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.
It’s not a question of favouring lower wage economies; it’s a question of economies having higher non-salary costs. In the US, you know exactly where you are, how much it will cost and how long it takes. You can almost turn on a sixpence. In Western Europe, it is a much slower and more bureaucratic process. But we need more policy specifics, beyond the generalities. Unfortunately, business does not speak with a combined and consistent voice.
Bankers continue to be bashed. There’s a growing feeling, epitomised by last Thursday’s measures announced by the White House, that the banks are just conducting business as usual and are not resetting their approach. It seems that the industry will have to do much more than has been done already.
Apologies and tactical responses may not be sufficient to counter further populist moves. More fundamental responses in relation to profits and bonuses may be needed. The man or woman in the street can’t understand why his or her money (through taxation and government intervention) was used to bail the banks out and now, only a year later, we are business as usual. Politicians who are there to be re-elected can’t afford to ignore such populist passions.
According to Nik Gowing of the BBC, the biggest argument at the Forum today was over whether the French flag should be placed behind President Sarkozy for his opening speech. He made a passionate and well-received speech and answered lots of questions. Quite a success and the Davos stage was all his. More later.
Now all attention shifts westwards tonight to Washington DC for the State of the Union and to San Francisco for Apple’s iTablet. Wish I was there.
