Message to Shaky World Economies: You'd Better Get Used to It
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By Jonathan Gage International Herald Tribune
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DAVOS, Switzerland - As a jazz orchestra played and lights twinkled across an immense indoor swimming pool, the party-goers looked out over a sea of loaded buffet tables and surveyed the feast: Should they choose the smoked salmon, the foie gras or the shrimp royale? Or maybe all three?
Such were the harrowing choices last weekend at Davos as the mandarins of the world's financial establishment took a break from the tough work of patching up the global economy.
As they partied, the 2,000 policymakers, political leaders and chiefs of multinational businesses practiced what they have been preaching: reflating the global economy with a burst of consumption in hopes of powering a demand-driven economic recovery. But back in the real world that message has failed to take root, they acknowledged.
And so there was not a whole lot to celebrate at this year's gathering of the World Economic Forum, 19 months after the onset of Asia's financial crisis and as intermittent tremors still shake economies around the world.
Indeed, the real message to emerge at Davos over the past week was: Get used to it. Financial turmoil and trouble is here for the long term and something the world must learn to live with.
One thing is clear, said the U.S. Treasury secretary, Robert Rubin. There are no ''easy answers and no magic wands,'' he said, for overhauling financial institutions to make the world safe for global capitalism.
This is because no one really knows what to do.
Ted Hall, a director of consultants McKinsey & Co., said that first and foremost, ''we have a crisis of thinking and facts, and we are trapped by them.''
While markets become truly transnational and nearly instantaneous, he said, ''there is no evidence of anyone trying to treat the problems as anything other than a national problem.''
For the moment, many participants said, the best hope is to learn enough about the new world of global markets and technology to ride out the inevitable cycles of crises.
''All participants know globality is here to stay,'' said Senator John Kerry of Massachusetts, reporting back from private talks here among dozens of government leaders and other officials. ''No government thinks it can block the tide of globalization and technological change.''
However, he said ''there was no sense that there should be some larger new international structure'' to ride herd on the world's financial markets.
Kenneth Courtis, chief economist and strategist for Deutsche Bank Group, agreed. The Davos conferees ''aren't going to do anything dramatic, big and universal,'' he said.
Despite the pain the current crisis has caused in developing economies around the world, he said, it ''was far too short and far too small to effect real change, particularly because it hardly affected the world's core economies.''
''We may fix some plumbing or holes in the roof,'' Mr. Courtis said, ''but we'll soon forget about this crisis.''
There was another troubling message here from an upstart economy that most conferees acknowledged they knew little about: the world of computers and electronic commerce.
The skyrocketing market value of American technology stocks stunned economists and officials from around the world, said David Hale, chief economist of Zurich Insurance Group.
America Online Inc., he said, ''now has a bigger market cap than all the transport companies in the United States put together. That's what really stunned everyone in the private sessions here.'' But there was also a widely voiced fear that high-flying technology stocks will soon collapse and knock down the broader U.S. equity market, triggering another global crisis and hobbling the world's strongest economy and biggest importer.
At the intersection of the old and new economies, some found humor.
Lawrence Summers, the U.S. deputy secretary of the Treasury, suggested that the best way to resuscitate Brazil's traumatized currency, the real, would be to float it on the stock market as real.com.
But humor was not the prevailing theme at Davos, where the discussions, according to Senator Kerry, ''centered on the thesis that we need to find a way to put a human face on globalization and respond to a set of needs that are imperative if all countries are to manage this process effectively.''
''The atmosphere is very different this year than last,'' he added. ''Last year, there was a sense of foreboding, helplessness and confusion. This year there is both resignation and confidence about where we're headed.''
However, he also noted tactfully that there was ''agreement that stronger leadership may be needed.''
Lee Kwan Yew, Singapore's senior minister who described himself as a conservative and proponent of what he called firm leadership, said the toll in Southeast Asia had been high.
''In Indonesia,'' he said, ''it will be many years before you have a leader who can swing things back to a situation that will allow the proper running of the country.''
Under traditional Asian leadership, Mr. Lee said, ''there had always been not a counting but a chopping of heads,'' and thus leaders were strictly obeyed.
''The world is changing so fast,'' he said, ''I do not know whether Singapore can move quickly enough to find a niche in the new constellation of technologically and knowledge-based economies.
''It is a totally different world that can unravel age-old values that have held our country together.''
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