Davos is now over but where do we go from here?
As Veredus continues to expand its international footprint we have been watching the outcomes of the 2011 World Economic Forum at Davos with interest; At Davos political leaders from all over the world tacitly agreed to set aside their differences and to speak a common language. Closeted together in a mountain valley, they restate their commitment to a single, global economy and to their capitalist values that underpin it and campaign to attract foreign investment and trade. For five days the world's leaders seem to agree on a narrative about how the world will move forward. At Davos even the most intractable differences are temporarily smoothed by the globalisation consensus.
The Forum has seldom welcomed its members in less auspicious times, it continues to evolve, with representation from across the globe, but there were fears that its powerful friends in the west drifting away?
The investment bankers are likely to creep back into Davos in greater force as the shock of the financial crisis recedes a little. They still have a real interest in being there; given that so many of their best clients these days are from developing countries that traditionally turn up in force in Davos.
The secret side of the Alpine talkfest centres on the new globalised economy, “business is pushing the old ‘Chatham House’ world of traditional diplomacy to the margin.... but, ‘The Economist’ concluded, it was more likely to bring people together than force them apart".
Reactions to this week’s unrest in the Arab world illustrated that. The US Administrations statements were clearly designed to encourage greater dialoge with the protestors. Discussions covered a range of issues, the rise of China and the growing prosperity of Asia, and attendant decline in maternal and infant mortality and rise in educational levels seemed the most positive steps forward this past half Century...despite the fact according to Save the Children that 8 million children die needlessly under the age of 5 every year - a horrendous statistic that challenges complacency.
Much of the business leaders briefings with global leaders were taken up with the economy and the Euro Zone crisis. America's deficit and moves towards currency protection. Nouriel Roubini, the American economist, coined one of the phrases of the week when he attacked the lack of leadership being shown by large nations. “It’s not a G7 world, it’s not a G20 world, it's a G-zero world" he said. The debate was framed by Britain’s shock GDP figures unfortunately released on Tuesday-bad timing! This showed that the UK economy shrank in the last quarter of 2010. This led to one of the themes of the week-the two speed, or perhaps multi-speed, recovery from the banking crisis. Emerging economies such as China and India are roaring ahead at 8% or 9% growth a year. America is lagging behind at just 3% with the stragglers in Western Europe. Business Chiefs urged the UK government to promote George Osborne’s speech with Bill Gates to foster a climate for growth. Sir Michael Rake, Chairman of BT and Easy jet stated “confidence is the most important thing for the UK economy now, the government must send out a clear signal that it wants to encourage business, and that includes banks so companies can get on with investing and creating jobs"
The mood amongst British delegates was downbeat compared to other international delegates said the head of an international engineering group. “My rivals are here are tremendously upbeat but none of the big UK companies is talking investment in the home market. If they are investing, it’s in higher growth economies.
One International banker echoed the thoughts of many when he stated that the power of London has diminished that power is rapidly swinging from the West to the East.
Job creation is ‘crucial to our recovery’ the global recovery is under way but western countries must start creating jobs to maintain growth the World Economic Forum was told. Balance sheets were strong, confidence was rising and the availability of credit had increased, said Nouriel Roubini. But in the US and Europe, growth was low and unemployment high, he added. America still faced a real estate crisis and was struggling to tackle its deficit and debt, while in Europe forced austerity measures endangered growth. With China overtaking Japanese the world’s No.2 economy last year Beijing and other ‘emerging economies’ in the east had to ne considered major players by the west, said Martin Sorrell, head of WPP Group. Philip Jennings, of the UNI global trade union group, warned the gap between eastern and western jobs markets was a threat and urged G20 nations to create employment to sustain economic recovery.
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Clive Sexton is a Director of Veredus, part of the FTSE, Capita plc.
Thanks to the FT., Times/ST. Associated and the Guardian for the inspiration behind this summary.