from The Great Debate:
Trust: the commodity in shortest supply
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.
I think that's the issue behind all of the discussions here.
The shift in power from West to East
One news theme I’ve asked our journalists to be alert to this year is the shift in power and emphasis from est to East.
The rise of China’s economic power during 30 years of reform and opening to the world is just one manifestation of this; the knowledge and service powerhouse that India has come in a globalised world is another. At Davos this year I’m moderating a panel on Asian innovation that will surely highlight software advances in Japan, Korea and Thailand as well.
I’m convinced the current global economic crisis must lead to a fundamental reassessment of how power and influence is expressed through the world, from manufacturing and service oriented Asia through the oil-rich Gulf.
This isn’t because of “decoupling” – that notion so prominent in discussion circles a year or so ago that said things like China’s economic boom could make up for any economic weakness in the U.S. That idea has been well and truly discredited as trade and money flows have caused bank after bank, nation after nation and economy after economy to buckle and bend in the current crisis.
No, it’s precisely because of “coupling” that the world will have to rethink radically its governance and regulatory and influence structures.
I see today’s opening session at the World Economic Forum as emblematic of this shift. The two world leaders taking centre stage at Davos today are not from the United States or from the United Kingdom or from France or Germany or Italy or Japan or Canada.
The only power shift of any meaning and consequences is between US and China. Because of size and the nature of that shift.
While many East-West countries have traded during the past 20 years, these trades have benefited all fairly equitably when summed over this period. Except US-China.
The so-called globalized trades between US-China have benefited the principally the big corporations (i.e. their balance sheets and executives) in the US, and the state in China. Because that’s the way each country wanted.
When you sum up 20 years of massive US-China trade, the balance sheet shows:
a) Giant net benefits to major US corporations. US consumers also benefited, in the short term. But over a 20 year period, they actually lost much of value, except perhaps a very good time.
b) The Chinese state has gained tremendous net benefits, and since the state dominates so much, Chinese infrastructure, consumer and industries have also shared the very large net gain.
In short, globalization has produced reasonably good net gains to world countries. But the US comes out a loser and China the winner over the long term.
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Resident Davos Expert
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You can trust the people who make the things you use everyday. You can trust the people who understand how to make and design those things,and the people who know how to make more of them. The size of this financial crisis has made it physical. Think of an office building that is falling apart. Nothing works, the building itself is starting to crumble. The first guy you run to is the maintenance man. When you can breathe again, talk to the architect, etc. Get money to the people who know how to turn it into real, tangible things. In the end, they are the only people who will dig us out. It may take them awhile, but they can be trusted.