World Economic Forum Saving the World in Davos?
Political and business leaders will meet in the Swiss resort of Davos for the annual World Economic Forum starting Wednesday. It's the 40th anniversary of the elite gathering, but the mood is somber thanks to fears of an Asian market crash, global warming worries, shattered faith in the financial system, and Haiti.
Nicolas Sarkozy might feel snubbed. The French president has been granted the honor of opening the five-day World Economic Forum in the Swiss resort of Davos with a speech. But all eyes will be on other visitors, such as Chinese Deputy Prime Minister Li Keqiang. The world's political and business elite converging on Davos for the 40th time this year is deeply worried, and their concerns focus partly on China.
The forum's latest "Global Risk Report," which will be submitted for discussion in Davos, contains urgent warnings of a possible stock market crash in China. US economist Nouriel Roubini, a Davos regular, spoke in apocalyptic terms about the dangers arising from the billions of dollars in speculative capital flowing into China. One day, he says, the new asset price bubble will burst and lead to the greatest capital devaluation of all time.
The world's leading banks have flown in large delegations to exert subtle pressure on policymakers at the countless backroom meetings, parties and dinners in Davos. They have a lot on their plate after US President Barack Obama last week announced plans to limit the proprietary trading activities, and overall size, of top US banks.
US government officials are conspicuous by their absence at this year's meeting, with the exception of Lawrence Summers, Obama's National Economic Council Director. But there will be hundreds of senior politicians from other countries for the bankers to work on. "The lobbying is getting very strong and the political will can be diluted quickly," warned Cedric Tille, professor of economics at the Graduate Institute in Geneva.
"Rethink. Redesign. Rebuild"
Klaus Schwab, the forum's German founder, has his own agenda. The motto of the 2010 meeting is "Improve the State of the World: Rethink, Redesign, Rebuild." Schwab wants to focus debate on climate change after the failure of the Copenhagen summit in December. The 71-year-old also wants to talk about problems in the financial sector, and the earthquake in Haiti. Former US President Bill Clinton plans to launch an aid initiative for Haiti in Davos.
So there's an air of tension as the meeting gets underway. Given the grim topics under discussion, Schwab's foundation won't throw any parties to celebrate the Forum's 40th anniversary, although it's an incredible success story. The economist first invited top managers to the luxury ski resort for an exchange of views in 1971. That year, some 444 guests came. Davos has since grown into a mega-meeting of the world's political, business and science elites. Thousands of police and snipers have cordoned off the town and private jets crowd the little airfields dotted around the valley.
Over 2,000 Guests
The number of participants has risen to 2,500 in 2010, including 30 government leaders, some 60 ministers and 1,400 top executives including billionaires like George Soros and Bill Gates. Hollywood stars like Angelina Jolie or Sharon Stone have graced Davos in past years. This year, the pianist Lang Lang will be among the celebrities.
Being there is an expensive business. The roughly 1,000 firms that belong to the World Economic Forum's foundation pay an annual fee of 30,000. Add to that an attendance fee of some 12,500 per visitor. Hotel prices are predictably exorbitant, but it's a worthwhile investment for the managers and politicians because they can hold dozens of top-level meetings for which they would otherwise have to fly around the globe. They also appreciate the relatively easygoing atmosphere of the Davos meeting, despite the enormous security presence.
Davos has long been more than just a huge conference. The history of the forum is peppered with historic moments. In 1994, Shimon Peres, then Israel's foreign minister, and Palestinian leader Yasser Arafat reached an agreement on a draft treaty in Davos for the Gaza Strip and Jericho. South African President Willem de Klerk and Nelson Mandela shook hands there for the first time. And just a few months after the fall of the Berlin Wall in November 1989, German Chancellor Helmut Kohl held talks in Davos with the premier of East Germany, Hans Modrow.
Davos has never been short of critics. The gathering of elites is almost always accompanied by demonstrations by anti-globalization activists across Switzerland. The World Social Forum and the Women's Forum have been established as counter-events. The latter meeting emphasizes the pitifully low proportion of women among the Davos participants -- just 15 percent.
With his white hair, rimless glasses and south-western German accent, Klaus Schwab seems more like a university professor than the world's most important networker. In addition to Davos, he also organizes regional conferences in China, India and other Asian countries, as well as in Africa, the Arab countries, Russia and South America. He has set up forums for Young Global Leaders, for Social Entrepreneurs, for non-governmental organizations as well for religious, academic and cultural leaders. Bill Clinton has praised his talent for bringing people together.
Polite but Firm
Schwab doesn't shy away from interrupting government leaders if they run over their allocated speaking time. His tone is always modest, but he isn't averse to speaking his mind, and politicians and executives tend to listen to what he says. He hasn't held back this year, making angry comments about the high bank bonuses paid out in recent weeks. "The payment of millions of euros in bonuses betrays a lack of understanding of what's going on at the moment. One could call it arrogance or the last battle of the ignorant. We simply cannot go on like this," Schwab told German daily Süddeutsche Zeitung ahead of the meeting. Paying out 20 times the minimum salary should suffice, he added.
Despite such plain speaking, though, there's little hope that this year's meeting will generate spectacular headlines. The problems of the financial markets are too complex for that, and there's a broad mix of opinion. Will raw materials markets experience a new price bubble, or is that pure panic-mongering? Should the G20 group of leading developed and emerging economies put more pressure on the financial sector, or are the banks overburdened with new regulations? These issues will be hotly debated, but there won't be any clear answers. And without a high-level US government presence at this year's meeting, there's no chance of a breakthrough on combating climate change.
Schwab seems aware of this. This year's Forum should be a "Davos of reflection," he told Süddeutsche. He promised not to retire despite his advanced age. After all, he hasn't accomplished his mission yet. Saving the world is a pretty big challenge.