Cosy deal-making gave way to crisis management at the World Economic Forum, writes Simon Carswell, Finance Correspondent, in Davos
Davos is akin to a music festival but, instead of rock stars, the world's leading business, political and economic acts have top billing for five days. Of course, there is one exception - U2 front-man Bono, for whom the global gathering has become an annual stop on his anti-poverty/ pro-Africa tour.
The annual meeting of the World Economic Forum, which has the lofty objective of "improving the state of the world", has been regarded by many as an opportunity for heads of state, renowned economists and corporate bosses to enjoy fireside chats about global affairs in a Swiss mountain resort.
Supermodels and Hollywood actors have lifted the profile of the event over the years. But showbiz stars have been noticeably absent this week, though Oscar-winning actress Emma Thompson and musician Peter Gabriel did grace Davos with their presence to promote good causes.
Around 2,500 politicians, economists, businesspeople and social entrepreneurs have instead listened to such heavyweights as Pakistani president Pervez Musharraf, former US vice-president Al Gore, Microsoft founder Bill Gates and Nobel-prize winning economist Joseph Stiglitz, giving their views on issues ranging from the threat of terrorism, climate change and economic stability.
The heads of corporate giants such as Coca-Cola, PepsiCo, Intel, Chevron, Nissan and Volkswagen appeared in Davos this year.
The availability of high-profile business and political leaders at the summit is staggering. During a 30-minute interview with a senior investment banker in the main congress centre, a former Egyptian foreign minister, a Belgian prince, a former Japanese UN high commissioner for refugees and the boss of a leading European airline stopped to greet the banker.
With so many prominent participants, access is everything at Davos and the most pressing business is carried out in closed, mostly off-the-record sessions where corporate and political leaders share their ideas and thoughts. "It's like going back to university without having to do the exams," said one senior Irish participant.
"There is nothing like Davos," said the Sligo-born chairman of media giant Reuters, Niall FitzGerald. "I like to go to a number of the offbeat sessions for intellectual stimulation or for an understanding of something which I never had time to look at before."
One session yesterday dealt with the increasingly influential role played by faith in politics and economics. It was chaired by former British premier Tony Blair and featured a former US Catholic archbishop, a member of an Iranian cultural institution, the director of the American Jewish Committee and the prime minister of Malaysia.
A huge number of discussions and meetings are crammed into the five days. "It's like the Louvre," said one participant, "you have to choose what you'll see, otherwise you'll see very little."
Delegates congregate in the bunker-like congress centre, which is surrounded by heavy security and circled above on a regular basis by military helicopters. Armed guards patrol the tops of the nearby hotels, keeping a protective eye over the VIPs.
This year, the usual brainstorming at Davos took on a more pressing dimension, as the surprise US Federal Reserve rate cut - its largest in more than two decades - on the eve of the forum and the emergence of a €4.9 billion rogue trader at French bank Société Générale yesterday gave participants something of substance to discuss and explain.
"It's a CEO's worst nightmare," one senior European banker told The Irish Times of the latest rogue trading scandal. "We all pride ourselves on our control environment."
He said the reaction in Davos to the controversy at the French bank has ranged from "disbelief" to "empathetic". Controls should stop "collusion" between the trading in the front office and the middle office, but this system didn't exist in this case as the trader had worked in both.
He said the losses at Société Générale and the Fed's rate cut had given a greater relevance to Davos this year, "though the temperature had been very much set by the blow-out in the financial sector".
The worldwide banking crisis and the threat of a global recession have put the headline business and economic performers on the spot to offer specific solutions on how they might stop the rot.
But, for the most part, Davos this year has been more about soul-searching than problem-solving, with some high-profile participants, including billionaire financier George Soros, being openly critical of how regulators the world over have allowed the markets to run riot and jeopardised the world's economy.
Participants sat enthralled by some of the debates and then rushed out afterwards to see how their stocks had performed in the turbulent markets during the short time they were away from their computer screens.
Few solutions were provided during the forum's "plenary sessions". A lack of leadership in regulatory and government circles appeared for many speakers to be the main reason why figures on the stock market screens have been flashing red this week.
Many participants felt the heightened tensions encouraged a new urgency in bringing proceedings beyond the usual chin-stroking that takes place in Davos.
However, the general mood rarely lifted above doom and gloom, with most participants expecting the US economic downturn will inevitably send the rest of the world's economies into a tailspin, despite the growing emergence of new economic superpowers in the Middle East and Far East. The most bearish were Soros and Morgan Stanley's Stephen Roach. Fred Bergsten, director of the Peterson Institute for International Economics in the US, and former US treasury secretary Jon Snow were among the optimists.
Many debates centred on the growth of the sovereign funds - the state-owned, non-voting investors that have taken stakes in investment banks to help cover some $100 billion (€68 billion) that has so far been written down by financial institutions due to the sub-prime crisis. Some expressed concern about the shifting of financial powers to the cash-rich economies of the Middle East and China.
Peter Sutherland, chairman of Goldman Sachs International and one of the organisers of Davos, believes concern about sovereign funds is overdone. "These people are finding a home for their investment. If they weren't investing their money in stocks and shares, we would be complaining about it. There is a sort of fear factor that some people are creating about these funds buying up Western assets. The total amount of sovereign funds in global assets is about 2 per cent. It's infinitesimal."
Sutherland believes the negative talk at Davos will not help the financial situation. "I don't think we are on the edge of a cliff. We are only on the edge of a cliff if we are excessively apocalyptic about what admittedly has been a very traumatic moment."
FitzGerald believes that Davos 2008 has been positive because "we got back to understanding some of the basics about how the economies and the financial markets work, and not live in Alice in Wonderland as we have been for a while".
For many, the financial turmoil and economic uncertainty turned this year's gathering at Davos into an opportunity for crisis management rather cosy deal-making. Ultimately, the music at this year's economic festival has been heavy and sombre.
