Davos: Who's to Blame for the Economy?

For centuries, historians have debated whether history is propelled by Great Men (and Women), human forces of nature who bend events and systems to their will, or by vast impersonal forces (communism, capitalism, globalization) that render even the most powerful of us a mere reed basket floating in a massive river. There's no session on the subject at the World Economic Forum in Davos. But at least with regard to finance and business, the consensus seems to be clear: Success is the work of Great Men and Great Women, while failure can be pinned on the system.

Ordinarily, Davos is a Great Men kind of place, as the motto of this year's gathering implies: "Shaping the post-crisis world." The people who show up here—political leaders, scientists, entrepreneurs, musicians, and, above all, businesspeople—have all shown an ability to impose themselves on history. Otherwise, they wouldn't be invited. And yet in the many discussions held here about the recent global financial debacle, the question of human agency is shunted to the side.

At a CNBC event yesterday, groups of 10 to 12 people sat at tables and mooted three questions: Which policy assumption failed? Which regulatory failure proved to be the largest systemic shock? And which market failure proved most damaging? The answers were obvious: poor regulation of the shadow banking system, mispricing of risk, the failure of models. But there was very little talk about the people who helped design and justify the systems, the mispricing, and the models. At one point, someone in the crowd stood up and said: "It's intriguing nobody is to blame. In other industries, there are consequences if you make toxic products that hurt people. Policy makers need to make it clear that there are serious consequences for that type of behavior." Big applause! And yet aside from the odd mention of Alan Greenspan and an oblique reference to Robert Rubin, the former treasury secretary who became a senior executive at Citigroup, there was little talk of individual players who had responsibility.

An all-star dinner that included bravura performances from behavioral economist Daniel Kahneman (brilliant and charming), historian Niall Ferguson (brilliant and charming), and Black Swan author Nassim Nicholas Taleb (brilliant and narcissistic) focused on the dramatic events of mid-September 2008. It was off the record, but Taleb asked journalists to please quote him. While not naming names, Taleb had nasty things to say about traders and exulted at the fall of Lehman Bros. But beyond that, the talk was mostly of systems that didn't work and the nameless minions who simply couldn't help themselves. Most of the talk was of the models and the market. And today, at a lunch that was testimony to the transformative power of the individual—it included Great Men Bill Gates, serial entrepreneur Richard Branson, and Nobel Prize winner Mohammed Yunus, the father of micro-lending, who talked about philanthropy and capitalism—Gates stumbled when asked about the failures. "Here we had some severe imbalances that led to, when people finally looked at their savings rate, you got the knock-on effect," he fumfered before mentioning Keynes and Soros. "I don't think we can find the villain and point at him and say, Aha, he did it."

The dismissal of human agency is ironic, but also predictable. Just as financial markets in the United States privatize profits and socialize losses, Davos and other conferences like this privatize success (by chalking it up to individuals) and socialize failure (by blaming it on large systemic problems).

The preferred strategy at Davos is to simply ignore failure. By and large, screw-ups don't make the agenda. It's just not that sort of place. If you screw up, you don't get invited, and you don't show up. This explains why I couldn't see a single economist or official associated with the Bush administration on the roster, and why there are very few American bankers at Davos this year. As John Thain's career at Merrill came to a close, he suffered the ultimate indignity: Bank of America told him it wouldn't be a good idea for him to come to Davos. The only thing worse than being attacked is being ignored. You don't matter anymore. You're not even worth mentioning. As World Economic Forum founder Klaus Schwab put it: Davos is not a place for "has-beens."

Ultimately, the "blame the system" will undermine the spirit of Davos. The notion that large forces—cheap money, liquidity, mispriced risk, inefficient markets—are responsible for success or failure is an affront to Davos Man, who believes that his prominence is due to merit and hard work.