My Top Five Takeaways from Davos

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From left to right: Martin Wolf, chief economic commentator at the Financial Times, Motohisa Furukawa, Japan's national strategy minister, George Osborne, U.K. chancellor of the exchequer, Donald Tsang, Hong Kong's chief executive, Christine Lagarde, managing director of the International Monetary Fund (IMF), Ali Babacan, Turkey's deputy prime minister, Mark J. Carney, governor of the central bank of Canada, Robert Zoellick, president of the World Bank, attend a session on day four of the World Economic Forum (WEF) in Davos, Switzerland, on Saturday.

One of the challenges of covering the World Economic Forum at Davos as a journalist is making sense of the whole thing. The forum is days and days of wandering conversations and endless debates on just about every subject you can imagine. So as I tried to summarize what I learned from Davos, I came up with these five main takeaways:

The U.S. is worse off than I thought. I had the misfortune of attending a dinner populated by senators, representatives and other political types from the U.S. The subject was supposed to be American identity. Instead, the pointless bickering of the Senate floor got transported to Davos. One after another, the politicians grandstanded on mundane issues like regulation and taxes. The other Davos events I attended were marked by a free exchange of ideas and open, respectful discussion. Not this one. The sole intelligent question of the evening (asked by an Egyptian businesswoman), about the gap between American ideals and American foreign policy in the Middle East, was dismissed with a brusque lecture from Congressman Darrell Issa. All in all, an embarrassing display that left me more concerned than ever that the U.S. government has become incapable of solving the nation’s problems. Most (but not all) of the politicians came off as narrow-minded, out-of-touch, and self-involved, unable or unwilling to see the U.S. within a changing global context, even though that context was forced into everyone’s face minute after minute at Davos. As one participant put it, “it’s like the world has passed them by.” If we don’t see U.S. politicians broaden their perspectives, that also could become true of America.

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CEOs are a bunch of sissies. Equally infuriating was the endless whining by big businessmen and financiers. The world environment is too uncertain, I heard again and again, for business leaders to invest their trillions in hoarded cash. Government, they said, had to do more to create certainty; only then they can invest and create jobs. Typical of the comments was this one by David Rubenstein, co-founder of Carlyle Group: “My view is that government is supposed to be the leader. I think what we’d like much more in the business community is leadership from the government officials that we elect.” Excuse me? Yes, I can understand what businessmen like Rubenstein are talking about. Without policy and regulatory clarity, and a more favorable global economic environment, it is hard to make that decision to invest real hard cash. We shouldn’t expect anything else. However, it seems a bit hypocritical to blame government for inaction by the world’s CEOs. Executives justify their multi-million dollar paychecks by insisting that they are the rare, talented, far-sighted few to steer corporations into the future. Aren’t our CEOs paid to be out there seeking opportunities for growth and creating jobs no matter what the environment? Instead, they’re sitting on their hands waiting for governments to sort through paperwork? In general, I found the business community unwilling to accept its role in the continued downturn, and its responsibility for getting the global economy going again.

Multilateralism is dead for now. I was struck by how the world leaders I met believed that efforts to solve global issues through multilateral negotiations had become almost completely hopeless. Indonesian Trade Minister Gita Wirjawan told me that the Doha round of free-trade talks is “temporarily moribund.” South Korea’s Han, who is now chair of the Global Green Growth Institute, believes progress in climate change talks is unlikely this year. Usually such people in authority like to at least pretend that progress is on the way. Not anymore. Instead, we get finger-pointing. Peter Mandelson told me he blamed the American government for stalled global trade talks. Washington, he argued, had lost interest in pursuing the process. Ron Kirk, U.S. Trade Representative, rejected that, insisting that there was enough blame to go around. True enough, but therein lies the problem. In my discussions, blame was firmly placed on local politics. The world leaders are too concerned about public opinion at home, especially with so many upcoming elections, that they are wary of making decisions on controversial global issues, even though they may be of global importance. Very depressing.

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No one knows what will happen to the euro. Europe, Europe, Europe were the three biggest subjects of this year’s forum. Everybody I met listed the euro debt crisis as the No.1 concern in the world economy right now. That’s not surprising, since the fate of the euro continues to be the main source of uncertainty facing policymakers today. But what did surprise me was the incredibly wide range of opinions I heard about how the crisis might unfold. Here’s just a sampling: (1) the monetary union will completely collapse over the next few years; (2) the euro will survive, but only after one or more members exit; (3) the Europeans have a grand strategy for solving the debt crisis, which is now in motion, and will save the euro; (4) the pain of breaking up the monetary union is more excruciating than keeping it alive, so it will somehow survive; (5) the Europeans will continue to slap band-aids on their problems, hoping that will be enough to resolve the debt crisis. Perhaps former South Korean Prime Minister Han Seung Soo said it best: “The European leaders are trying to muddle through the problem. My worry is that they may muddle but not through.” The main thing most people could agree upon is that they are growing increasingly frustrated with the lack of action in Europe. Says Rob Davies, South Africa’s trade minister:

When we speak to officials in Europe they try to tell us it’s all sorted out. But I think they’ve got some way to go. I think we remain concerned that they haven’t got the conditions, including political conditions, in place to take some of the decisions they need to take.

Youth unemployment is the worry of the day. Once you get past the jitters about the euro’s future, the next big topic on everyone’s lips was youth unemployment. What the global elite has come to realize is that economies throughout the world are not creating enough jobs for the people just entering the workforce, and that is a potential source of instability. Pakistan’s Prime Minister Syed Yousuf Raza Gilani made clear that in his discussions at Davos, generating more jobs for young workers was the No.1 topic. “The world is facing this issue,” he said. “We have to create more jobs for our young people.” However, I found the folks at Davos conflicted on what to do about it. The issue got wrapped up in the bigger discussion on how to fix capitalism. Some feared that the current anger about joblessness and income inequality was souring the public on the free markets that are best equipped to create jobs. Others contended that markets alone won’t do the job, and that government, business and labor have to sit down together and work through solutions. If we don’t see the high level of youth unemployment reduced over the next 12 months, my guess is that this issue will be an even bigger topic at next year’s Davos forum.

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