I’ll be blogging this week from the World Economic Forum in Davos, Switzerland. The theme of this year’s gathering of political and financial movers and shakers is “Improve the State of the World: Rethink, Redesign, Rebuild.” Sounds like a plan to me.
Last year’s meeting, which followed on the heels of the Fall 2008 meltdown, was something of a time to be humble (or at least so I’ve read). This year, rethinking regulation—even the nature of capitalism itself—will be a major topic. It will be interesting to see how much hubris returns to the discussion.
The Telegraph has provided us with this synopsis of what Davos fixture Stephen Roach expects out of the meeting. An excerpt:
My guess is that there will be two themes: first, significant relief that the world didn’t end – that we were on the brink of disaster, and are now nearing recovery… The Davos crowd will presume things will continue to get better.
The deeper debate will be over the post-crisis fix – how to repair the broken architecture of the post-crisis financial system; there will be lots of hand-wringing but my guess is that the Davos consensus will get on the bandwagon of blaming the financiers and banks.
Roach disagrees with a lot of that: he thinks the recovery is more fragile than people realize, and that the post-crisis regulatory fix needs to be much broader since (in his view) it was a failure of central banking that let macro imbalances get so out of control.
Will Davos Man prove Roach wrong and rise to the occasion to embrace the bigger conversation?
Bruce Nussbaum over at BusinessWeek gives us reason to be skeptical by arguing that it was the exact ideology of the people who tend to go to Davos that delivered us here in the first place:
The Great Recession of the past two years is revealing that globalization, the economic ideology of Davos Man, was never more than a gloss over nascent nationalism. In the end, it is the nation-state and the local taxpayer that is saving the banks and businesses run by Davos Man from total destruction.
The Great Recession is also showing that Chicago-School efficient market theory is as false an economic belief system for the global economy as it is for national policy. While globalization has clearly improved the lives of millions of Chinese, we can now see that it has also led to the immiseration of millions of middle class and poor Americans. The theory that efficient markets within a free trade system would benefit ALL participants is now proven wrong.
If you buy that argument, then the folks who gather in Davos are the exact wrong ones to look to for solutions.
But I’m still holding out hope.