Davos Dispatches: Why Davos Matters
Does Davos matter? It's a question that gets asked every year at the World Economic Forum, an event that involves the global good and great (think Bill Gates, Nicholas Sarkozy, Larry Summers, etc.) trekking three hours up a Swiss mountain to spend four days in mediocre hotels and a Stalin-esque conference center talking about the state of the world. In some ways, the clear answer is no. Sure, it's a minor league thrill for all the consultants, bankers, and corporate types in attendance to run into Niall Ferguson in the bathroom, or a more major one to share a shuttle bus with Sergey Brin, but really, it's not like anything concrete gets done here. It's just a bunch of VIPs chatting amongst themselves.
Which is exactly why it matters. Davos is a weathervane for the global economy – whatever the pervasive feeling is there, it tends to become the mood for the entire year ahead, shaping how people think about the issues. "Davos is the Frankfurt Book Fair of economics," says Canadian author Margaret Atwood, one of the token cultural figures brought in to entertain the men in dark suits. Last year, chaos reigned – the world was still reeling from the financial crisis that began in September of 2008, and there was a palpable sense of panic in the Congress Center. Endless disaster scenario panels reflected this – there were talks on peak oil, how the world was running out of food and water, and whether banks would ever lend again. Even the politicians were jittery – Turkish prime minister Recep Tayyip Erdogan angrily stormed out of a debate with Israel's Shimon Perez. The crisis vibe, of course, motivated world leaders to stabilize things. Post Davos, the world's central bankers promptly started helicoptering in money and U.S. officials snapped up trillions of mortgage backed securities.
That's one reason that things are a bit calmer on the Magic Mountain this year. The mood isn't crisis, but a vague unease with a world order that is clearly changing. China is in (CCTV tents dominate the real estate once taken by the BBC), the U.S. is on the outs, and laissez faire economics is over. As one Indian economist at a panel on the New Normal on Wednesday declared, "we've gone from a period of economic uncertainty to a period of political uncertainty." World leaders, responding to voters outraged by how quickly bankers have returned to business as usual even as unemployment remains high and grow slow, are moving towards reregulation and a rethinking of free trade and migration (or, towards populism and protectionism, depending on your point of view). There's been plenty of grumbling this year about Obama's new Volcker inspired regulatory plan, British caps on banker pay, and French president Sarkozy's promise, in his Davos keynote speech, to rethink market capitalism. "We're moving from a new era, one in which we must shift the focus from global corporations, to global citizens," he said, calling for new ways of calculating economic growth that would account for people's happiness, as well as their wealth.
That would be a big switch for Davos Man. Robert Shiller, the behavioural economist who called the housing crisis, is optimistic it will happen. "People here are beginning to think about economic issues within a moral framework," he says. "It's not too often that it happens in my profession, because it's considered too loose a way of thinking – people want to go to the blackboard and come up with a formula." Of course, it's not easy to model the human heart. But then, as the financial crisis proved, it wasn't easy to model much of anything else, either. To the extent that this penny drops for the masters of the universe at the World Economic Forum this year, Davos does matter.
