The Davos annual gathering has an uncanny knack of being able to both predict and understand future waves of investment and growth. The wisdom of this particular crowd has been adept at capturing the zeitgeist. Two years back for instance, at Davos 2007, the reigning superstars were the wizards of private equity. These men and women, who Tom Wolfe had called the ‘Masters of the Universe’, were welcomed everywhere with applause and appreciation, and they fascinated audiences with their war stories of multi-billion dollar acquisitions. There was widespread speculation surrounding when they would break the US$ 100bn mark. There was no public company in the world that seemed beyond them.
But by Davos 2008 and with the onslaught of the credit and liquidity crisis, the attention shifted to sovereign wealth managers. Each seemed to have a hoard of funds running into several hundred billion dollars, and the erstwhile private equity czars could be seen milling around them in the hopes of wrangling a meeting. These sovereign wealth funds were the ones who now seemed to be ready to take over the world, and urgent questions were asked of their transparency and their political agenda.
In a year’s time however, the SWFs themselves are nursing their diminished holdings like wounded limbs, and focusing on capital preservation. Now at Davos 2009, the people in the spotlight are the central bankers.
Two years back they would have been part of the anonymous ‘government types’. Now however, they embody an assurance of safety and security no one seemed to need in the years before, and people are hanging on to their every word, just as we did with astrologers in a previous century. And as the Russian premier rails on at ‘unregulated markets’ and everyone speaks worriedly about oversight, it feels like a not-so-Brave New World.
In the short span of three years, we had gone from lauding private enterprise to praising state capitalism, and finally the state itself. We are re-examining our basic beliefs about capitalism, and people in government are the new in-crowd.
While we might have been good at identifying the next growth waves, these past few years have shown us up as immensely short-sighted when it comes to creating a sustainable balance in the global economy. We shifted too far towards markets and deregulation in the past, championing investors and businesses as if they could do no wrong.
Now, as markets have let us down so thoroughly, we have turned back to the state. But what we need most desperately is a cautious realignment so that markets can function effectively, but with oversight.
And consequently, no single group on its own – elected officials and the government, the capital markets, the entrepreneurs – holds the keys to this crisis. Rather, real solutions will require an intense period of dialogue among a variety of players, and ideas from every corner of the globe.
Nandan Nilekani is co-chairman of Infosys