The World Economic Forum likes to bill itself as the foremost gathering of global leaders from business and politics. So there’s no small irony that many of the Davos attendees last week were bemoaning a lack of leadership as one of the key problems facing the planet.
The loss of confidence in Western institutions and values as a result of the economic and financial crisis is palpable here. The point was driven home by a CNBC-sponsored debate entitled, appropriately, “The Future of Employment -- The West Isn’t Working.” Panelists like Laura Tyson, a management professor at UC Berkeley’s Haas School of Business and member of President Obama’s Economic Recovery Advisory Board, acknowledged the U.S.’s lagging performance in education and dilapidated infrastructure.
Timothy Geithner, the first U.S. Treasury secretary in more than a decade to attend the forum, portrayed the U.S. economy as recovering but far from healthy. His vague promise that today’s loose fiscal stance would give way to serious deficit reduction in the medium failed to convince the crowd that Washington has the will or ability to address its problems. That much was admitted by William Clinton, whose appearance as a U.S. spokesman of sorts underscored the impression that the U.S.’s best days were behind it.
Europeans did better. Although an impressive series of leaders including German Chancellor Angela Merkel and French President Nicolas Sarkozy took to the forum stage, their message was largely defensive, acknowledging the region’s deep economic woes and debt problems and vowing to tackle them. The universal expectation was that Europe would remain the slowest-growing part of the global economy.
The one exception was the youthful British Prime Minister David Cameron, who confidently outlined his government’s austerity program and delivered a robust defense of liberal democratic values, insisting they were the key to the West’s future rather than a cause of its decline against an autocratic China. “It’s these values that create the climate for innovation,” he said. “Look at where the big ideas come from – the Facebooks and the Spotifys – and the vast majority are from open societies.”
Officials and business executives from emerging markets countries, whose growing numbers swelled the forum attendance to a record 2,500, expressed confidence about the economic outlook but stopped well short of triumphalism. Victor Chu, the chairman and CEO of First Eastern Investment Group, put it best in cautioning against the idea that an ascendant Asia was destined to overtake the West in economic and political power. “Long term, East and West either prosper or perish together,” he said. “So I don’t think there is a zero-sum game.“
Such a shared prosperity will require cooperation on everything from currency and trade issues to geopolitical risks like climate change and nuclear proliferation. So far, however, there’s little evidence of that kind of cooperation. The G-20 moved quickly to respond to the financial crisis after the collapse of Lehman Brothers Holdings, but so far shows little sign of making the transition to becoming an effective manager of the global economy. It’s that void that leads Ian Bremmer, head of the risk consultancy Eurasia Group, to speak of today’s situation as a G-zero world.
All of which explains a lot of the unease expressed by forum attendees about the outlook, even if short-term growth prospects seem bright.
The big question is not who will replace the U.S. as the world’s economic and political leader, said Richard Haas, president of the New York-based Council on Foreign Affairs. “The real danger is that nobody will,” he said. “All things being equal, the world will be a messier place. We will be less able to deal with the currency issues. We will be less able to deal with the trade issues.”
