World Economic Forum at Davos: Still Standing

The Schatzalp hotel, a funicular ride above Davos, was once one of the local sanatoriums made famous by Thomas Mann's The Magic Mountain, on whose balconies tuberculosis patients basked in the alpine sun and gulped the clean air. On the last day of the annual meeting of the World Economic Forum, attendees gather for lunch on the hotel's terrace, serenaded by alpenhorn. When as was the case this year the sun is shining, there are few more splendid views in Europe. From the terrace you can look south at the white peaks of the Graubünden serrated against a Carolina-blue sky, tuck into your wurst and rösti and think that all is well with the world.

Then you remember the ghosts around you. Not all those patients made it down from the Magic Mountain alive.

It was a useful thought to keep in mind during this year's annual meeting. Of course, there's always something a little forced about identifying a shared sentiment at Davos. Given that there are hundreds of sessions from which to choose and hundreds more conversations to enjoy in the corridors and at the parties, no one person's Davos is quite the same as anyone else's. Davos is like the Olympic Games, where folk from different countries cheer different sports Australia, swimming; Bhutan, archery. It's not like a football World Cup, with a single narrative. Still, it was plain that the dominant mood among policymakers and business leaders was a bit like that of a lunch on the Schatzalp. As they looked to the future, they were more confident about the global economy than they had been for four years. But unadulterated optimism was kept in check, lest unfinished business and unpredictable shocks chill the recovery.

One such shock, emanating from Egypt, sent tremors through the meeting all week. A new crisis in Europe, a run on the dollar, inflation in China and India these are things that those planning the winter program could foresee. Revolution in the Middle East? Hardly. Then the Tunisian government fell, and just as Davos got started, Egypt was convulsed with protests.

As oil prices spiked higher (the benchmark price for Brent crude touched more than $100 a barrel the day after Davos concluded), the economic elite already worried, with good reason, about rising food and commodity prices had to contemplate a degree of political risk to the recovery, a risk for which few were prepared.

Still, assuming (perhaps unwisely) that we are not on the edge of an oil shock like the two that shook the world economy in the 1970s, the broad shape of the global economy over the next few years is well understood. We are in what the International Monetary Fund calls a two-speed recovery, with emerging markets from Asia to Latin America racing along while the U.S. and many European economies struggle to get out of second gear.

In the high-speed world, growing confidence has led to a striking willingness to admit to shortcomings in economic governance the sort of admissions that only those who are optimistic about their long-term future make. President Susilo Bambang Yudhoyono of Indonesia spoke of the need to build a climate of "zero tolerance" for corruption. At a number of panels on India, participants including such key officials as Interior Minister P. Chidambaram openly and honestly discussed the problem of corruption and poor public administration, especially in India's burgeoning megacities. In a frank speech made in the wake of the terrorist attack on Moscow's Domodedovo airport, Russian President Dmitri Medvedev admitted that Russia faces "many difficulties in building the rule of law, in creating a modern state of the economy."