What is Davos?
Whether decried as a week of gormless schmoozing and networking, or hailed as a means of solving the world’s greatest problems, critics and fans alike can all agree on one thing. “The World Economic Forum is the greatest talking shop on earth,” says Jeremy Warner in The Independent. “And at $50,000 (£25,000) a pop, it has to be.”
Started in 1971 by Charles Schwab, a University of Geneva economics professor, the idea was to hold a management forum high in the Swiss mountains, where delegates could spend the day talking, and the evening skiing or lounging at the spa. “When we started, it was a small, family affair, with not more than 400 people,” Mr Schwab tells the FT. “And in those days, we could devote two full weeks to the meeting.”
But after dialogue at Davos helped Greece and Turkey to tone their warring rhetoric in 1988, the European Management Forum became the World Economic Forum. It soon became a conduit for reconciliation in South Africa and an unofficial means of engaging with Palestine. Now the forum’s length has shrunk to five days, while attendance has grown to more than 2,500, not to mention the thousands of hangers on for parties and receptions held by banks, firms and governments.
Viewed by many critics with suspicion because of the secretive nature of the forum, Schwab invited campaigners and advocacy groups, eager to wash away the air of freemasonry around it. But despite its popularity, he remains humble as to what it can achieve. “The Forum is not a decision-making body. The WEF is a body that enlightens people, that helps them to make better informed decisions. The rest is up to them”, says Schwab.
The big problem: water
With global stockmarkets going haywire in the background, there was no shortage of things for Davos delegates to worry about. But the biggest concern wasn’t financial liquidity, but liquid of a very different sort. UN Secretary General Ban Ki-moon warned of a new era of resource wars, as water shortages overtook climate change as the biggest issue of 2008. “Too often where we need water, we find guns,” he said. “Many more conflicts lie just over the horizon.”
In that, he found agreement with Andrew Liveris, chairman of Dow Chemical, who added that “Water is… the oil of the 21st century”. That led to increasing criticism of biofuels. World Bank President Robert Zoellick said the price of basic nutritional requirements for the world’s hungriest was rising sharply, and Climate Change Chairman Rajendra Pachauri made no bones about pointing the finger squarely at the chief culprit. “I am not entirely happy with the diversion of areas for the production of food into the area of production of fuels.”
The big idea: ‘creative capitalism’
Perhaps Bill Gates might be able to help. In his keynote speech, Mr Gates deplored the fact that “diseases like malaria, which kills a million people every year, get less attention from pharma companies than drugs for baldness”. He argued that capitalism only works for those who can pay and called on firms to engage in “creative capitalism”, to find out “how the power of the marketplace can help the poor”. He suggested that firms need to forget about profits when trying to serve the very poor, in favour of the “reputational benefits” of “recognition”.
The prediction: US recession
Of course, while the richest man in the world was talking about swapping profits for recognition, many of the chief executives in the audience were almost certainly frantically checking stock prices on their Blackberries and worrying more about swapping profits for plain old losses. And George Soros, the man who broke the Bank of England, didn’t do anything to cheer them up. A global recession was now inevitable, said Soros, telling the Today programme that “central banks have lost control”. Stephen Roach, head of Asia at Morgan Stanley, disagreed, but remained highly critical of the rate cut. “(This is) excessive monetary accommodation that just takes us from bubble to bubble to bubble.”
It may be too late anyway. John Thain, Merrill Lynch’s CEO, warned one panel that the credit crisis was spreading. “We are likely to see another wave of problems on the consumer credit side”. But no one should be surprised that we’re facing recession, said JP Morgan CEO James Dimon. “People have to keep in mind, throughout history we have always had cycles.”
The saviour?
But try telling that to the International Monetary Fund, whose head, Dominique Strauss-Kahn, was in full-blown panic mode. “What is clear is there will be a serious (US) slowdown and it needs a serious response,” he said, calling for interest-rate cuts and looser fiscal policy. It was an historic moment, said Larry Elliot in The Guardian, “the first time in a quarter of a century that the fund had deviated from its iron belief in balanced budgets and fiscal consolidation, to call for a classic Keynesian approach to economic slowdown”.
But surely China can ride out the storm? Wang Jianzhou, head of China Mobile Communications, seemed to think so. Sure, he said, Chinese exports might fall, “but we still have very, very strong domestic consumption”. But Goldman Sachs CEO Lloyd Blankfein wasn’t buying it. “It’s impossible for it to be a complete decoupling,” he said. “How can growth be maintained if the ultimate source of demand [the US] is receding?”
And lest we forget China’s shaky record on human rights amid talk of its economic superiority, Nobel prize winner Elie Wiesel was applauded for calling on the country “to open its doors to the Dalai Lama so I could accompany him to go to Tibet”. Human rights: that’s one import we can’t see the Chinese snapping up any time soon.