Davos Shock: Carney Warns the World Order Has Ruptured

DAVOS, Switzerland — Canadian Prime Minister Mark Carney used the World Economic Forum’s Annual Meeting 2026 to deliver a stark warning: the rules-based order that protected middle powers for decades has fractured. The old “pleasant fiction,” he argued, has given way to a harsher reality defined by coercion, economic weaponization and great-power rivalry. The choices ahead, he insisted, will determine whether countries like Canada and India become architects of a new system — or collateral in someone else’s.

A Fractured Backdrop: Tariffs, Sovereignty and Strategic Hedging

Carney’s address landed in the middle of geopolitical turbulence. Under U.S. President Donald Trump, recent tariff moves against European allies — intertwined with escalating disputes over Greenland’s sovereignty and strategic value in the Arctic — strained NATO cohesion and reopened difficult questions about territorial bargaining, alliance trust and the future of transatlantic leadership.

The shock has not remained confined to the West. India, another pivotal middle power, has been quietly recalibrating in response to the same rupture. New Delhi has intensified economic and security engagement across multiple fronts, including with Canada, to secure greater autonomy in trade, technology and raw materials. The alignment reflects a wider global shift: middle powers are learning to hedge, diversify and build options rather than rely on a single hegemon.

For Carney, these tensions illustrated the broader thesis: the old order is no longer buffering countries caught between hard power blocs. If middle powers do not organize, he warned, they risk being forced to adapt on the terms of others.

The End of a Comfortable Illusion

Carney traced how Canada and its peers once prospered under a U.S.-led architecture that provided public goods — open sea lanes, stable capital markets, multilateral forums and predictable dispute settlement. Middle powers could pursue values-based foreign policy under the umbrella of American dominance.

Everyone understood the imperfections. The strongest players exempted themselves when convenient. Trade rules applied unevenly. International law varied by aggressor and victim. Yet the fiction worked, and most countries “kept the sign in the window,” to borrow Carney’s metaphor from Václav Havel.

“But this bargain no longer works,” he said. “We are in the midst of a rupture, not a transition.”

Weaponized Integration and Fortress Logic

Carney detailed how major crises — financial, health, energy and geopolitical — exposed vulnerabilities baked into extreme globalization. In the past five years, world powers have begun weaponizing integration itself: tariffs as leverage, supply chains as pressure points, financial systems as coercive tools and critical minerals as bargaining chips.

“You cannot live within the lie of mutual benefit through integration when integration becomes the source of your subordination,” he told the Davos audience.

As multilateral institutions lose influence, governments are accelerating efforts to build strategic autonomy in food, energy, minerals, finance, defence and technology. Carney warned that a world of “fortresses’’ would be poorer, riskier and less sustainable — and that middle powers must chart a different course.

India’s Strategic Play: Autonomy Without Alignment

India embodies that alternative. In commerce, Ottawa and New Delhi are negotiating a free trade pact targeting services, talent and advanced technology — areas now central to long-term resilience. In critical minerals and clean energy, both sides are exploring frameworks that marry Canada’s resource depth with India’s manufacturing and innovation base.

The tech layer is equally strategic. Cooperation in AI, quantum, cyber and semiconductors reflects the emerging reality that digital sovereignty is no longer optional for countries seeking to withstand coercion. In the Indo-Pacific, naval and maritime coordination between India and fellow democracies — including Canada — signals how security and economics increasingly fuse.

India’s posture represents a new template: coalition-building without formal alliance, diversification without subordination, and autonomy without isolation. It is a logic now spreading across the middle-power world — from Southeast Asia to the Nordic states to Latin America.

The ‘Value-Based Realism’ Doctrine

Carney revealed that Canada has already pivoted. The country is abandoning passive multilateralism in favor of “value-based realism” — principled in defending sovereignty, territorial integrity and human rights, but pragmatic in recognizing that interests diverge and cooperation must be flexible.

At home, Canada is building strength by cutting taxes on incomes, capital gains and investment; removing interprovincial trade barriers; doubling defence spending by 2030; and fast-tracking more than $1 trillion in energy, AI, critical minerals and infrastructure projects.

Abroad, Ottawa is orchestrating what Carney called “variable geometry” — coalitions tailored to specific problems:

• Core support for Ukraine’s defence
• Arctic cooperation with Greenland and Denmark
• NATO reinforcement in the northern and western flanks
• A potential TPP–EU trade bridge covering 1.5 billion people
• G7 buyers’ clubs for critical minerals
• Tech and AI coordination among democracies

This is not nostalgic multilateralism; it is functional coalition-building for a fractured era. “If middle powers are not at the table, we are on the menu,” he warned.

Forward View: The Third Path for the 2030s

Carney closed with a challenge. Middle powers cannot merely adapt to a world remade by hegemons — they must help design a third path rooted in legitimacy, reciprocity and resilience. Canada believes the rupture is irreversible, and that nostalgia for the old order is neither strategy nor solution.

“The powerful have their power,” he said. “But we have something too — the capacity to stop pretending, to name reality, to build our strength at home and to act together.”

The era of comfortable illusions is over. The contest to build what replaces them has already begun.