Groundhog Day in Davos
The programme may strike a different note — this year’s Davos is apparently all about Shared Norms for the New Reality — but much of the discussion at the 41st World Economic Forum annual meeting in Davos this month will have a distinctly familiar ring to it.
Last January, the five-day talkfest in the Swiss Alps was dominated by Greece’s near-death experience at the hands of the bond market and recriminations over the role of bankers in the financial crisis, as well as worries about China’s rapid economic ascent and a lot of calls for a new trade deal.
Fast forward 12 months and not much has changed.
Ireland has joined Greece in the euro zone’s intensive care unit and Portugal and Spain are getting round-the-clock monitoring. The annual round of bankers’ bonuses is once again stirring up trouble. China looms larger than ever on the global stage, after overtaking Japan in 2010 to become the world’s second-biggest economy. And trade ministers who signally failed to make headway last year say they really must get down to business when they meet on the sidelines of Davos this time round.
For a sense of the deja vu, take a look at the WEF’s latest hot-off-the-press report on Global Risks — a 50-page tome on the spider’s web of interconnected threats now facing the world. Not much progress in addressing them has been made, it seems. Government debt and the danger of sovereign default remains top of the risk hit-list, alongside macroeconomic imbalances, the fragility of the economic recovery and resource limits. It is a very similar litany as a year ago.
Worryingly, while the threats remain all too visible, the report’s authors conclude that the world is now uniquely vulnerable to any further shocks in the wake of the financial crisis.
Maybe we are at junction. If so, Lee Howell — the WEF’s head of programming — says it is vital policymakers take the right turning. “Will the shared norm be about protectionism and competitive devaluation? I certainly hope not. Or will the shared norm be about greater macroeconomic coordination, particularly at the G20 level?”