Out of the valley This year, conference goers in Switzerland discussed how to achieve a better balance between growth and stability
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One understands the point, even if it ignores the fact that pre-communist China was developing a middle class in the 1920s and '30s. But it's hardly the whole story. Plenty of business leaders — though not all, as a well-known European CEO emphatically told me — say that China, of late, has been tough as nails with investors. The China style they see is less that of a poor, developing country and more that of a bully. Beijing's unveiled warning on Feb. 2 that for Obama to meet the Dalai Lama "would damage trust and cooperation between our two countries, and how would that help the U.S. surmount the current economic crisis?" falls squarely into the second style of dialogue. Besides, developing country though it may be, China now has a position of great power in the global economy, and with that power comes responsibility — a responsibility that is not discharged by a nakedly mercantilist, cheap-currency economic policy, or by free-riding on an international system in which the U.S. carries a heavy load. There were some in Davos who thought the world has been too polite to China since the financial crisis took hold, and my guess is that the tone of Beijing's comments on the Dalai Lama will have added to their number.
Let's Get Together
For all that, it was good to hear from senior non-Chinese finance officials how impressed they are by the professionalism of their counterparts in Beijing. One very clear impression with which I left Davos was that since the crisis broke, coordination between finance-ministry officials, central bankers and leaders of the international financial institutions has been sustained and effective. (Though I would bet the price of a Swiss watch that not a single non-American official was given advance warning of Obama's adoption of the Volcker rule for bank regulation.)
It's easy to be cynical about the need for international coordination of policy, especially at the WEF, which exists in part to advance that very thing. "At the World Economic Forum," said David Rubenstein of private-equity firm the Carlyle Group, "you should always say, yes, multilateralism is possible and we should come together. But getting national solutions is hard enough." This, though, is one of those moments when cynicism should not determine policy. It really is important that international coordination continue as the world moves from recession into recovery — coordination on when stimulus packages are unwound, on exchange rates and on legal reform, so that banks do not play a game of regulatory arbitrage between different supervisory regimes.
The process of coming to international agreement on policy is bound to be a messy affair. Sarkozy called for "a new Bretton Woods" and promised to place the "reform of the international monetary system on the agenda" when France chairs the G-8 and G-20 in 2011. But I don't think that's going to happen. The unhappy outcome of the Copenhagen summit on climate change last December has soured many observers on the (always foolhardy) hopes for big-bang solutions to complex global problems. Tim Wirth, president of the United Nations Foundation, told me that we were moving into a world of "ad-hocery" in international affairs, with various coalitions of nations coming together to sort out economic, political and environmental issues. That may not satisfy the desire for institutional neatness and clarity that is so marked in Paris, but it's not the end of the world. So far, the G-20 — which few had heard of two years ago and which still doesn't have a full-time secretariat — has performed remarkably well.
Davos wasn't all about the economy, and China, and the G-20, of course; it never is. Often wrongly dismissed as nothing more than a gabfest for fat cats, the annual meeting has, in the last 10 years, become a focus for global philanthropic efforts, epitomized this year by Bill Clinton's call for a long-term commitment to rebuilding Haiti (when he's there, the Davos crowd can feel like Clinton's extended family), the Gates Foundation's pledge of $10 billion to develop vaccines, and Ukrainian mogul Victor Pinchuk's annual philanthropy summit. This philanthropic thrust of Davos may turn out to be one of the most enduring legacies of Klaus Schwab, the WEF's founder and executive chairman.
And there was fun to be had, too. With the football World Cup — the global event beyond all others — due to start in just a few months, an enormous South African delegation took over the town. There have been other nations that have used Davos to "brand" themselves, but — from the ubiquitous scarves in South African colors, the music at the closing night's party, and a screening of Anant Singh's wonderful film More Than Just a Game, about the football played by political prisoners on Robben Island — none have ever done so much with such brio as the South Africans. The "Davos kickoff" of the World Cup, when a collection of luminaries (including Schwab) lined up in South African football shirts and blew vuvuzelas was quite simply the most joyous moment I have ever seen on the main Davos stage — and, thanks to a perfectly judged short speech by Trevor Manuel, Minister in the Presidency of the South African government, one of the most moving, too.
As it enters its 40th year — the event started as the European Management Forum in 1971 — Davos can expect to continue to be overanalyzed, as it has been for years. Whatever you hear, remember that it's not just about economics, it's not a plutocrats' paradise (as anyone who has stayed in a certain type of Davos hotel knows), and it's not a weeklong party. I think of its winter charms, rather, as akin to those that London's frost fairs must have had in the 17th century, when the Thames froze solid and countless stalls were set up on the ice with hot pies, fortune tellers, dancing bears and a hundred other attractions. We really need a latter-day Bruegel to paint Davos, and a diarist as great as Pepys to write about it. But for that, I fear, we will have to wait for more than another 40 years.
With reporting by Barbara Kiviat / Davos