A Hippocratic Oath for Davos Man

As the world economic forum in Davos concluded late last week, people were left wondering, Did it matter? It's a question Davos raises every year, when the great and the good trek three hours up a Swiss mountain to spend four days in mediocre hotels drinking lots of espresso and talking about the state of the world. In some ways, the answer is always no. Sure, the event offers minor thrills to the consultants, bankers, and corporate types who get a chance to bump into Niall Ferguson in the bathroom or share a shuttle-bus ride with Sergey Brin. But it's not like anything concrete gets done there. It's just a bunch of VIPs chatting among—and largely, about—themselves.

But, though it might sound odd, this is exactly why Davos does matter. The confab acts as a weather vane for the global economy—whatever the pervasive feeling there is, it tends to reflect the mood of the year to come and to shape 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 add a bit of color to rooms filled largely with somber men in dark suits. What she means is that Davos is a place you go to put a finger to the wind.

Last year, that wind blew chaos. The world was still reeling from the financial crisis that had begun four months earlier, and there was a palpable sense of panic in the Davos Congress Center. Endless panels were held on terrifying disaster scenarios: there were talks on diminishing oil reserves, on 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 Recip Tayyip Erdogan angrily stormed out of a debate with Israel's Shimon Peres. The crisis vibe, of course, helped motivate world leaders to actually do something about it. Post-Davos, the world's central bankers quickly started helicoptering in cash to the major economies, and U.S. officials snapped up trillions of failing mortgage-backed securities.

That's one reason that things are a bit calmer on the Magic Mountain this year. The crisis mood has passed since the major economies are now out of recession. Yet a vague sense of unease prevails. Things are changing, but no one's sure quite how. China seems to be in (CCTV tents dominate real estate once held by the BBC), while the U.S. looks to be on the outs. Laissez-faire capitalism seems dead. As the University of Chicago finance professor Raghuram Rajan put it, "We've gone from a period of economic uncertainty to a period of political uncertainty." World leaders seem stunned by the swell of public anger over the way bankers have returned to business as usual even as ordinary folks still struggle.

In the rich West, this anger has led to greater regulation and even a rethinking of free trade and migration. Worries over populism and protectionism abound. There was plenty of grumbling this year about Obama's new bank regulatory plan, about British caps on banker pay, and French president Nicolas Sarkozy's promise, in his keynote speech, to rethink market capitalism in its entirety. "We're moving to another 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 jarring switch for Davos Man. Yet there are other nascent signs that the world's captains of industry are finally beginning to think differently about themselves and their work. Embarrassed by bankers like Goldman Sachs's chairman Lloyd Blankfein, who likes to joke about doing "God's work," a number of young financiers in Davos started talking about creating a financial Hippocratic oath ("first, do no harm with CDOs…"). There was much discussion of "stakeholder capitalism" and how corporate leaders need to stamp out short-term, speculative thinking. That has people like Robert Shiller—the behavioral economist who predicted the housing crisis—feeling optimistic. "People are beginning to think about economic issues within a moral framework," he says. "It's not too often that it happens in my profession."

Of course, no one's singing "Kumbaya" yet and bankers are grumbling over the newly heavy hand of the state. But to the extent that this penny dropped at the World Economic Forum this year, it will probably make the world a better place. And because of that, Davos does still matter.