THE WORLD Economic Forum (WEF) which opens in Davos today can be dismissed as the annual gathering of the world’s rich financiers, powerful politicians and policymakers at which much is discussed, but little is decided and therefore not very much is achieved. However, that would be to misunderstand the forum’s purpose, and to underestimate its real value.
This five-day event, which is held in a remote ski resort in the Swiss mountains, combines the formal with the informal: almost 300 official sessions are held on a variety of subjects that this year range from the future of capitalism to the euro zone crisis; with many more unofficial bilateral meetings and private exchanges held on the margins of the conference event.
In an interdependent and interconnected world the forum, now in its 42nd year, attracts 2,600 participants from almost 100 countries – including many heads of state and government. Davos performs a necessary and useful function. It facilitates a public and private debate on issues of major global concern between some of the world’s key decision takers. It gives politicians, business leaders and others (trade union activists and social entrepreneurs) an opportunity to listen and to learn more about the range of complex challenges that face the world – those of poverty, climate change and growing income inequality.
One difficulty, however, is that the gap between political and business elites and the public is widening, as mutual trust and confidence are lost between leaders and led. An annual international opinion poll by WEF showed that trust in government has fallen sharply since last year, faith in business has also declined and banks and financial services remain the two least trusted industries. Unsurprisingly, “Occupy WEF” protesters have chosen to attend as uninvited guests, symbols of that lost public trust. Consequently, as one Davos delegate remarked: “The focus on ethics and responsibility and social justice will be much stronger this time round.” A glaring deficit in political leadership will no doubt surface at many junctures.
This year the forum takes place against the background of major world-wide political and economic uncertainties, and an unresolved crisis in liberal capitalism in the US and Europe. Tensions are mounting in Iran and Syria, and elections will be held in the coming months in Russia, France and the US, while a leadership change is awaited in China. The global economic outlook is clouded by fears about the US recovery, as the euro zone faces a prospect of recession.
Every year one topic comes to dominate discussions at Davos. This year it is likely to be the euro, given the risk that a bank or sovereign default by a euro zone member poses for the world economy. In that regard, close attention will be paid to a keynote speech by German chancellor Angela Merkel; not least how she counters criticism of her policy of fiscal stringency as the singular solution to the euro zone crisis, despite growing evidence that it is deepening recession in countries like Greece, Portugal, Italy and Ireland.