Sunday, January 28, 2007
Davos seeks something to worry about
Posted by David Smith at 06:00 PM
Category: David Smith's other articles


Surrounded by fresh-faced young people, Gordon Brown was sharing a platform with Queen Rania of Jordan, to talk about the “wisdom of youth”. She looked fresh-faced enough, while the chancellor had the traditional bags under his eyes.

At another event, a lunch for British business leaders, the Duke of York was struggling to stay awake during a speech by Alistair Darling, the trade and industry secretary. Many will sympathise, and in Prince Andrew’s case he could plead that this was not his normal line of work.

Davos, the annual gathering in the Swiss mountains, throws together odd partnerships. It also, in time, makes the odd seem normal. Not so long ago, people would have been astonished to see a British prime minister sharing a platform with a rock star and software billionaire. Margaret Thatcher would never have done it. Now nobody bats an eyelid when Tony Blair takes to the stage with Bono and Bill Gates.

It is easy to be cynical about the annual World Economic Forum in Davos. Like the G8 world economic summits, which started life as “fireside” discussions about the global economy, Davos, also dating back to the turbulent 1970s, has become a big, sprawling event with a big, sprawling agenda.

A recent report from the United Nations University calculated that 2% of the world’s individuals controlled 50% of global wealth. Many of those individuals, and quite a lot of that wealth, have been on show in this Swiss ski resort in the past few years. A ban on fur, diamonds or four-wheel-drive limos would go down like a lead balloon when the world’s movers and shakers are in town.

The forum, which has the motto, “committed to improving the state of the world”, had plenty on its formal agenda about lifting poor countries out of poverty, improving health systems in developing countries, tackling inequality and living in a multicultural world. There is more to it than the clink of cocktail glasses. But perhaps there was unintended irony in the description the organisers gave to the event, which was to face up to the challenge of living in “an increasingly schizophrenic world”.

Davos is also a good guide to who is up or down, and not only in business. Lord Browne, BP’s chief executive, was to play a major role in the forum when the programme was drawn up in the autumn. But events intervened and it may have been more than just the flu that led to his decision not to make the trip this year.

Others, however, have fared even worse. January is a favourite time for corporate culls. Todd Thomson, heir apparent to succeed Chuck Prince as chief executive of Citigroup, the world’s largest financial-services firm, was sacked even as he was packing for the trip to the Alps. As we report in today’s front page story, he was said to have been brought down by his extravagant corporate lifestyle, such as providing a journey from China to America on the company jet for Maria Bartiromo, the CNBC financial presenter. Bartiromo, known as the “money honey”, was nevertheless much in evidence at Davos.

So were plenty of British politicians. Under Labour, Davos has sometimes struggled to attract senior government figures. This year it got not only the prime minister, who gave his swansong performance, but also Brown, his likely successor. It may, too, have got the next prime minister after Brown. David Cameron, who a year ago was fresh in the job of Tory leader, made his debut on panels tackling climate change and terrorism. Three other ministers were there, perhaps to keep an eye on him — Patricia Hewitt, the health secretary, David Miliband, environment secretary, and Darling.

What did the 2,500 business leaders, politicians, academics and media folk get in return for their efforts? In some ways this was a large event in search of a theme. “I don’t really know what’s going on here, and I’m hoping somebody will tell me,” said Richard Lambert, director-general of the CBI. “Everybody is extremely confident about the world economy, though I did notice that a session on (mental) depression was pretty well booked up.”

Confidence about the world economy is tangible, even alarming. This year much of the angst about global imbalances and the sustainability of a world upturn reliant on America has evaporated. The rise of China and India, once a source of wonderment, is now regarded as part of the furniture. If this is an example of pride coming before the fall, there is plenty such pride around. Maybe this meeting will go down as the World Economic Forum’s most complacent.

Or maybe not; the International Monetary Fund, after all, says the global economy is enjoying its strongest sustained run of economic growth since the second world war.

The men and women who run the world’s top businesses appear to know that in their bones. But that does not stop them fretting about things. The forum offered a platform to Brazil’s President Lula da Silva, although it has not yet found a place for Venezuela’s Hugo Chavez. The rise of regimes that challenge globalisation is a concern for some. “The thing we worry about is rising populism and protectionism, particularly in Latin America but also in places such as Thailand,” said Sir Martin Sorrell, chief executive of WPP, the marketing-services company.

One of the backdrops to this year’s forum was an attempt to kickstart the stalled Doha round of world trade talks. The International Business Council consists of top executives from many of the world’s leading companies, including Anglo American, British American Tobacco, Goldman Sachs, Coca-Cola, Reuters and Dell. “The impasse with the Doha round threatens to undermine growth and the spread of economic opportunities to all,” it said in a statement. “Trade is the most effective means we can offer to the members of the global community struggling to lift themselves out of poverty.”

Brown said that statement by business leaders was a powerful signal to politicians engaged in the trade talks. “We will be judged harshly if we cannot move this forward,” he said, backing calls for a meeting of political leaders — rather than just trade negotiators — to break the deadlock.

Darling agreed. “The price of failure would be colossal,” he said. “It would be 10 years before we could come back to these talks.” If the language is familiar, it is because the Doha stalemate has been going on so long. Begun in 2001, the warnings of the consequences of failure were just as loud at the Davos meeting a year ago.

But if business is uncertain about trade liberalisation, it appears to have bought in to climate change in a big way. This was supposed to have been the first “green” Davos, and in many ways global warming was the dominant theme. “I’m looking at this from my perspective, but this seems to have been the main issue,” said Sir Stelios Haji-Ioannou, chairman of Easy Group. “I counted 17 sessions on climate change.”

From the opening of the forum, when the German chancellor Angela Merkel called for “global responsibility” on climate change, covering governments, businesses and consumers, it was one of the key themes. She pointed out that the European Union accounts for only 15% of global carbon emissions and that share is set to decline.

What was less clear was what should be the solution. Stelios said that airlines were willing to take part in the European emissions-trading scheme but objected to what they see as tax raids dressed in green clothing — such as the doubling of UK air passenger duty, to take effect this week.

At one session, James Rogers, chairman of Duke Energy, an American firm, said the solution to global warming lay with nuclear power and “clean” coal technology, in which emissions are captured. But Vinod Khosla, the Silicon Valley entrepreneur, said the lead times for nuclear were too long, and that the world should invest much more in alternative energies such as solar power.

Sir Nicholas Stern, who recently wrote a report on the economics of climate change for the government, said the solution lay with setting the right global price for carbon emissions. But others said this would be arbitrary in its impact, distorting economies and trade.

Climate change will not go away, unlike some of the topics that have topped the Davos agenda in recent years. But if the World Economic Forum is a guide, the world is a long way from agreement on what to do about it. Businesses want to know, not only how they can stop their firms being harmed, but how they can make money out of taking action against global warming.

But many businessmen and women come just to meet others, and to learn. “The cynics say it is a talking shop, but the fact is that you have some of the best brains in the world getting together to try to sort out problems,” said Alastair Lukies, the young chief executive of Monetise, a British technology firm.

From The Sunday Times, January 28 2006