World Economic Forum at Davos: Still Standing

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Geithner insisted that steps would be taken to get the fiscal situation back within the realm of the tolerable "There's no alternative to it," he said and promised that when Obama unveiled the new budget, "you'll see our view of the best way to bring those deficits down over time." But he resisted calls for immediate deep budget cuts, and more than one commentator pointed out that in the debate over whether to make cuts now (the British position) or make cuts later (the American one), Washington seems to have the evidence on its side. Cameron and Osborne arrived at Davos in the shadow of awful U.K. growth figures for the last quarter of 2010.

Yet Geithner was realistic about what recovery means. The U.S. expansion, he said, was "not a boom it's not going to offer the prospect of a rapid decline in the unemployment rate." American companies have a tendency to get through tough times by shedding labor, especially at home. The result is that the U.S. is likely to see "a tragically more moderate reduction in unemployment as the economy recovers."

A sustained period of high unemployment means that what one U.S. official called "exceptionally high income inequality" will continue to be a feature of the economy for some time. In this, the U.S. won't be alone. The breathtaking speed of economic growth in nations such as China, India and Brazil often obscures the fact that the benefits of that growth are unevenly spread: more go to the cities and to those with marketable modern skills; fewer go to the villages and those with ancient work practices. Zhu Min, a well-known Chinese economist who is now a special adviser to the IMF, went so far as to call growing income inequality "the single most severe challenge facing the world." It's a problem that will only intensify as rising commodity prices put pressure on the developing countries' poor, who spend half their income on food and oil.

The social and political dangers of inequality are well understood in emerging markets. Chinese leaders routinely stress the need to extend growth inland from the coastal provinces (labor shortages and high wages on the coast are helping the transition), while the Indian government is committed to "inclusive" growth that delivers benefits to the villages.

Not so in the Atlantic world. One senior business leader said frankly that during the crisis, companies around the world had "sacrificed the workers to please the shareholders" and called for a more "humanistic" approach. Another mused that although new technology had done wonders in creating marvelous products, so far it had not demonstrated that it could create millions of middle-class jobs to replace the ones disrupted out of existence. Add to that the opportunity for shifting high-skilled, high-paid jobs from the Atlantic core to Asia and other areas of the developing world on a scale never seen before and it becomes easy to understand why frustration with conventional policies and institutions may grow.

In these circumstances, those who have done well from global capitalism might at least show a degree of sensitivity. At one plenary panel, there was a priceless exchange between Lagarde and Bob Diamond, the CEO of Barclays Bank. Meaning well, no doubt, Diamond expressed heartfelt thanks to the authorities for rescuing the global financial system in 2008-09. Thanks, Lagarde told him tartly, were not enough. What the banks needed to do was lend more, improve their capital ratios and reform their compensation structures.

It was a reminder that plenty of people have not yet seen any benefit from the recovery; millions of small businesses need capital as much as middle-class families need jobs. Until they get those things, there will be the risk which, of course, will manifest itself in different ways in different societies that ordinary people in the rich world will lose confidence in the processes of globalization that have done so much to lift millions in the developing world out of poverty. As they looked to the sunlit uplands at the Schatzalp, did the Davos attendees this year feel a chilly breath from those who have not yet felt any warmth at all from the recovery? If they were wise, they did.

This article originally appeared in the Feb. 14, 2011 issue of TIME Europe.