From its origins, the World Economic Forum at Davos has been a European-U.S. joint venture. With their united currency, free trade regime, high standard of living and strong safety net, Europeans believed they could afford to turn their attention to solving the rest of the world's woes. The U.S. brought to the table its dynamism, manifest superiority in business and finance, and its sheer power.
And so each January, as part of an effort to raise the standard of living in the vast swathes of the globe that have yet to see the benefits of free markets and technology, trans-Atlantic big shots throng to the Alpine resort. Make no mistake: The folks in Davos believe they have the solutions to the world's problems — otherwise they wouldn't be running banks, companies, non-profits and countries.
This Davos spirit is still very much in evidence, in sessions such as Ensuring Inclusive Growth and Insights on Africa. But my biggest takeaway so far is that it's the most fortunate who may need help from the developing markets, not the other way around. The theme of this year's confab was Shared Norms for a New Reality. But the new reality may not be what the planners thought. After all, what do European bankers and policymakers have to teach the world about fiscal and financial management — other than what not to do?
Europeans showed up here with their own fiscal and political houses in serious disarray. The European Union is coming apart at the seams, in large measure over the divergent fiscal fortunes of member states. Greece, Ireland, Portugal and Spain are struggling to impose austerity and cut budget deficits. The European Central Bank is trying (and failing) to craft a monetary policy that pleases both expanding Germany and shrinking peripheral economies. It's nice that European poobahs are concerned about debt relief in Tanzania. But they should really be more concerned with debt relief in Spain. The prospect of Europeans gathering to advise, say, India, on how to manage its financial affairs seems a bit like having a convention of cardiologists filled with overweight smokers who subsist on BLTs slathered with mayonnaise. The physicians must heal themselves before they start treating others.
Britain, which has remained aloof from the European currency and from some of Europe's problems, isn't in much better shape. I attended a briefing with Britain's Deputy Prime Minister Nicholas Clegg, head of the Liberal Democratic party. He spoke about how the new government's austerity plans would promote growth. Coming just days after England reported that its economy shrank in the 2011 fourth quarter, I found Clegg to be more articulate than convincing.
The political problems on everyone's lips stemmed from the Middle East. But this year, there are equally troublesome issues right on Europe's borders. The keynote address was delivered by Russian Dmitry Medvedev, the 45-year-old Russian president. The prospect of an energy-rich Russia, newly emboldened and willing to thumb its nose at big business, by, for example, jailing businessman Mikhail Khodorkovsky, is contributing to a sense of unease. Medvedev, slated to give the keynote address, arrived late because he was dealing with the aftermath of a terrorist bombing in Moscow. His large entourage, complete with Cold War-era military attaché gripping a portentous briefcase, didn't help matters much. Acknowledging some shortcomings in Russia's legal and other systems, Medvedev gave the West a warning: "But what we don't need is lecturing — we should be working together."
As for America, whose poor public and private financial management has inflicted numerous woes on the global economy? There were very few U.S. politicians in attendance. (Barney Frank was the only U.S. elected official I saw here). Treasury Secretary Tim Geithner arrived on Thursday just as it was reported that America's deficit for fiscal year 2011 would rise to $1.5 trillion.
In recent years, a series of strongly held preconceptions has fallen. Participants used to believe the developed world had all the capital to solve the world's woes. A few years ago, the rise of Sovereign Wealth Funds from the Persian Gulf and China changed that calculus. Now, the notion that the U.S. and Europe have a monopoly — or even a sound grasp — on the basics of economics and finance is falling by the wayside.
The confusion and insecurity of the U.S. and Europe contrasts sharply with the growing self-assurance of the developing world. On Thursday night, I attended a dinner with Latin American leaders. While they didn't glide over problems — Mexican President Felipe Calderone spoke about the country's issues with crime and drugs — they expressed a strong optimism that this could be the Latin American decade. Despite issues (hello, Venezuela), countries in South and Central America are increasingly trading with one another, trading with the world and growing prosperous. A colleague who attended a dinner with five heads of state in Africa reported a similarly upbeat mood. I interviewed an Indian financial services executive who confidently outlined his plans to expand in Asia and the U.S.
Throughout the year, the World Economic Forum holds smaller satellite meetings in Latin America, the Middle East and Asia. The idea is to take the spirit of Davos directly to the developing world. But perhaps they should consider upending the model. Maybe it would be more productive for the bigwigs in Colombia, South Africa or Malaysia to get together at a resort for a few days of parties, panels and earnest discussion on how they can help solve the problems of Europe, the United States and Japan.
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- World Economic Forum
- budget deficits
- The European Union
- free trade regime
- free markets
- high standard of living
- the Middle East