It’s a bit unclear at Davos when a session is on the record and when it’s off the record. In years gone by (I am told) part of the magic of Davos was the opportunity to hear the thoughts of global leaders off the record. But in the digital age of bloggers, Twitter and YouTube, the dividing line is less clear. And I think that is a good thing. Davos is much more transparent now.
The place is awash with bloggers and “tweeters”. Folk like the legendary Michael Arrington and Robert Scoble, Loic Le Meur of France and Richard Muirhead of Tideway in the UK broadcast continuous updates to their Twitter followers running in to the tens of thousands around the world.
A 3.8 per cent annualized decline in US GDP in the fourth quarter of 2008 is just the first validation of what is likely to be a series of sharp output declines reported in the major industrial economies. Moreover, to the extent that the decline in US GDP was tempered by an unintended pile-up of business inventories, there is good reason to look for further sharp cutbacks in production in the current quarter. Elsewhere around the developed world, the results are likely to be comparable—unusually steep declines in both the fourth quarter of 2008 and the first quarter of 2009.
Three grace notes as this year’s Davos stumbles towards a gloomy conclusion.
There’s an old saw, often used in government circles, that when it comes to public policy debates, if you’re not at the table, you’re certain to be on the menu.
The bankers have learned that lesson this year. Their low-key presence has itself achieved a high profile in the public prints. In their absence all the world’s problems have been laid at their door. No one would deny that in this economic car crash a high percentage of the blame should be ascribed to the financial sector. But not 100 per cent, I think. Bank salaries were exaggerated, definitely, but others benefited from the boom also, and should similarly have known better. There is an irony that an event strongly supported by finance should have bitten the feeding hand so firmly.
Davos was early in proclaiming that the 21st century would be the Asian Century. China’s miraculous development story is central to this vision—a transformation that would inevitably push the pendulum of global power from West to East. This tectonic shift was very much on the minds of most who attended my final Davos session of the year “China, India and Japan: Asia’s Big 3.”
Not so fast, I argued—even though I have made my own career bet on just such a possibility. Yet the Asian century is hardly as preordained as the Davos consensus seems to believe. The main reason, in my view, is that the region continues to rely far too much on exports and external demand. Developing Asia’s export share hit a record high of 47 per cent last year—up 10 full percentage points from levels prevailing in the late 1990s. That hardly speaks of a true economic power that has become increasingly capable of standing on its own.
Given the scarcity of liquidity, the lack of IPOs, the limited number of meaningful M&A exits, and the shrinking capital base to fund private equity and venture capital, it’s not surprising that many people at Davos question the future of these forms of risk capital. Well, in a homage to Mark Twain, I would say the rumours about the death of venture capital have been greatly exaggerated.
The question of the US reaction to China’s exchange rate policy continues to rumble in Davos, though the absence of the US policymakers makes the debate somewhat one-sided.
The response by Chen Siwei (former Vice Chairman of the People’s Congress and now Chairman of the Global Council for the Future of China), to the remarks of US Treasury Secretary, Tim Geithner, about China’s manipulation of the RMB exchange rate, can be translated as follows:
‘I don’t quite understand why he had said these unwise words, may be just to get the approval from the Senate. What I know is that he is a smart guy. I just hope he will just talk the talk and walk the walk when he is officially in office”.
One of the biggest rounds of applause came when John Neill, chief executive of Unipart, the logistics company, said that if he had sold toxic products he would have been committing a criminal offence and would have expected to be in prison.
There was a frisson in the room. The atmosphere was such that a lynch mob could have been formed for the nearest banker. That got me thinking about the conduct of some of the bankers which has ranged from gross misjudgment to selfish actions in relation to bonuses and golden parachutes which really are totally unacceptable.
Another day in Davos, another bout of “commie-style” bank bashing. Or that, least, is what some frazzled financiers are now muttering as they slosh around the snowy Swiss mountains.
The frenzy kicked off at the start of the week with the arrival of Vladimir Putin, Russian prime minister, who addressed the opening session of the conference. With visible pleasure, he pointed out that “the pride of Wall Street banks” had crumbled, and railed against the folly of creating an economic system where financiers were allowed to run amok with “virtual money” and other forms of financial innovation.
I note that Bill Clinton, whom I warned last year was in danger of tarnishing his Davos brand by being nasty about Barack Obama on the US campaign trial, seems to have bounced back.
The absence of any senior figures from the US administration at the World Economic Forum this year has left Mr Clinton to re-occupy his place as the well-loved philanthropist and former president who represents the acceptable – even loveable – face of the US in Europe.
God it must be fun being Nourieil Roubini. Once dismissed as a bit of a crackpot by the Davos elite, Dr Doom is now the star of the show – billed as “the man who got it right”. At dinners, seminars and parties, everybody now wants to hear from the great Roubini. What is going to happen next? Nothing very good, apparently - he thinks the US banking system is basically insolvent, and the same goes for Europe.