Under the facade of a newfound confidence, the attendees of this year’s World Economic Forum still managed to convey a sense of lingering insecurity about the upcoming year. Over 2,000 of the world’s richest and most powerful people met in Davos, Switzerland to celebrate last year’s unanticipated growth and prepare themselves for continued progress at the same trajectory. However, beneath the surface of the rhetoric communicated at this year’s meeting lies an acknowledgement of the obstacles to come.
2010 certainly went better than this group had predicted it would at this time last year, when any optimism was tempered with talk of a “double-dip” recession. In fact, growth rebounded in a strong way. Companies reaped the benefits of becoming necessarily leaner and more efficient after the crisis. The emerging markets of China and India continued to boom. Rapid technological developments completely changed business for the better. At Davos this year, the economic collapse of 2008 seemed far behind us.
But power is shifting before the world’s eyes. Is business-as-usual plastic enough to accommodate the imminent changes? Some economists such as Barrie Wilkinson, a partner at the London-based Oliver Wyman consulting firm, say no. However most forum attendees chose not to acknowledge the possibility of an economic sea change as Wilkinson predicts it.
This May End Badly
“The fundamentals haven’t been addressed at all,” Wilkinson confides. “The things that caused the previous crisis—loose monetary policy and trade imbalances—they’re actually bigger now than they were then.”
Wilkinson represents a small and unwelcome community of cautious reformists that attended the forum. The deception of short-term prosperity is not to be confused with long-term stability, they warn, claiming that the returns seen in the past are unsustainable. Until risks are properly monitored and banks are deleveraged, we are not out of the woods.
When recounting last year’s success, the implicit aside is that 2011 may not be quite as profitable. The circling sharks include runaway inflation, exchange rate fluctuations, and trade disagreements.
During a session titled “Globalization 3.0”, one executive voiced concern about growing volatility. “I’m concerned that too many are too bullish, that this may end badly,” he said.
While another year of strong economic growth await us—4.4 percent being a modest estimate compared to the 5 percent seen last year—there’s still a lot of risk to consider, including the European debt crisis, capital flows, and income inequality.
However, as we saw with the last economic collapse, it is more than challenging to convey the exigency of systemic reform to those benefiting from the status quo until all other options have been exhausted or they are confronted with no other choice.
The Value of Rhetoric
The blunt question raised from past Davos forums is, “is this event necessary?” The meetings’ primary criticism has been that rarely does talking about the world’s problems directly translate into tangible results. Considering not only the immense cost of flying 2,500 people (and their staff) to a remote Swiss location but also the cost of time to the world’s most influential, it seems difficult to justify a social gathering.
However, the forum never claimed to be about decision-making, but instead asserts itself to be an independent platform for discussion. The attendees are opting to spend their valuable time thinking critically about how to confront issues such as AIDS and climate change. But is it enough to say that the forum has raised levels of awareness about important issues?
More Questions than Answers
Economic power is shifting from West to East and production is moving from developed countries to emerging markets. This means an increased emphasis on innovation investments for the Western world, as iterated in President Obama’s State of the Union Address. For the Eastern world, this power shift means quickly deciding if the Western globalization model is really the ideal, especially if independence is sought from the West through the development of domestic economies.
Food prices are an important variable to consider as well, as we’ve seen illustrated in the later half of 2010. Droughts in Eastern Europe, wildfires in Angola, and mass flooding in Australia worked together to drive up food prices around the world. How to create a global food trade that is sustainable, reliable and accommodating of population growth will be the primary challenge of the upcoming generation.
The prospect of terrorism will undoubtedly influence how countries and corporations interact with each other in 2011, yet it is difficult to directly confront an issue so pervasive and obtuse. Discussions about the potential challenges and repercussions of terrorism and large-scale social unrest looked to last weeks Moscow bombing, the Tunisian riots, and the unfolding events in Northern Africa as models.
Egyptian Elephant in the Room
During talk of progress and improvement, violent protests raged on the streets of Northern Africa. The interconnectedness granted by ubiquitous technology permitted these leaders to remain fully informed about the progression of events, but it was also a fascinating coincidence that so many influential people were assembled together as these critical events occurred and were able to speak face-to-face with one another about its implications.
A shared conviction of the need for Egyptian government to listen to the voice of its people provided a common ground that the forum attendees could discuss global affairs on. It was agreed that a lack of employment options and political inclusion is at the root of the unrest, forging a new forum agenda of urgently addressing poverty. The meeting was concluded with a call to help the world’s poor and jobless who have taken to the streets in protest.
Chandra Kochhar Sunday, chief executive of the largest private bank in India, voiced hope for a new more inclusive model of globalization: "It is just imperative for all of us as companies and as countries to focus on saying that 'I'm making our growth more inclusive. Gone are the days (when) it's just enough to say that some people will earn theirs, and then they will distribute," she said at a closing panel on the Global Agenda in 2011. "I think the model has to shift to the grass roots to say, 'can we create enough basic stability plus employment generation opportunities for each and every of the small individuals ... to participate in growth.'"
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The Battle for Change at Davos
February 2, 2011
Under the facade of a newfound confidence, the attendees of this year’s World Economic Forum still managed to convey a sense of lingering insecurity about the upcoming year. Over 2,000 of the world’s richest and most powerful people met in Davos, Switzerland to celebrate last year’s unanticipated growth and prepare themselves for continued progress at the same trajectory. However, beneath the surface of the rhetoric communicated at this year’s meeting lies an acknowledgement of the obstacles to come.
2010 certainly went better than this group had predicted it would at this time last year, when any optimism was tempered with talk of a “double-dip” recession. In fact, growth rebounded in a strong way. Companies reaped the benefits of becoming necessarily leaner and more efficient after the crisis. The emerging markets of China and India continued to boom. Rapid technological developments completely changed business for the better. At Davos this year, the economic collapse of 2008 seemed far behind us.
But power is shifting before the world’s eyes. Is business-as-usual plastic enough to accommodate the imminent changes? Some economists such as Barrie Wilkinson, a partner at the London-based Oliver Wyman consulting firm, say no. However most forum attendees chose not to acknowledge the possibility of an economic sea change as Wilkinson predicts it.
This May End Badly
“The fundamentals haven’t been addressed at all,” Wilkinson confides. “The things that caused the previous crisis—loose monetary policy and trade imbalances—they’re actually bigger now than they were then.”
Wilkinson represents a small and unwelcome community of cautious reformists that attended the forum. The deception of short-term prosperity is not to be confused with long-term stability, they warn, claiming that the returns seen in the past are unsustainable. Until risks are properly monitored and banks are deleveraged, we are not out of the woods.
When recounting last year’s success, the implicit aside is that 2011 may not be quite as profitable. The circling sharks include runaway inflation, exchange rate fluctuations, and trade disagreements.
During a session titled “Globalization 3.0”, one executive voiced concern about growing volatility. “I’m concerned that too many are too bullish, that this may end badly,” he said.
While another year of strong economic growth await us—4.4 percent being a modest estimate compared to the 5 percent seen last year—there’s still a lot of risk to consider, including the European debt crisis, capital flows, and income inequality.
However, as we saw with the last economic collapse, it is more than challenging to convey the exigency of systemic reform to those benefiting from the status quo until all other options have been exhausted or they are confronted with no other choice.
The Value of Rhetoric
The blunt question raised from past Davos forums is, “is this event necessary?” The meetings’ primary criticism has been that rarely does talking about the world’s problems directly translate into tangible results. Considering not only the immense cost of flying 2,500 people (and their staff) to a remote Swiss location but also the cost of time to the world’s most influential, it seems difficult to justify a social gathering.
However, the forum never claimed to be about decision-making, but instead asserts itself to be an independent platform for discussion. The attendees are opting to spend their valuable time thinking critically about how to confront issues such as AIDS and climate change. But is it enough to say that the forum has raised levels of awareness about important issues?
More Questions than Answers
Economic power is shifting from West to East and production is moving from developed countries to emerging markets. This means an increased emphasis on innovation investments for the Western world, as iterated in President Obama’s State of the Union Address. For the Eastern world, this power shift means quickly deciding if the Western globalization model is really the ideal, especially if independence is sought from the West through the development of domestic economies.
Food prices are an important variable to consider as well, as we’ve seen illustrated in the later half of 2010. Droughts in Eastern Europe, wildfires in Angola, and mass flooding in Australia worked together to drive up food prices around the world. How to create a global food trade that is sustainable, reliable and accommodating of population growth will be the primary challenge of the upcoming generation.
The prospect of terrorism will undoubtedly influence how countries and corporations interact with each other in 2011, yet it is difficult to directly confront an issue so pervasive and obtuse. Discussions about the potential challenges and repercussions of terrorism and large-scale social unrest looked to last weeks Moscow bombing, the Tunisian riots, and the unfolding events in Northern Africa as models.
Egyptian Elephant in the Room
During talk of progress and improvement, violent protests raged on the streets of Northern Africa. The interconnectedness granted by ubiquitous technology permitted these leaders to remain fully informed about the progression of events, but it was also a fascinating coincidence that so many influential people were assembled together as these critical events occurred and were able to speak face-to-face with one another about its implications.
A shared conviction of the need for Egyptian government to listen to the voice of its people provided a common ground that the forum attendees could discuss global affairs on. It was agreed that a lack of employment options and political inclusion is at the root of the unrest, forging a new forum agenda of urgently addressing poverty. The meeting was concluded with a call to help the world’s poor and jobless who have taken to the streets in protest.
Chandra Kochhar Sunday, chief executive of the largest private bank in India, voiced hope for a new more inclusive model of globalization: "It is just imperative for all of us as companies and as countries to focus on saying that 'I'm making our growth more inclusive. Gone are the days (when) it's just enough to say that some people will earn theirs, and then they will distribute," she said at a closing panel on the Global Agenda in 2011. "I think the model has to shift to the grass roots to say, 'can we create enough basic stability plus employment generation opportunities for each and every of the small individuals ... to participate in growth.'"
