The negative-sum new reality
Remember those off-the record comments by “top executives from Goldman Sachs and Standard Chartered” which indicated that the era of contrition had come to an end? Well, they’re on the record now, splashed all over the front page of this morning’s FT. Goldman’s Gary Cohn is coming out swinging, saying that the real danger to the global economy is now posed by unregulated non-banks, while Peter Sands of Standard Chartered reckons that most bank regulations will no more prevent another crisis than seatbelts on airplanes will prevent a plane crash.
It’s true that bankers are not contrite these days: Bob Diamond is standing tall in the halls of Davos, seemingly emboldened by his performance in front of the UK parliament, at which he said that “there was a period of remorse and apology for banks and I think that period needs to be over”.
Looking at the bankers as just one of the many species of plutocrats and power brokers in Davos, it seems to me that they’re taking full advantage of their present profitability (thanks, Mr Bernanke) to consolidate their position as much as possible in a world which is evolving in a fast and unpredictable manner.
Nouriel Roubini had a nice little soundbite yesterday, which I think touches on something important:
“There is complete disagreement and disarray. That’s the sense of the G Zero,” Mr Roubini said, explaining the new buzzword at the World Economic Forum’s annual conference in the Swiss resort of Davos.
“There is no agreement on anything. We are in a world where there is no leadership,” he added.
This is bearish, yes, but it’s also descriptive of an every-man-for-himself kind of world. There’s a good number of heads of state floating around, but many of them seem more interested in selling their countries as a great place to do business — just see Dmitry Medvedev’s opening address last night — than in trying to put together any kind of grand international coalition which could bring a measure of predictability or stability to a world filled with massive risks.
In that kind of world, it makes no sense for bankers to stay on the back foot or to try to work constructively on building what the World Economic Forum calls “shared norms for the new reality”. There’s been general puzzlement in Davos as to what that slogan is meant to mean and I was of the opinion, up to yesterday, that it was simply empty pablum. But I’ve changed my mind a bit, now, and I think that the WEF is, in its own weak and powerless way, making a desperate and doomed attempt to recreate the sense of global purpose that reached its high point at the G20 meeting in London in 2009.
The problem is that there’s a huge difference between a real global crisis, on the one hand, and a parade of theoretical risks, on the other. The former can concentrate minds and get people pulling in the same direction; the latter can’t. So instead we’ve got thousands of people, in Davos and around the world, all making tactical maneuvers and trying to position themselves as advantageously as possible in relation to everybody else. It’s a negative-sum game which will all end in tears, but I fear that if there really is a “new reality”, it will turn out to be one marked by destructive power struggles rather than constructive strategic cooperation.
Update: Ian Bremmer tells me that G-zero is his big idea; I’m perfectly happy to give him the credit for it.