Titans of capitalism shaken and stirred
This year the soul-searching was blunt and the debates were reassuringly honest
DAVOS WAS shaken from its slumber this year as the normally cordial Swiss love-in between politics and business got testy.
Traditionally, every January high-powered captains of industry have easy access to government leaders in this Swiss ski resort in a stress-free, congenial environment. Not this year. Tensions grew over who was to blame for the worst economic crisis in 60 years and how to solve it.
Out went the feel-good element of this economic festival; in came the recriminations and remonstrations about the runaway bankers who have crippled the world’s economy.
Power at the five-day meeting of the World Economic Forum (WEF), which prides itself on being “committed to improving the state of the world”, shifted back to the politicos. It’s hardly surprising given that most governments have much greater control over their economies since the bank bailouts.
The absence of senior American officials and bankers – Valerie Jarrett, a close aide of new US president Barack Obama, was the only high-ranking attendee of note from the US – created a vacuum. It was filled by the emerging leaders of capitalism, Chinese premier Wen Jiabao and Russian prime minister Vladimir Putin.
The two leaders gave confident speeches, signalling to Davos that they were willing to take a leadership role in the world’s economy and sort the financial mess that had been created by the West.
Delegates were buoyed when Wen said China was committed to “reform, opening up and win-win progress”, marking the first time a Chinese leader had made such a statement. Businessmen at Davos saw trillions of yen worth of future eastward-bound exports flash before their eyes.
Putin felt it wasn’t a time for gloating, but he couldn’t resist goading the US for creating the “perfect storm” in the global economy.
He spoke about the “pyramid” of excessive expectations that “would have collapsed sooner or later” and the “unearned wealth” that will be repaid by future generations.
Where Putin’s talk was fighting, Turkish prime minister Tayyip Erdogan went a step further, bounding off the main discussion stage at Davos in frustration following a heated debate with Israeli president Shimon Peres on the Israeli offensive in Gaza.
An irate Erdogan said he would not be returning to Davos, and departed for Turkey and a hero’s welcome. WEF founder Prof Klaus Schwab, who has nurtured Davos into a series of amiable discussions over the 38 years he has been its host, looked ashen-faced.
It may be freezing outside but inside debates were heated. This could be a sign of things to come outside. On Saturday, as French finance minister Christine Lagarde warned of two future risks – social unrest and financial protectionism, anti-WEF protests were held in Davos and Geneva.
One theme ran through the five-day gathering – how could the kings of capitalism had got it so wrong? The soul-searching was blunt, the debates open and reassuringly honest.
JP Morgan Chase chief executive Jamie Dimon, one of the few bankers willing to show his face in Davos, called on bankers and politicians to admit their mistakes and move on. (There were no Irish bankers present this year; two travelled last year.)
Harvard historian Niall Ferguson said the American “debtosaurus” was following Britain down the road of imperial exhaustion and decline.
British prime minister Gordon Brown was the most vocal on how to fix the global economy. He said bank recapitalisations had saved the banks and fiscal stimulus packages injected money into economies, but warned that the toxic assets needed to be isolated with insurance schemes in an international effort.
He said the world required co-operation, a new financial architecture and institutions that prevented financial crises and didn’t just clean up afterwards. German chancellor Angela Merkel said the crisis showed the need for better international co-ordination and maybe even a UN economic council.
But for all the ideas floated by government leaders, actual solutions were put on ice until the G20 group of the world’s largest economies meets in April. There, Obama, who was frequently elevated in the Swiss resort last week to be the great hope for the world’s economy, can share his thoughts.
Davos stirred the debate but the hard decisions on rebuilding the global economy will be made elsewhere.