The Hindu Business Line : Missing the reality at Davos

The takeaways from Davos are a mixed sense of rebuff, defiance, confusion and denial. The way out of the economic crisis is still no clearer than it was before the meeting.

Mohan Murti

What has the ‘Spirit of Davos’ in common with the running theme of the Upanishads that there is only ‘Brahman’ that engulfs everything in the cosmos? Everything! The Brihadaranyaka Upanishad, a highly advanced philosophical and mystical text, emphasises that no one can identify or describe the concept of Brahman. It, therefore, gives the injunction Athatha Adesa Neti Neti meaning, “now, therefore, the description of Brahman: not this, not this (neti , neti Bri. Up. II. 3.6).

This thought directly conveys the incomprehensibility and mystique of Brahman. While you cannot say what Brahman is, one can say what it is not. I was reminded of this aphorism when I was sitting through the Annual Meeting sessions of the World Economic Forum, in Davos, two weeks ago.

Soul-Searching

If one expected concrete measures for the solution of the global economic crisis and a schedule for their implementation, World Economic Forum would have to be considered a failure. Now that the summit is over, the way out of the economic crisis is still no clearer than it was before the meeting in Switzerland.

Certainly, there were enough suggestions: German Chancellor Angela Merkel advocated the creation of an international economic council as the new controlling body, which — just like the Security Council — would be located at the United Nations.

Economists Nouriel Roubini and Nassim Taleb — famous for their pessimistic but accurate forecasts — demanded the full privatisation of banks. And, British Prime Minister Gordon Brown spoke up, like several other participants, in favour of strengthening the World Bank and the International Monetary Fund.

But the question of how these ideas should be practically implemented and how long this would take remained unanswered. Many propositions contradicted each other, either in parts or fully.

This made the most important element of any solution for the world economic crisis — a global consensus on the methods — impossible to reach.

Instead of adopting a master plan with concrete steps for the future, Davos delegates had systematic analysis, enclave gash-licking and mutual soul-kneading as the order of the day.

For the first time since the beginning of the crisis, business and political leaders could thoroughly share and exchange opinions with one another in the midst of the salubrious Swiss alpine air. In a certain way, the World Economic Forum functioned as a global psycho-chesterfield settee.

If an important part of getting to understand and evaluate the crisis took part in Davos, then the World Economic Forum was a success.

Pies, Pastries, Nightcaps

I was expecting Davos 2009 to be a fish-bone plate Davos, but it was the same Davos, with the same pies, pastries and night-caps.

The common mantra at the Forum was that while there was an understanding that something needed to be done, and fast, it was still unclear exactly what that something might be.

Some ideas were floated to get lending back on track, including pumping liquidity into banks and markets and putting so-called “toxic assets” into bad banks in order to free up the balance books of financial institutions.

One agreed-upon point was the need for increased international co-operation. However, it was clear most leaders did not feel there was a one-size-fits-all approach to fixing the problems and each state would have to take the right steps for its economy.

Era of humility

In none of the sessions I attended were participants willing to accept the precise dimensions of the crisis or predict when the crisis would end, or even bottom out. I heard the optimists say that eventually things would work out, though changes would need to be made.

There was consensus that regulation would likely get tougher, both on existing banks and all financial institutions.

Several business leaders said they were simply waiting for the proverbial other shoe to fall.

What came out loud and clear was that for the already humbled, the world’s poorest or “bottom billion” economies, times might get tougher as they lack both the capital and the credit to stimulate their economies, while the industries they depend on are likely to be hard hit.

Resist Protectionism

While Trade Ministers from 24 countries pledged in Davos, to resist protectionism and strive to conclude the seven-year-old Doha Round of trade talks before the end of the year, the US Senate is to compel companies making use of the economic stimulus package to buy their steel and iron from American producers. The slogan is ‘Buy American’.

When it comes down to brass tacks, self-interest always comes first. And Davos clearly gave warning signs of the ghost of protectionism that will now haunt the whole world.

Less Glitter, More Substance

I noticed that while multinational companies had not seriously scaled down their party portfolios, they were serving ham and cheese instead of caviar and lobster.

Even at some elite events, guests had to toast with ordinary champagne instead of the usual Dom Perignon.

And, at less extravagant gatherings, the champagne was replaced altogether in favour of a good old glass of white wine.

Instead of glamour and glitter, substance was king at the World Economic Forum 2009.

To that end, a section of global business and government leaders tried hard to sketch a post-crisis world, while others were still grappling with the dimensions of the crisis and of the nightmares yet to come.

The takeaways from Davos are a mixed sense of rebuff, defiance, confusion and denial.

I was hoping to see light at end of the tunnel at the WEF. I did see the light — but only the blinding light of a bullet train, speeding towards us.

(The author is former Europe Director, CII, and lives in Cologne, Germany. blfeedback@thehindu.co.in)