Davos Notebook

Conventional wisdom has it that if the leaders of the world can’t agree on a round of negotiations to liberalise world trade then there’s no chance they will agree on measures to tackle climate change.

After all, a pact to cut greenhouse gas emissions will involve re-tooling vast swathes of industry and impact the way companies do business from Boston to Beijing.

But is that view right? British economist Nicholas Stern – author of a seminal report in 2006 on the economic fallout of global warming – thinks not.

“Actually, agreement on climate change, I think, will be easier than agreement on trade,” he told reporters in Davos. “People understand climate change much better than trade.”

The crunch will come in December, when world leaders meet in Copenhagen to hammer out a replacement for the current Kyoto protocol which expires in 2012.

Two years ago businessmen and leaders coming to the World Economic Forum in snowy Davos were still betting on economic expansion.

They got it wrong, but this has not put off about 2,500 CEOs and policy-makers from coming here in the hope of catching a glimpse of how the world will evolve.

“I am here to get an idea of where this crisis is going,” said Mario Moretti Polegato, Chairman and founder of Italian “no-sweat” shoe-maker Geox.

Good session on the “Frugal American,” an as yet undiscovered species that is coming to a global economy near you.

You know the general idea, a decade or so of living beyond their means, borrowing money against their rising house values to finance consumption is coming to a grinding halt. That’s called a recession, but how long will this frugal thing last?

Ian Davis, the MD from consultants McKinsey & Co was blunt:

“Americans have no option but to be relatively more frugal over the next 10-20 years.” This is irrespective of the crisis and is a structural issue due to overspending in the past and the huge host of baby boomers who are now moving into what they fondly hope will be their retirement years. Old people buy fewer ipods and ski boots apparently, and are less likely to remodel their kitchens and bathrooms. That is a problem for the global economy.

Alan Greenspan hasn’t been chairman of the Fed for three years, but his policy mistakes keep paying dividends in the form of blame at this year’s World Economic Forum in Davos.

Polish Finance Minister Jacek Rostowski yesterday:

“This was the failure of one of the key institutions in the world.” During the Greenspan era he said they continually met downturns and distress with easing and “eliminated fear.”

Ken Rosen of Berkeley, who was writing about the housing bubble in 2005 or so, is in the same camp:

Watch interviews with top business and world leaders including the following:

Andrei Kostin Gerard Lyons Jean-Claude Trichet George Soros Tom Glocer

There’s no better way to start Davos than to see a string of top delegates breeze into your studios. On time. Happy to brave the cold in the early hours. Full of interesting comments and insight.

For the second year running, Reuters News is producing a live breakfast show for the World Economic Forum – Davos Today.

It has been months in the making. From designing a set that fits into the town library, to booking satellite paths, to contacting dozens of delegates to invite them on the programme. At 4 o’clock this morning, the adrenaline was pumping. It was time to pull the whole thing off.

Though a financial crisis and global recession have left many of the world’s biggest companies uncharacteristically humbled, that didn’t stop NGOs from taking shots at a few of them at the World Economic Forum.

U.S. gold company Newmont Mining and Swiss utility Bernische Kraftwerke picked up a couple of pretty dubious honors from Greenpeace Switzerland and the Berne Declaration.

Newmont received two awards — the Global Award and People’s Award — for its mining project in eastern Ghana. According to the NGOs, Newmont “is ignoring the environmental and social damage” the planned mine will create.

Where do I put my money?
What do I read?
Who do I listen to?
Who saw it coming?
Who made money from it?
Who will make money from it?
Who can I trust?
As Davos gets under way, my feeling from chatting with contacts and listening to conversations around me is that one thing the world economy is really suffering from right now is a crisis in trust.

Institutions failed us. Governments failed us.

Our own intuition failed most of us (George Soros said today that he protected his capital and had a satisfactory return — that’s certainly better than I did!).

Our advisers failed us.
The media failed us too.

So before we buy again, or invest again, or behave normally again, people need an answer to the fundamental question — where can I invest my trust.

Near the VIP entrance of the congress hall here in the World Economic Forum in Davos, scores of delegates, press, aids, security guards are all waiting for the imminent arrival of Russian Prime Minister Vladimir Putin.

It’s extremely cramped here with a constant stream of people squeezing past those who are standing here to catch a glimpse of Putin.

Former UN secretary Kofi Anan was nearly hit by a TV camera while financier George Soros asked the press “Who’s coming?” When someone said it was Putin, his aide said: “Say hello to him!”

So do countries which can borrow money more cheaply, Germany for example, have a higher obligation to borrow, spend and make things better for everyone across Europe?

Polish finmin Jacek Rostowski, speaking in a session on the outlook for Europe, seemed to think so:

"Fiscal policy ... some countries which are far more able to afford increases in govt expediture and budget deficits than others. We should apply the principle that those with the lowest debt financing costs should consider the most expansive policies."