China’s economy absent from concerns on Davos panel
If policymakers and financial markets outside the Swiss alps are concerned about China’s economic outlook, those worries were missing from a panel discussion at the World Economic Forum in Davos. While delegates to the meeting of the rich and powerful surfaced a host of challenges facing China’s new leadership later this year, the pace of growth wasn’t one of them.
The panel talked about political cronyism, pollution, and the need for a more robust safety net for migrant workers. But there wasn’t any talk of crisis or hard landing. Despite the fact that China is still very export dependent, defenders and critics at this session betrayed no concern about the impact that the euro crisis and slow U.S. growth could have on the Asian powerhouse.
Many economists expect China to grow at 8 percent or more this year, slowing from 9.2 percent in 2011, as authorities seek to avert inflation and ensure more sustainable expansion. China is comforted by having the world’s biggest foreign reserves, which lets it cope with weaker demand for its products. Li Daokui, Director of the Center for China in the World Economy in Beijing, and an advisor to the Chinese central bank, is sticking to his 8.5 percent growth projection this year and insists the economy, the world’s second largest, will grow by “at least 8 percent” in 2013.
Stephen Roach, Chairman of Morgan Stanley Asia and senior research fellow at the Jackson Institute for Global Affairs at Yale University, shared the optimism. The current five-year Chinese plan will be a “watershed”, he said. The shift from investment and exports to consumption leaves him positive further out into the future. “China has demonstrated it’s up to the task.”
Perhaps the biggest concern among panel members is the need to develop a safety net that can support the masses of migrant workers who head for China’s cities, struggling to make ends meet, and maintain social peace. Housing has been expensive, leading to a bubble, and rental costs are dear. Roach dismissed talk of ghost towns. He recalled Shanghai in the 1990s, relatively empty then, booming today. “Ghost towns are built in anticipation of the people who come.” Housing has spooked the markets. “They’re expecting the worst,” he said. “They will be pleasantly surprised.”
Other problems: pollution, which will impact health and be a burden on the state; and what Roach describes as “the financial repression” created by a gap between deposit and lending rates.
But there was not a word about the value of the yuan, and it took until question time for this to be raised. So how would Chinese authorities respond if Mitt Romney wins the U.S. election and declares China a currency manipulator? “You can expect a strong reaction from the government,” Li said. He, in turn, countered that the yuan was fairly close to “equilibrium”.
Tackling healthcare for the very poor
This year in Davos, there is a lot of talk about transformations and new business models that will be important in our global economic recovery. In healthcare, new models will be a significant part of expanding access to patients in need. While it is clear there is lots of growth potential in emerging markets, it’s also important to address the larger societal challenges associated with this growth. This is especially true in the developing world where access and affordability are major issues.
Nearly half of the world’s population lives on less than $2 per day. I was recently in India, where I got to see firsthand what this means. According to the latest estimate from the World Health Organization, there are more than 835 million people across rural India — more than twice the entire population of the United States. Only 35 percent of these people have access to essential medicines. For those of us in the developed world, this is a seemingly unimaginable gap.
As CEO of a global healthcare company, I believe it is critically important to help improve the health of people everywhere by expanding access to medicines in a sustainable way. However, there are many obstacles to delivering care in developing countries, and overcoming them requires adapting to local needs. Poor infrastructure, poverty, inadequate sanitation systems, unclean drinking water and a lack of trained health workers all compound the problem. The question is: With problems so large, how can we be part of the solution?
At Novartis, we realized it was important to take a step back and consider not just how we can enter a market but also how we can adapt to better consider local conditions. We saw that there was a need for a new model in emerging markets like India. That is why we developed Arogya Parivar, meaning “healthy family” in Hindi. This is what we call a “social business” model, meaning it blends corporate citizenship with entrepreneurship.
While many have highlighted the cost of medicine, there is not enough emphasis on solving the associated distribution and social challenges. Arogya Parivar addresses what I believe are the two most important issues in developing countries: healthcare education and infrastructure. The program works by recruiting and training locals to become health educators and tour villages, schools, and health centers. They conduct community health meetings and talk directly to patients about disease prevention and encourage them to seek timely treatments. Also, the local teams address the infrastructure issue by organizing health camps — mobile clinics that provide access to screening, diagnosis and therapies to patients in remote villages who don’t have regular access to healthcare. In 2010, we hosted more than 3,000 health camps, reaching an estimated 140,000 people.
To make treatments more available and affordable, we also sell over-the-counter medicines in smaller packs with doses for only one to three days. While patients need to purchase the packs more frequently, one local doctor mentioned that this helps them better track a patient’s compliance and helps keep weekly out-of-pocket costs low. Importantly, this initiative turned profit-positive this year after four years of losses. This is critical for its sustainability.
Our model is based on the understanding that access to medicines in the developing world is bigger than a pricing issue. Insufficient infrastructure and lack of healthcare access are larger problems that need to be addressed. What is needed is entrepreneurship that creates jobs, expands access to health education and works closely with patients in the context of local customs. Health solutions must be tailored to meet diverse local needs.
Pharmas are not compassionate, they are bottom line.
A Van Winkle return to Davos and to real problems
It was well past midnight in late January 2000 when an investment banking contact called my Davos hotel room to share the latest details on Vodafone’s hostile bid for Mannesmann. That was news, but the huge hostile takeover was no longer the largest deal in history. It had been displaced a few weeks earlier by the agreed merger of AOL and Time Warner. Such was the talk of the World Economic Forum. The great and the powerful had gathered together to celebrate the success of business and, especially, of finance.
Exuberance over technology and venture capital was almost limitless back in 2000, thanks to the seemingly limitless rise of the tech stocks. Dotcom startups were all the rage. When Japanese Internet mogul Masayoshi Son finished one panel, he was assailed by a gaggle of entrepreneurs waving business plans for him to peruse. In full disclosure, this columnist two weeks later signed up to establish the online financial commentary business that eventually became Reuters Breakingviews.
Coming back to this gathering 12 years later is a Rip Van Winklerian experience. The old world and its little worries look positively quaint. Back then, at what in retrospect proved to be the height of the Great Moderation, business was booming, the Nasdaq still had another 20 percent or so to climb, companies were merging like mad; everything looked rosy. President Bill Clinton parachuted in to give a victory lap. Even the demonstrations that took place against neoliberalism and world trade now look quaint. Defacing a McDonald’s is a far cry from overthrowing governments.
The economic moderation turned out to be built on financial excess. That AOL deal – hailed as visionary by all the delegates of 2000 – has become the poster child for foolish corporate finance. The Nasdaq is a third lower than 12 years ago (before adjusting for inflation). And the banks – what can I say? From triumph to tribulation.
The political world also looks much more treacherous. Geopolitics has not yielded to the irresistible forward march of free market capitalism, and peace no longer looks like something to be taken for granted. The 9/11 attacks spawned wars in Afghanistan and Iraq – the kinds of conflicts that in 2000 were supposed to be a thing of the past.
The World Economic Forum has changed with the times. The rise of the BRICs has brought greater diversity to the audience, which is a good thing. It has also brought many more people – so many, in fact, the organizers have expanded their caste system. There is now a dizzying number of different badges, each offering differing levels of access and status. It’s much easier to be here and still be excluded from the elite – much like the feeling of many of the world’s dispossessed.
The most striking difference, though, is in the increased complexity and severity of the questions confronting the collection of top business people, politicians, investors and academics. Europe’s sovereign debt crisis keeps trundling forward, bringing to the fore thorny challenges to sovereignty, the role of central banks and the solvency of nations. Instead of Clinton smiling from the podium, this year’s keynote address came from the troubled German Chancellor Angela Merkel, the leader with the most cards at the debt crisis table.
Making the business case for a healthy workforce
The role that today’s workplace plays in health and well-being is often debated. People spend much of their time at work, and wellness at work matters. Employers generally find that healthy employees contribute to business success, but the exact quantitative relationship between improvements in employee health and corresponding improvements in employee productivity and engagement remains elusive.
At the same time, employees around the globe are increasingly subject to non-communicable diseases – primarily cancer, heart and chronic pulmonary diseases, and diabetes. Many such diseases have their root in obesity or tobacco use, and thus to a large extent are preventable. Worldwide, non-communicable diseases cause an estimated $2 trillion in losses each year in economic activity, as well as the premature deaths annually of 18 million people still in their productive years. That’s why the World Health Organizations tags such non-communicable diseases as “the world’s biggest killer.”
For the past two years, the Workplace Wellness Alliance has been tackling the problem. Triggered by a call to action during the 2010 World Economic Forum, this consortium began with 13 companies and now has more than 100 major global employers representing 4.5 million employees worldwide, all dedicated to ensuring that – regardless of country or industry – optimum employee wellness is a priority in the workplace.
As the consortium has grown in size, so has its influence. In fact, the corporate social responsibility newswire CSRwire recently named the rapid growth of the Workplace Wellness Alliance as a “Top 10 CSR Moment of 2011.”
Specifically, the Alliance is helping establish a global standard of wellness – through metrics and best practices contributed by its member companies – to improve workforce health and productivity. Already, it has collected homogeneous health metrics from more than 150,000 employees across 20 global companies. These will help establish a measurable global workplace health baseline and provide the structure, tools and processes essential to maximize efforts against chronic diseases. It also has established a database of real-life case studies that describe successful workplace wellness programs.
It’s a critical effort. In the U.S., chronic illnesses affect more than one in three workers, with treatment costs accounting for about 75 percent of our national healthcare spending annually.
The consequences are equally dire elsewhere. In the Russian Federation, every employee on average loses 10 working days a year to chronic disease and injury. In the United Kingdom, the cost of mental ill-health to employers was estimated at 25.9 billion British pounds in 2006. The societal implications are far-reaching as well. In Taiwan, if you’re diagnosed with diabetes or cardiovascular disease, your chances of being hired are reduced by 19 percent and 27 percent, respectively.
There is no “business case for a healthy workforce”.
It’s an oxymoron.
The only rational “business case for a healthy workforce” is to quietly get rid of an employee when he/she (or their family) becomes a healthcare burden to the employer, since it directly affects the bottom line.
This also includes the ongoing need for “preemptive action” on the part of an employer to keep its employee base as young as possible, since an older workforce tends to cost more, but without generating any additional efficiency that drops profits to the bottom line for investors.
US jobs are “outsourced”, not only because of direct labor cost, but also to avoid having to pay the “overhead” associated with a US work force, which includes, among other things, health care costs that are rising rapidly each year.
No matter how you look at it — from a financial investment standpoint — maintaining a business in the US versus overseas is a lose-lose proposition.
And, taking the US economy as a whole, the fewer individuals insurance companies have to spread the risk over, the higher the healthcare costs to the employer.
Then the cycle begins again, ad infinitum.
It’s the dirty little secret about healthcare no one wants to talk about, but it exists nevertheless.
What we REALLY need to do is to take the employer out of the equation altogether, thus reducing business overhead costs, which are a direct conflict of interest for any employer, and then we can REALLY focus on a “healthy workforce”, plus a whole lot of other social problems that contribute to an unhealthy US workforce.
The underlying problem is that neither government nor business can seem to understand that maintaining this employer-based health care system is destroying this country, no matter how you choose to look at it.
What we REALLY need is a healthcare system like many European countries, which would probably give us better coverage for less cost.
The underlying problem is that moving to a healthcare system that really works, would gore too many “sacred cows” in the healthcare industry.
What we REALLY need is way to force healthcare changes on an industry that is unwilling to reform itself.
The underlying problem is the healthcare industry has too much clout with the federal government to ever allow that to happen.
Which brings us back to square one again — a massively overburdened healthcare system, that delivers poor results, and costs a fortune to boot.
Privatizing this system is guaranteed to make matters even worse than they are now — just like privatizing other industries has done. It is NOT the solution.
Why doesn’t someone tell the truth for a change as to what is really wrong with our healthcare system?
Recognizing the problem would at least be a start to correcting it, which would be a lot further than we are today, since we are clearly moving in the opposite direction from any solution that will work.
PseudoTurtle
CPA/MBA
The problem with capitalism is democracy
The rich and powerful at Davos debated capitalism today with a defense that invoked Winston Churchill’s famous dictum on democracy. “Democracy,” Churchill told the House of Commons, “is the worst form of government, except for all those other forms that have been tried from time to time.”
Carlyle Group Managing Director David Rubenstein suggested in his historical comparison is that capitalism is not perfect but it’s the best we’ve got.
While the Time Davos panel, entitled “Is 20th century capitalism failing 21st century society?” acknowledged a desire to reduce inequality, there was a shrug of resignation about the way forward and an absence of solutions.
Indeed, one business member of the panel, pressed by a question from the audience, acknowledged there was only so much they could fix in a 90-minute panel. That may go to the heart of the World Economic Forum annual meeting itself: while it admirably raises the attention of complex issues by debating them with the media world watching, it can’t be expected to resolve them in this snow-capped Swiss town.
And it couldn’t in a forum like this which was, as Alcatel-Lucent CEO Ben Verwaayen grumbled, a “battle of nostalgia.”
It was an outdated debate which started in spirited form when Sharan Burrow, general secretary of the International Trade Union Confederation, accused business leaders of “losing their moral compass” and urged them to “stop the greed”.
“The right debate is about how we get the innovation and creativity we need,” Verwaayen countered. “We need to talk about innovation, real sustainability and reforms – not about corporations and greed. It’s about decision-making. We have to go for transformation. We have to talk about job creation, not job security.”
Let’s end world hunger
Last year was a milestone year for raising awareness and advancing a global dialogue about the challenge of doubling food production by 2050 to combat hunger and malnutrition and meet the needs of a fast-growing population. Recent attention paid to the birth of the 7 billionth human on earth did much to help drive this global conversation. But looking ahead to 2012 and beyond, our challenge – in fact our imperative – must be to translate this momentum into action.
In 2000, the United Nations member states, together with international organizations, challenged the world to come together to address the Millennium Development Goals, first among them being the eradication of extreme poverty and hunger. We now have but three short years remaining to meet these goals. While much has been debated about the analytics and measurements driving the goals themselves, the simple, incontestable fact is that to thrive — and in many cases to survive — we as a global society must address poverty and hunger.
The two problems are inextricably linked. And we must come together – CEOs and NGOs, those focused on increasing productivity and those focused on environmental sustainability – if we are to have any hope of being successful.
According to the World Food Program, hunger is the number one health risk in the world, killing more people than malaria, AIDS and tuberculosis combined. By 2050 there will be 9.5 billion people living on earth. Today, nearly 1 billion people are already suffering from hunger and malnutrition in some of the fastest growing regions of the world. The challenge of doubling food production by 2050 will become more difficult as key resources become increasingly scarce and a changing climate creates unforeseen obstacles.
There is broad-based support for tackling hunger, which has been a key point of discussion in leadership meetings including the G20 and the World Economic Forum as well as the United Nations General Assembly meetings. While we can point to significant strides in areas like combating malaria and access to education, the most recent Millennium Development Goals Report indicates that our progress in addressing hunger has plateaued, and may have worsened in some regions.
One of the biggest challenges we must overcome in addressing hunger is blending a technical approach to farming that increases productivity with an environmental approach that promotes sustainability. I am excited by recent advances by the private and public sectors in creating solutions for farmers that increase yields per acre while at the same time requiring fewer environmental resources — notably water, which is often so precious in developing countries. It is this type of innovation that will enable us to produce more from the same, if not a smaller, footprint on the planet. I am confident that with the right set of diverse partners around the table, we will continue to bring solutions to the farmers who feed us and provide the materials used to clothe us.
At Davos I will meet with leaders from other companies and representatives of governments and civil society groups as part of the initiative focused on sustainable agriculture called the New Vision for Agriculture Initiative. Monsanto is one of the 26 global partner companies of the World Economic Forum providing strategic leadership and championship of the initiative. This will be a great opportunity to work with our peers to build on the ideas put forward in 2011 at the World Economic Forum.
There is a hugely obvious reason for poverty and hunger.
People with no resources to care for children have them anyway. It doesn’t mean we have to kill people. But we could provide birth control to people who want it. And we could stop telling unbelievably poor people (like Haitians) that birth control is a sin. Somehow that seems evil.
from Mohamed El-Erian:
Davos at a distance
I’ve never been to Davos, despite attempts by many over the years to persuade me to go. Don’t get me wrong. I understand that it is a special event for many people, and for many reasons. It is anchored by wide-ranging and engaging agendas, and participants get to mingle with a global cornucopia of important people. It is also the place to see and be seen for heads of state, politicians, academics, thought-leaders, media pundits, CEOs, and movie stars.
The annual meeting of the World Economic Forum in that intimate setting remains one of the year’s hottest tickets, but its organizers want their event to be much more than what it currently is—a big, prestigious talk-shop. They want it to influence policy at the national, regional, and global levels.
Yet, over the years, and in the context of an increasingly unsettled and uncertain world, Davos has not had much impact.
I get a range of responses when I ask attendees why so few, if any, of the interesting discussions that have taken place in those beautiful Swiss Alps have led to change that improves the lives of most people.
Some say the strength of the typical Davos agenda is also a weakness. The topics are overly ambitious. In trying to cover too much for too many, breadth trumps depth.
Others cite the inherent difficulty of distilling the opinions of such a varied group of people into specific action points. This is never an easy endeavor, and it becomes a virtually impossible one when it involves so much wealth and so many egos.
Then there are those who believe that too much time is spent arguing about what has happened—especially when things have gone horribly wrong—and too little time is devoted to what lies around the next corner, and the one after that.
Davos is networking, it’s where politicians can officially meet with their paymasters, it’s where wannabes and slimey fake businessmen run aroundtrying to sell themselves. And it’s full of something that rhymes with pull grit. The WEF does do some decent research, but it is a business enterprise, let us never forget that. The statistic I would like to see is how many jobs did those billionaires eliminate in the past 5 years.
TFF
“there are so many ways that the typical family earning $80-$100k could save an additional $5k”
Median family income in the US is $51k. Your “typical” family has an income twice as large. If you are so out of touch w the circunstances of actual working people you have no business commenting on how they should go about paying for their kids education.
from Breakingviews:
Euro zone crisis may be close to resolution
By Hugo Dixon The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
DAVOS, Switzerland -- The euro zone crisis may be close to resolution. There is certainly optimism among policymakers at the World Economic Forum in Davos that a comprehensive deal -- involving more discipline by peripheral nations and more help from rich nations -- could be put together in coming weeks. If so, the hot phase of the crisis could be over and even Greece would have a fighting chance of getting out of the woods.
There is still no deal. But the stars seem to be coming into alignment. Germany, the zone's paymaster, clearly realises that it has a strong interest in the single currency holding together -- and will do what is needed to make that happen. Peripheral nations also seem to be willing to go an extra mile to give Berlin enough air cover to sell further help to the German people.
The basic bargain would involve more generous terms for loans to indebted countries, especially Greece, balanced by hard-and-fast promises not to run up debts in the future. The countries are discussing some form of "debt brake", a provision embedded in the German constitution which forces it to balance its budget in the medium term. Such self-denial could, indeed, be a healthy mechanism for all countries to adopt.
Meanwhile, two changes could be made to make even Greece's debt burden -- which is officially forecast to peak at just under 160 percent of GDP -- more bearable. The first would be to buy back chunks of its debt in the secondary market at a discount and pass the benefit onto Athens. If, say, a quarter of its debt could be acquired at a 20 percent discount, the peak ratio would fall by 8 percentage points. Not huge, but helpful. More importantly is the idea of cutting the interest rate on the debt. If the country was able to fund itself at below 5 percent, the annual interest payment would be below 8 percent of GDP.
Even with such a package, Greece would still face a massive uphill struggle to boost its competitiveness. It would still need to push through aggressive moves to tackle rampant tax evasion. And it would still need to punish those who have looted the public purse in recent years -- otherwise, the general population will not be willing to endure the years of hardship ahead. But there is a narrow path the country could tread back to long-term health.
It will also be important to stop further dominoes falling, especially Spain. Madrid had a golden opportunity earlier this week to draw a line in the sand by coming up with its own comprehensive solution for its troubled savings banks, the cajas. It flunked it by saying that a maximum of 20 billion euros would be needed -- significantly less than the market consensus. But it is not too late to remedy the error. Spain's euro zone partners should pressurise it to make crystal clear that there is more money if needed. If a proper clean-up of the region's troubled banks is also part of a comprehensive solution, the euro zone will indeed be able to look forward to better times.
Is Davos toxic? (for your health)
This is part of a series written by Anya Schiffrin, author of “Bad News,” and the wife of Nobel Prize Winner Joseph Stiglitz. The opinions expressed are her own.
This morning at the Davos coffee bar I was, as usual, tucking into the stale Danish, when I spotted a Davos Wife (easily identifiable by the infamous white name tag) drinking a cup of green tea. My companion, a Glamorous Davos Girlfriend (GDG) (my husband was, of course at a meeting) congratulated her on her healthy choice.
“I am trying to detox because of all the crap I have been eating,” came the pithy reply.
It may sound like we Davos-goers are whinging ingrates – and that is certainly true — but one of the perennial complaints about Davos is the generally unwholesome atmosphere. Indeed the GDG – who juggles being a GDG with her job as a health consultant — is convinced that Davos is toxic.
Apart from the obvious problem of male egos, general pushiness and bad behavior there is the physical exhaustion that comes from the relentless string of panel discussions in oxygen-deprived basements rooms. It starts with the flight to Zurich and the schlepping of luggage and continues with massive sleep deprivation, stodgy food and the risk of broken bones.
Before the sun has cracked through the dark Alpine sky, the average Davos Man has left his hotel room and begun the long march to his early morning power breakfast. The most legendary was the annual Musharraf breakfast which meant thinking about the Pakistan Intelligence services, the doomed war in Afghanistan and Islamic fundamentalism over bad coffee, rubbery overcooked eggs, sugary orange juice and gluey yogurt. It’s a menu that would make Michael Pollen cry and which surely can’t be expected to inspire the financial world’s most brilliant minds to come up with a way to save the world.
But it’s even worse at 3am New York time before anyone has gotten over jet lag. The sponsor’s sister complained so much about the timing that this year the organizer changed it to a lunch with Imran Khan which was a lot easier all around.
