Reuters blog archive
from Anatole Kaletsky:
The Davos economic forum, held every winter in the Swiss Alps, allows its participants to look down at the world from above: topographically because of the high-altitude location, but also symbolically, because of the high incomes, high status or high-minded rhetoric that characterize the jet-setting global elite dubbed “Davos Man” by the American political scientist, Samuel Huntington. This week, however, I discovered a sub-species of Davos Man with a very different perspective. At the “summer Davos” that the World Economic Forum now organizes every year in China, participants look at the world sideways, from the East instead of down. The shift in viewpoint is striking, even for people who travel frequently to Asia, as I do, but rarely experience such total immersion in the eastern elite’s hopes and fears.
The biggest surprise at this week’s Dalian forum was the East-West divergence of opinion on the economic outlook, both in the months ahead and in the very long term. Western economists mostly believe that developing countries in general, and China in particular, are threatened by serious financial crises as U.S. monetary policy begins to be tightened, probably as soon as the Federal Reserve Board’s meeting next week. The consensus view is that emerging economies have invested and borrowed too much, taking advantage of the Fed’s easy money and will now face painful deleveraging similar to what Europe and the U.S. experienced five years ago. This deleveraging means, in turn, that the glory days for developing economies are probably over -- and most of these countries, perhaps including China, may never escape the “middle-income trap” that has prevented further progress in many developing economies. The trap starts to hobble growth when per capita incomes rise to around $10,000 and many of the obvious opportunities for catching up with Western productivity are exhausted. China’s is $9,160 according to the IMF.
When I travelled to China this week, I expected obsessive discussion of the recent shift of economic sentiment against developing countries and the resulting collapse of bonds, shares and currencies in most emerging markets this year. And indeed warnings of ruinously compounding debt burdens and dangerously unsustainable investment bubbles did dominate Western presentations, both in Dalian and at an earlier academic seminar in Shenzhen, organised by Tsinghua University and the Institute for New Economic Thinking.
Surprisingly, however, the Chinese economists in Shenzhen seemed largely unperturbed by the Western warnings, preferring to concentrate on environmental, governance and public health issues and the details of financial market design. In Dalian, too, the sense of financial foreboding was strangely absent, as speakers from other developing countries agreed with their Chinese colleagues that higher priorities than debt management were structural issues such as demographics and education, governance and corruption, bank regulation and competition, energy and urban design.
from Ian Bremmer:
After another year of panels, colloquia, summits, meetings, whispers and skiing, the Davos emissaries headed home with a few new connections and catchphrases (“Resilient Dynamism” forever!). After four years of gloomy predictions and summits dominated by post-financial crisis concerns, this year the mood was significantly more positive. While I would argue that the pendulum of sentiment has swung too far, there are reasons to be cautiously optimistic. Based on my observations at the 2013 World Economic Forum, here’s a power ranking of who’s up, who’s down and who’s off the radar—according to Davos attendees, at least.
United States: The politics of Washington were all but forgotten. With the so-called fiscal cliff standoff resolved and no current budget battle hurdles (at least for the next few weeks), there were no urgent crises to distract Davos from the strong American economic fundamentals. Instead, the chatter was about insourcing, the energy revolution and the positive growth outlook this year – all sources of a (perhaps inflated) exuberance.
from Davos Notebook:
One sometimes hears that the World Economic Forum is all talk and no action. I don’t buy it — talk matters. Social currency is a powerful driver of change, even at the highest reaches of business and government. And last week climate change was on center stage at the famous Davos summit. So as I moved through the WEF Annual Meeting, the question on my mind was simple: How many of the conversations here will lead to real-world outcomes?
President Barack Obama had helped point the spotlight with his second inaugural address two days earlier, but the real reason for renewed focus, after several years of near silence, is the increasingly destructive and incredibly costly wave of unprecedented weather events that have occurred around the globe. There were more than 30 official sessions on climate change, environmental resilience and food security this year at the Annual Meeting, and even more related side events.
from Photographers' Blog:
By Denis Balibouse
Seeing world leaders at shoe level - you can tell a lot about them.
Last week my colleague Pascal Lauener and I covered the annual meeting of the World Economic Forum (WEF) in the Alpine ski resort of Davos in Switzerland. According to its website the WEF is "an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas."
The 2,500 participants can take their pick from 258 official sessions over a four-day period. Some only come for informal meetings in the hotels surrounding Davos' congress center, where discreet talks covering business, politics and deal-making thrive away from the spotlight. Contracts are signed, soirees take place, deals are made.
from Felix Salmon:
This year's Davos was all about tail risk -- or, more to the point, the absence thereof. The ECB's Mario Draghi said -- more than once -- that he had "removed the tail risk from the euro". His colleague Ignazio Visco went almost as far, saying that only a few tail risks remain. The EU's Olli Rehn talked about how there's "no tail risk" any more. The IMF's Zhu Min said that "In Europe, the tail risk has been moved off the table", which was exactly the same language also used by Ray Dalio. Bank of America CEO Brian Moynihan said that "euro tail risk is now sorted". The FT editorialized about the best policy response when "the tail risk of renewed financial chaos is reduced". Even Nouriel Roubini declared that tail risks have declined in the past six months, although they haven't gone away. And that was just the on-the-record comments: off the record, many more people, including at least one official US representative, were saying the same thing.
It was enough for both incoming Bank of England chief Mark Carney and UBS's Alex Weber to start cracking jokes about how tail risks had been reduced on Wednesday and downright eliminated by Friday. As Stephanie Flanders says, Davos wouldn't be Davos if people weren't constantly talking about the need to avoid complacency -- but for once, this year, "there seemed a genuine risk of it breaking out".
from Felix Salmon:
Frank Tantillo has a good overview of the inescapable country-branding exercises that happen in Davos every year; this year Azerbaijan was rivaling India in the ubiquity stakes, while countries like Peru and Japan made do with events.
Countries in Davos behave much like corporations: they brand themselves, they throw parties, they maneuver to ensure that their high-level representatives appear on the most important panels. And while the highest-profile heads of state, like Angela Merkel, are at the very top of the Davos pecking order, the general mass of presidents and prime ministers (there were more than 50 heads of state in attendance) are clearly less important, here, than Davos stars like Larry Summers, Henry Kissinger, or even Nouriel Roubini. The question to ask yourself is: given the choice, who would the average global CEO or hedge-fund manager rather meet. And put like that, it's easy to see how Danny Kahneman outranks the president of Guatemala.
from Chrystia Freeland:
DAVOS, Switzerland – Get ready for a new elite consensus on the U.S. budget deficit. One of the functions of the World Economic Forum – decide for yourself whether this is a virtue or a vice – is to give the plutocrats a venue for figuring out their party line. Think of it as crowdsourcing for the 0.1 percent.
For a long time, the conventional wisdom among this crew has been that the deficit and the debt were the United States' chief economic problems. That's why I wasn't surprised when Martin Sorrell, the head of the global communications giant WPP, referred to the deficit as the country's most important economic issue at a breakfast discussion he moderated at the forum this week. The conversation was off the record, but when I asked Sorrell if I could quote his comment, he happily doubled down: Not only was the deficit the United States' most important economic woe, it was the most important economic issue in the entire world.
from Davos Notebook:
“The impatience for growth will really take patience” -- that’s Bank of America CEO Brian Moynihan in a panel on low economic growth, using the particular kind of language particular to the people who inhabit particular places like Davos. A panel called “No Growth, Easy Money -- The New Normal?” (those latter three words another terrible Davos phrase) began with the moderator grimly telling the crowd: “Will we ever return to the normal, free world?” This kind of sentence is ostensibly the kind of English you and I subscribe to, but on further examination, not so much.
Are the Davos elite really worrying about their freedom? Well, no. The World Economic Forum has no shortage of silly phrases, but some of them actually do have meaning beyond the euphemistic. What Davos folks mean when they constantly call for a “growth plan” or “restoring growth” is that no one can see any particular industry that’s going to increase the pace at which they get rich. And, as a result, the rest of us will have fewer jobs.
from Davos Notebook:
With 1,500 business leaders and up to 50 government officials in town for the World Economic Forum it shouldn't be a surprise that advertising messages in Davos are aimed at a different demographic than one would expect in even the most upscale of ski resorts.
The most popular source of ads are emerging nations attempting to attract investors with millions of dollars to sling around. For example many of the buses here tout former Soviet State Azerbaijan as the "Land of the Future."
By Christopher Hughes
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
To feel good again, the world’s financial elite need a growth catalyst like the Internet. America’s shale gas revolution fits the bill. Ask delegates at the World Economic Forum in Davos for their 2013 outlook, and that simple idea features in most answers. It may only surface as a passing reference in conversations around the Swiss ski resort. But in the echo chamber of Davos, the notion that shale gas is a reason to be bullish has become common wisdom.