The hot ticket at Davos last year was the “dialogue in the dark” event, when delegates at the World Economic Forum were plunged into complete darkness to experience the loss of sight. This seems an apt metaphor for the blindness of the world’s elite to the fragility of the global financial system.
The business leaders and policymakers flocking to the Swiss mountain resort of Davos this week will share little of last year’s jubilation over the strength of the global economy and the prospects for companies. Though the conference is titled “the power of collaborative innovation”, it is bound to concentrate on fears of political and economic uncertainty.
Even Klaus Schwab, the founder of the Davos meetings, sounds downbeat: “The discussions in Davos will certainly be very dominated by the economic challenges we have at the moment – the aftermath of the subprime crisis, the transfer of capital from energy-consuming to energy-producing countries, inflationary tendencies.”
Or as David Nadler, vice chairman of Marsh & McLennan, the professional services company, echoed: “With so many potential consequences of the 2007 liquidity crunch unresolved, the outlook at the beginning of 2008 is more uncertain than it was a year ago.”
With the state of the financial world having seen a dramatic turnabout in the past year, WEF organisers have staged a series of high-profile debates on financial stability and banking risk, and there will be a flurry of senior bankers in attendance, ranging from JPMorgan’s Jamie Dimon to Goldman Sachs’ Lloyd Blankfein – as well as some of the newly appointed Wall Street chief executives such as John Thain at Merrill Lynch.
As striking is the large contingent of senior US regulators and policymakers – a reflection perhaps of the pressure the US financial community feels to convince the rest of the world that it has the country’s banking woes under control. For while Hank Paulson, US Treasury secretary, has had to cancel a planned appearance due to the looming US fiscal package, Timothy Geithner of the New York Federal Reserve, Christopher Cox of the Securities and Exchange Commission are among those in attendance.
They will be joined by a clutch of senior European policymakers – such as Jean Claude Trichet of the European Central Bank and many European finance ministers – allowing a flurry of transatlantic behind-the-scenes debate about global policy responses to the credit crunch before next month’s crucial meeting of the Group of Seven finance ministers and the spring meetings of the International Monetary Fund and World Bank.
It is in those forums that the decisions will be taken, but is at Davos where the main players can see if consensus will be possible in a less formal and more private environment.
Another notable swathe of attendees – which marks a contrast with earlier years – comes from the sovereign wealth funds, and other manifestations of the cash that continues to swirl around Asia’s exporters and the oil-rich Gulf. Officials from the China Investment Corporation and Dubai International Capital, for example, will all be in attendance – and a planned debate on their investments could be a highlight of the meeting.
Indeed, sovereign wealth funds could overshadow one topic that was prominent at last year’s event: the role that private equity now plays in the global economy. For while the Harvard professor Josh Lerner is due to release a landmark report on the sector – which was commissioned at last year’s Davos event – the turn in the credit cycle means that buy-out funds are no longer generating so much fear.
Another sign of the shift in sentiment is the inclusion of a new set of topics on this year’s agenda: competition for global commodity resources. For the first time Davos is staging a series of debates about food supplies – a topic that could generate lively debate given the recent sharp rise in many agricultural commodity prices, and the political challenges this is generating in emerging economies.
With all these important debates and discussions going on, WEF delegates might be in need of some peace during the week. Cue the “dialogue in silence” sessions, where they will learn to “communicate our messages in a clear manner and understand others beyond oral communication”.
