Global imbalances

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.

On this, my fourth visit to Davos, I have been curious to see if the recession has transformed the attitudes of the captains of world capitalism who come here to network. My past World Economic Forums have all been dominated by a smug, self congratulatory mood of corporate success and boundless optimism for wealth creation in the future.

True, there have been attempts by the organisers to stimulate thoughtfulness on environmental questions and some fashionable social causes like the need for cheap generic drugs against aids.

As I make my way this week to Davos via Riyadh and Zurich, it becomes clear that the chill in the global economy has reached the deserts of Saudi Arabia. I attend a panel at the Saudi Global Competitiveness Forum where each speaker outdoes the next in headlining the many risks of the current downturn and predicting the gravest of consequences.’ Godzilla’ seems to have replaced ‘Goldilocks’ as the defining metaphor for our world markets.

It’s a grey day in Davos, in every possible sense. With their celebrated attention to detail, the Swiss have provided weather to match the mood. Once or twice, the sun threatened an appearance, but was quickly obscured. And there’s not a green shoot in sight.

Why are people here then, one might ask, if it’s gloom and doom from cappucino to gluwein? I guess the answer may simply be that they come in search of some mutual reassurance.

Davos blog 2009

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