When a French president praises capitalism an Englishman is conditioned to smell un rat, indeed a whole nest of them. And Sarkozy did not disappoint, in his grand opening address at Davos.
He offered three interpretations of the causes of the crisis: global imbalances, short-termism, and bankers being tempted into speculation and away from real banking. Arguably they point to quite different solutions, but they were all grist to his moulin. Read more
Focus on the first day, amongst other things, is on the high levels of unemployment and consequent risk of more protectionism. As unemployment is already at a very high level – an average of 10 per cent in most western economies and youth unemployment at least double that rate – social stability and long-term social damage are major issues.
As a jobless recovery kicks in, particularly in mature economies, the problem is likely to worsen and, as a result, protectionism will rear its head even more.
Organisations such as the ILO and WTO are pushing for more social programmes to cushion structural unemployment. Business generally argues that Western European economies, in particular, are not flexible enough. In America, although structural change is equally difficult and unpleasant, there is a mobility and flexibility that is absent from Western Europe, where higher taxation and social charges make plant location and similar investment decisions more difficult. Read more
I spent my day being interviewed by other media organisations and preparing my Friday column. So I did not attend any sessions. I rely on the excellent reporting of my colleagues to tell me what is happening in Davos, just like all the other readers of the FT and ft.com. But I have still managed to learn something from chance encounters here.
So what have I learned so far?
First, my criticism of the “Volcker rule” in banking, subject of my column this morning, is controversial. The desire of many non-bankers to cut the bankers down to size is, even here, quite noticeable. Have I gone soft on bankers? I do hope not. But this new addition to the already pressing weight of uncertainty worries me greatly. Read more
By Chris Giles, the FT’s economics editor
I have a terrible problem when I listen to chief executives talking about what they do for the world:how they give people livelihoods; how their fine management has given thousands of people jobs; how families would be destitute were it not for them. My problem is that I thought slavery had ended – quite some time ago. Read more
It was a sprightly and cheerful George Soros who addressed journalists at a lunch today in Davos on the aftermath of the financial crisis.
The crisis has been good for the credibility of Mr Soros and he drew a notable group of editors to listen to his recommendations, including John Micklethwait of The Economist, James Harding of The Times, Jacob Weisberg of Slate and Marcus Brauchli of The Washington Post. Read more
No doubt, the Global Competitiveness Forum in Riyadh was an excellent curtain raiser for Davos. The agenda for the latter seems set – management and timing of the withdrawal of the short-term economic stimulus, cutting and funding deficits in the longer-term, concern about co-operation over regulation, following President Obama’s recent unilateral moves, Paul Volcker’s new role, G2 or G7 or G8 or G20, American/Chinese relations (tyres and Google), protectionism, the environment, Palestine, Iran, Afghanistan and terrorism, energy policy, some cathartic banker-bashing (why not have some symmetrical regulator-bashing too!) and last, but most important, support for the Haitian tragedy.
Don’t get the feeling that much of the Obama administration will be present. Nor the presidents or prime ministers from Russia or Turkey or Japan, mostly as last year. No prime minister Brown, but UK shadow leader David Cameron will be there and the British lunch on Friday will be the first ever in six to host a conservative leader. There is, however, great representation from Latin America – Lula, Calderon and Uribe. In the developed world, President Sarkozy is left centre stage, for the opening big session with Professor Schwab. Read more
By Gideon Rachman, the FT’s chief foreign affairs columnist
Jesus drove the money-changers out of the temple. Now the World Economic Forum has driven the wine-tasters out of Davos. In previous years, one of the highlights of the forum was a small but spectacular tasting of fine wines. But last year Klaus Schwab, the forum’s mastermind, decided that guzzling first-growth clarets was an inappropriate way of celebrating the global economic meltdown - and the wine-tasting was cancelled. We all hoped that this was a temporary abberation, but apparently not. The new Puritanism is here to stay – Davos wine-tastings are off the menu until further notice. Read more
By Chris Giles, the FT’s economics editor
One of the joys of the World Economic Forum is the occasional real-time deflation of egos that you can witness. I am sitting in a session on asset price bubbles where one private sector speaker insisted that you can’t spot bubbles and you should not. I can’t name him because Chatham House rules apply. Then one econmics professor (not hard to guess who) and a prominent regulator, went through all the reasons why you can spot bubbles, and should think about using tools, such as capital requirements or loan to value ratios to limit the size of bubble. Back came a rather deflated first speaker, completely contradicting his earlier point, and arguing that there are some bubbles that can be spotted and need to be addressed with credit restrictions. Did he realsie his views had reversed? Sadly, I doubt it, but his ego was not what it was.