served as pillars of international cooperation, are now being questioned and viewed with skepticism by various stakeholders.

China's Economic Challenges

Turning to specific regional concerns, Prasad addressed China's economic situation, noting that the country faces significant internal challenges despite maintaining its export-driven economic model. He observed that China continues to rely heavily on exports as a primary source of revenue generation, even while grappling with domestic economic pressures.

Artificial Intelligence Impact Assessment

Prasad provided a nuanced view of artificial intelligence's current and projected impact on the global economy. While acknowledging that AI is expected to have substantial effects across various sectors, he noted that its direct impact on corporate bottom lines has remained relatively muted thus far.

However, the economist issued a significant warning about employment implications, suggesting that job growth could emerge as a major global challenge as AI adoption accelerates worldwide. This concern reflects broader anxieties about technological displacement and its potential to exacerbate existing economic inequalities.

Economic Outlook Concerns

The combination of institutional fragility, shifting perceptions of globalisation, and technological disruption creates a complex landscape for global economic development. Prasad's observations suggest that traditional approaches to international economic cooperation may require fundamental reassessment in light of these evolving challenges.

The World Economic Forum has barred Iran's Foreign Minister from attending the 2026 Davos summit, marking a significant diplomatic development amid ongoing tensions between Iran and Western nations. The decision represents a reversal of an initial personal invitation that had generated widespread controversy and criticism from the international community.

Invitation Withdrawal Amid Controversy

WEF management withdrew the invitation citing specific concerns over the Iranian government's handling of recent civil protests and the resulting civilian casualties. The move follows mounting pressure from Western nations, with critics describing the original invitation as a "huge betrayal." The exclusion highlights the complex diplomatic challenges facing international forums when engaging with nations under scrutiny for human rights concerns.

Broader Diplomatic Implications

The exclusion underscores growing friction between Iran and Western powers during the high-profile Swiss gathering, where global leaders typically convene to discuss economic, political, and social challenges. The Iranian economy continues to face heavy sanctions and internal strain, with the international community closely monitoring Tehran's official response to this diplomatic development.

Analysts suggest the move could have significant implications extending beyond diplomatic engagement with Iran, potentially affecting broader discussions on trade, energy, and security matters at the summit.

Geopolitical Tensions at Davos

The Iran exclusion occurs amid broader geopolitical sensitivities at the summit. Veteran economist Ken Rogoff, speaking exclusively to CNBC TV18, described an atmosphere of heightened tension, particularly regarding US policy signals. Rogoff noted unprecedented European concern, stating he has "never seen Europeans so upset" in his 25 years attending Davos, pointing specifically to alarm over Trump's renewed focus on Greenland.

Rogoff warned about the fragility of Federal Reserve independence and hinted at the possibility of Trump announcing a new Federal Reserve Chair during the summit. He emphasized that political calculations, including midterm election considerations, are increasingly influencing economic policy decisions, even as central bankers work to maintain institutional autonomy.