Give me hope, Davos

And so they gathered in Davos, hailing from all corners, leaders one and all, representing all quarters; innovators one and all, convening to conjure up new ideas to rescue a planet in peril; statesmen one and all, joining hands to give the world a dose of optimism when the future looks bleakest. A grim world looks to its best, brightest and most powerful, for a reason not to despair, for a reason to hope.

But this was not to be. These titans of our time spent their days in the Alps, ringing the alarm bells that had already been rung, pointing fingers at those who had already been assigned blame, stating the obvious regarding the need for solutions and cooperation, obvious because it has all been said before. Davos was a four-day recapping of all that has been said and done before, all that even we laymen knew from before.

Much of the four days were spent conducting a roasting of the United States and bankers. This I am sure was not very hard, since these were the two least represented parties at the forum. President Obama was conspicuously absent from the event, and from the ‘big bad’ American banks, only the CEO of JP Morgan was in attendance. I am surprised the audience did not pelt him, given the vitriol directed the financial services industry

Gordon Brown and Angela Merkel, representing the two biggest European economies, both spoke of the dated nature of the current international economic institutions, and the need for a new international economic regulatory system. In response, I would like to say, “Gordon, Angela, No DUH!!” We have been hearing this same statement repeated ad nauseum since the recession set in. However, there has been no progress in this direction; in fact, things have been moving in the reverse, as an every-state-for-itself attitude has mainly been the order of the day.

Perhaps the best example of this is the United States stimulus plan which was also the subject of concern and consternation. The $900 bn dollar plan, including massive public works programs, tax cuts, and bailouts for ailing American industries, has drawn the ire of other states because of its essentially America-centric protectionist nature. With local industries being subsidized and with material for public works programs coming only from local sources, foreign companies realize that they face the prospect of significantly reduced business within the United States. Angela Merkel has accused the US of neglecting the needs and demands of the international economy. However, we must be cognizant of the fact that these states are only looking out for their own countries’ stakes in the world’s largest market. The US after all has two models before them. Germany and the United Kingdom. The UK chose to abandon its base industries and specialize in the service sector, a move that has proven disastrous. On the other hand, Germany has maintained a strong indigenous manufacturing base, so they can withstand the storm of the financial systems collapse. So, if anything Merkel should understand the impetus to revive the indigenous industries, through stimulus and protectionism. But in an every-country-for-itself scenario, that is not to be.

That being said, however, there seems to be a lack of imaginative solutions in the US stimulus plan. They have essentially replicated aspects of different contrasting plans of the past, and in doing so, may not be emphasizing enough on the significant aspects of any single scheme, enough for it to make a difference. The challenges of the current financial system collapse are so unprecedented, and the nature of the present economy so different from prior experiences, I wonder whether, the US government has really understood what it is trying to solve. It seems in many ways a plan to hurriedly stop the bleeding. However, there is a need for major reforms and changes to the way the economy is run. We have seen little of this. As William Galstone of Brookings Institution writes, “haste precluded a serious consideration of structural change.”

The representatives from the world’s top economies at Davos provided us with no leadership for the future. Perhaps, befittingly, some of the only forward-looking thinking and action came from the newcomers, the small Gulf states. The representative from Qatar, spoke of a new program Qatar has launched called the Global Cooperation Project which is dedicated to understanding the new set of challenges the world is facing today. This is the key. We need to invest a lot in actually understanding the nature of the beast we are confronting, before any drastic ventures. As Arif Naqvi of Abraj, also from the Gulf said, “People are looking for the solution but don’t yet have the question formulated.”