Bono calls for 'conscientious commerce'

U2 singer reflects hard-headed, commercial mood at the World Economic Forum by seeking support for a new brand called RED, writes Denis Staunton in Davos.

"Here we are, fat cats in the snow - and I say that as one of them," declared Bono in Davos yesterday, unveiling his plan to harness the profit motive to save the lives of the world's poorest citizens.

The U2 singer's performance was sparkling, full of self-deprecating humour and expressions of amazement at "the lack of projectile vomit when I turn up here".

His intent was deadly serious, however, an attempt to use the power of the market to halt the carnage that AIDS has brought to Africa, killing 6,500 people every day. The Global Fund to Fight Aids, Tuberculosis and Malaria has raised $4.7 billion (€3.84 billion) in revenue but a paltry $5 million has come from corporations.

Bono said that traditional models of philanthropy were clearly inadequate in the face of a challenge such as the AIDS epidemic and he has launched a brand called RED, which businesses can use to sell products, contributing a share of profits to the fund. The products, which include an American Express card, Converse sneakers, Gap T-shirts and Giorgio Armani sunglasses, will not sell at a premium but the companies involved are confident they will make a profit none the less.

In Britain alone, marketing studies have identified 1.5 million "conscience consumers" who prefer to shop according to ethical principles. American Express chief marketing officer John Hayes predicted that number could rise to almost four million by 2009.

"The only way this can be sustainable is if it can generate profits for companies. It's conscientious commerce," he said.

Bono's initiative reflected the hard-headed, commercial mood of this year's annual meeting of the World Economic Forum, where business leaders have re-asserted themselves as the dominant players.

Concern's Tom Arnold believes that Irish companies can learn from the enlightened self-interested shown by some participants at Davos.

"Over the past few years in Davos, it is very apparent that many global companies are making an important contribution in the battle against global poverty.

"They are doing this for two reasons. One is enlightened self interest - it does not make long-term commercial sense that over one billion people live on less than one dollar a day and are therefore excluded from markets. The other is the acceptance that, in a wealthy world, it is morally outrageous that 30,000 people a day die from hunger and preventable diseases.

"For good reason, corporate social responsibility is an increasingly accepted principle of modern business. I urge more Irish business leaders, including those at Davos, to apply this principal to practical effect," he said.

This year's meeting has been dominated by discussions of the rise of China and India and the effect that Asia's ascent could have on the rest of the world. The World Economic Forum struggled to persuade Chinese leaders to come to Davos because the meeting coincided with the Chinese new year, but Beijing finally agreed to double the size of its delegation, which included the deputy prime minister and the governor of the Bank of China.

China's message was that it wants to boost domestic demand over the next five years, particularly household consumption.

China's massive savings rate - more than 40 per cent of GDP - and its turbo-charged export performance are often blamed for global economic imbalances.

Bank of China governor Zhou Xiaochuan acknowledged yesterday that the high savings rate puts pressure on producers to export.

But he warned that increased consumer spending could have an impact on China's immense foreign exchange reserves, which are growing at $200 billion a year, much of which helps to sustain the United States current account deficit.

"A stronger domestic demand must to some extent reduce the trade surplus. We believe that the pace of accumulating foreign exchange reserves will be reduced," he said.

At the cocktail parties at the Hotel Belvedere that form the social heart of Davos, few expressed anxiety about Europe's economic performance, but many shared their fears about the consequences of a major slowdown in the US.

Such fears focus on the housing market, which has fuelled the consumer spending that has kept the US economy buoyant in recent years.

Most analysts in Davos agree that the housing bubble has started to fade, noting a sharp fall in mortgage applications in recent months. Everyone agrees that energy prices will remain high and most expect the dollar to fall during 2006 - but few were willing to predict how far or how fast.

Meanwhile, most business leaders continue to look eastwards, working out strategies to secure a share of the fast-growing market in China. Orit Gadiesh, chairman of Bain consultants, advised investors to avoid the mistake of believing that China is westernising rather than modernising. "It's a culture of 3,000 years and the values of that culture are still there They don't think in quarters, they think in decades," she said.

There was little good news in Davos for western workers, who were told that the only jobs they could be sure of keeping were as waiters, cooks, hairdressers, plumbers and electricians. Some trade union activists expressed concern about the abuse of labour rights in China, where there are at least 70,000 strikes each year.

But Jagdish Bhagwati, professor of economics at Columbia University, may have expressed the view of many participants at Davos when he defined minimum labour standards.

"Of course you should have universal labour standards. You shouldn't pull people's fingernails out or shoot trade union leaders," he said.