Turning the tables: Can you help Davos leaders?

By Reuters Staff
January 27, 2009

Klaus SchwabDavos is a well-rehearsed event and everyone knows the part they should play. Business and political leaders gather each year to tackle the major challenges of a global economy while the rest of the world, or those of its citizens who are interested, look on from afar. But this year, for obvious reasons, things are different. The notion of leadership has been coupled in the public mind with that of responsibility. The tone here is a little more humble and the attitude more open-minded. There’s a recognition that new thinking is required.  A suitable time, perhaps, to turn the tables on convention and have Davos delegates ask the questions they can’t answer and for global citizens to offer solutions.

Gamefully opening the discourse is Professor Klaus Schwab, Founder and President of the World Economic Forum.

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If you’ve got suggestions for Klaus then use the comments section below.

997 comments

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it is not the bull market it is the people ho drive the market its is not the wall street bull is the people got no money the not buyng people no spending the car manifecture all the building indusry all they fail un less the sistem change right know not by put billions dollars in the hands of the banks or give more money to all this big industry it will never work becouse they they dont understand where the proble come from the money sistem not working there is only one sistem it will work and protect all the industry and protect the people by not lose they jobs they houses cars or go bankrupt there are only one plan and will take of fast but doit know not tomorrow

Posted by frank bruno | Report as abusive

Professor Schwab,

I have an idea, for part of the problem at least. It has to do with reducing what game theorists call “information asymmetries.” It’s a little too long for a comment though. Is there another way to communicate it to you?

Regards,
Ken

Posted by Ken | Report as abusive

john maynard keynes sounds familiar?
he didnt merely theorize but also proved his theories in practice as treasurer at his college…

Posted by roger | Report as abusive

How about using all the bailout $$ to open “NEW BANKS” I think these new banks having noting on there balance sheets “Except $ 825 B”
will loan out the money quickly so they can make more money, now the credit crunch should disappear.

Another plan just distribute the $825 B equally to all U S citizens, this should be about $2705 for each citizen this should avoid the need for a separate stimulus package and probably save billions of dollars in legal and accounting costs over the Obama plans.

Now for the corporate SO B’s & our elected officials that caused all these problems, don’t give them another cent just put them in jail for life! or 1000 years whichever one is the longest time.

Posted by Albert Pioli | Report as abusive

Well the question was how to use these communication channels to pull people in, I guess you’re doing that, Klaus, so I’ll just give a response to the problem, not the query.

It is difficult to give a blanket global approach, since the situations vary according to the nation. Mainly along the lines of debtor vs. saver nations, but you have further breakdowns of producer nations, raw material sourcing nations, and consumer nations. I hail from the U.S. so my approach will have the persepctive of coming from that culture.

A major need is to stabalize the evolving downward trend of asset prices. Stock prices for financial institutions will not stabalize until this is done, and financial institutions wont quit hording capital until this is done.

There is also the need to make sure that money spent by central banks or the public sector is spent wisely. Throwing trillions of dollars out there isn’t going to do much unless it is spent wisely.

What I would propose is a program to benefit both banks and private individuals, aimed mainly at the real estate market. If an entity can show a loss for a recent purchase of security showing lein on, or equity in, a real estate asset, then they should be able to have that loss subsidized toward the purchase of a similar asset.
This simple notion helps sop up existing inventories in the real estate market, and works to create a floor under prices, thereby stabalizing balance sheets, and consumer security.

Now another thing which must be done is a move from a debt driven economy. Even though most European or Asian economies are saver economies their economies have still been driven by debt via the U.S. economy. In order to avoid a complete unwind of the U.S. economy some healthy level of consumption must continue, this should be supplemented via the public sector while a move is made not to loosen credit for consumers, but to encourage savings by consumers. The traditional move to do this would involve raising interest rates. The needed level at this point would theoretically be modest given the low rate of inflation, and the generally depressed level of currency markets. Such a move also works to insure the currency reserves of other nations, since if saver nations can hold interest rates lower while the U.S. moves toward higher rates the dollar strengthens.

It is important to recognize that it isn’t a case that banks aren’t lending, they aren’t lending to risk, this isn’t something we should work to change. It is also important to differentiate between lending to indidviuals and businesses, capital for business operations should not be constrained.

When an economy has leveraged 50 + trillion dollars from 1 trillion dollars & it’s time to pay the 50 trillion dollars- which, by the way, never really existed, then words like sustainability lose meaning.

We are in the midst of a crisis created by man-made institutions–Must we return to the Greeks to figure out what happens in a tragedy? And knowing that, could we stop the tragedy from unfolding during the play?

The good news? this is a paradigm shift for many human beings–religion will not save us, war will not save us, the banks won’t save us, the government won’t save us, the financial institutions that got us here won’t save us, either. Frankly, I believe these institutions are only interested in saving themselves at any cost. When the ship is sinking.. well, desparate times bring, what else, desperation.

Looks like we will have to save ourselves, after all. Seems like we’ve tried everything else, why not commit to some love & compassion for a desperate & frightened lot. If we can right & repair the ship, cooler more mindful minds will need to get us there. Good luck everybody, I will be doing my part.

Posted by Paul W. Isbell | Report as abusive

there is allways problem when the people run out money the all country go down if they got no money to spend if they are at the risk of losing they jobs they will not spend money becouse they got no money to spend so the people run the country by make them sure that they jobs is save and they in come is save so they will spend buying house buyng new cars buy anything thing they need from food up to all they needs so and the only way to do just that they system have to change right know but all this so call smart people they are not smart they brain are only daily bread they dont understand how to change the sistem all the monye in the world they can nerver stop to go down un less is new world system and less the year all this penic all gone

Posted by frank bruno | Report as abusive

I have been in the ivestment business for about 15 years and have reached a few conclusions about how we arrived at this mess and how we may be able to get out of it. First, there seems to be something fundamentally wrong with trade flows. Capital should be flowing into developing nations rather than out of them, or equivalently, they should be incuring trade deficits rather than surpluses. In the US our trade deficit in real terms grew substantially faster than our economy for many years, creating, at least temporarily, a ponzi-like scheme. Second, monetary policy makers in the US and other nations failed to act in a countercylical manner when they should have in general have put the world economy on an unsustainable path of substandard interest rates while creating price instability.

To correct the international trade imbalances, emerging countries absolutely must import more from the developed world and allow there trade deficits to shrink in the process. Currencies must be allowed to adjust for this to happen and restrictions on imports and consumption spending must be relaxed. The idea of the developed world running government budget deficits and setting interest rates to substandard levels in an effort to offset global trade imbalances is a temporary fix, at best, to what is a serious structural problem.

I sincerly hope that the real issues are addressed soon.

Posted by F. Cihlar | Report as abusive

Francis Bacon wrote that “If Usury be allowed, it is a sure bet that at the end of the game, the banker will hold all the marks.” He apparently forgot to point out that this will result in all the marks being nearly worthless, which is the state our dollar will achieve without some hard social choices about what we, as a society really value and respect. Currently, we spend more money on professional sports than on educating our children. Clearly, we value the athletic prowess of a few overpaid, arrogant spoiled brats more than we value the future of our children. There is a bright side – as the economy gets worse (and we’re nowhere close to bottoming out) – being visibly affluent will begin to lose it’s appeal. Right now, unemployed fathers are beginning to despair. Some will take the lives of their families and their own lives. Soon, despair will begin to fuel rage, and they’ll begin taking lives farther up the food chain. It’s just a matter of time. For decades, the poor have hated and feared the rich and the police who act as their protective lap dogs. At some point, there will be a mass realization that the incredible greed of a very few has led to the economic downfall of millions.

This is the hush before the storm.

Posted by Mark Rhoads | Report as abusive

Tell Mr. Obama to listen to George Soros.

Do not creat a “bad bank”. It will only reward the bank flunkies and it will not solve the liquidty problem.

Tell Mr. Obama to do what Geoge says: “Buy preferred shares in the banks instead.”

It will work and punish the bank flunkies for their excesses.

Michael Hogan, Ph.D., P. Eng.
Toronto, Canada.

Posted by Michael Hogan | Report as abusive

Mr Klaus, will tell you and others that the only way will sop all thes doun turn is to change system fast special in usa they dont understand what going on they think they do but they dont the cars manifecture they gone broke and those not metter if the governament give them billions dollars they still go broke becouse the system not working they only way to fix the system not only cars manifacture but the all industry is only my system and that will see they country will turn up and up this is becouse we cant compite with china so the only way we can stop all this china and asia is only my system i will tell you that china will not sell no more to the us to take all the ameicans dollars in china belive me at the moment they have the vacoom to suck the money so let the new system work the people will buy the local produce not chines only the system have to change know

Posted by frank bruno | Report as abusive

James Demidoff’s comments are very close to the real issue, along with emanon’s too. When a person can fess up to a mistake BEFORE it gets out of control, without fearing inquisitional types of actions and outcomes with a strongly mandated provision to support their moral and ethical duty to do so, AND corporations write off the fictional values for the so-called goodwill value in the transaction immediately after acquiring an asset, as well as using property valuations, which are determined in the public domain, viz. those which governments of all levels use for calculating their rates and taxes, these simple actions may overcome: the flurry of fancy, (fraudulent, most likely) financial engineering, the downright misleading (and mostly untruthful) spin-doctoring of our times, and a few other less than creditable actions from those in charge that knew better or, at least, based on the size of their pay-packets, ought to have known better; then, perhaps, future instability may be less catastrophic, human frailty for doing the unexpected notwithstanding.

Posted by Allan Cox | Report as abusive

We need to decide if we have to move away from the current system of US as a global consumer and China, India & Japan as global producers and financiers. There are the biggest imbalances lie. Ironically, to the proponents of Free Trade, this system has backfired recently as it has been practiced to its zenith in the last decades or so. The next decade consumer growth should arise in the developing countries. US should starts a renaissance of creative discoveries in technology. There is not yet any significant innovation in this decade other than internet. If American history is to repeat itself, there should be an arising innovation of historical scale to revive the nation’s economy. Hopefully, this particular innovation will be exported to the benefit of humanity as a whole, plus US can reduce its trade deficit consequently to the benefit of global financial stability.

Posted by Jeff Tan | Report as abusive

The media say we’ve lost 2.6 million jobs in the past year.

The numbers:
$800,000,000,000 in bank bailouts
2,600,000 unemployed.
At $40,000 per year, we could give every one of those people a job for 7 years, and STILL not spend $800 billion.

What do YOU think will stimulate more economic growth and stability, 2.6 million $20/hr jobs, or a giant loan to a few banks?

Posted by Mark Rhoads | Report as abusive

None of this is difficult. Information technology has shrunk the world from isolated autonomous geopolitical economic units to that of an interdependent and complex common village. Some time ago decisions were made, accepted and implemented by both world leaders, business and academia to move towards “Globalism”. What we are experiencing now is simply the affects of geo-economic mutation along this globalism pathway that eventually will force us to a true one world geo-economy. The “depth and recovery” is simply a function of acceptance for political capitulation of the old models and derivation and acceptane of the new.

Translation: Economic Depression, Social/Political re-alignment, New World Order. Think Dinosaurs!

Posted by Michael | Report as abusive

World-wide commerce has worked well for thousands of years in spite of government. In our world of instant communication governments have come to think that they know more about commerce than the rug salesman in Bagdad. The problem is every time a committee of elected officials or bureaucrats get together to fix commerce they put into motion unintended consequences that the rug salesman in Bagdad could have predicted.
Then when the unintended consequences are in motion government once again feel that they need to repair the damage. It is time for governments to realize that they created the economic mess and it is time to go to wiser heads to fix it.
When I say wiser heads I suggest putting together a committee of small businesspeople or even house wives that have shown that they can survive all of the changes imposed by government and still make a living. Have them come up with a plan to recover from the world wide economic crisis. This plan will probably include a plan for the governments to allow business to fail regardless of size and stay out of the way of legal successful business.

Posted by Marvin Crowther | Report as abusive

quit screwing the little man.

The economist Louis Kelso, deceased, along with philosopher Mortimer Adler, produced the theory of binary economics. Kelso’s work as an investment banker, making ownership more widespread amoung workers and management using tools such as Employee Stock Ownership Plans, is a beacon in the present world of skewed ownership distribution. Unless this problem is addressed, problems such as global warming and overpopulation cannot be adequately solved, for the people say it is up to the rich to do something. If we move towards ownership by the many, rather than the few, we can substantively begin to address the financial crisis at hand.

Posted by Charles Setlow | Report as abusive

The first and foremost, the leaders of the developed world should develop and adopt the systematic approach to the most important technological phenomenon of our days – transition to Alternative Energy on a massive scale, which requires forward thinking and coordinated efforts of many industries, Governmental bodies and the engineering communities around the world. Refer to the “Green Electricity (GEL) Initiative” (www.alexanderbell.us/Initiative/GEL.htm  ), which is outlining the Energy agenda for the US and for the rest of the developed world, topping the Google search list for many years.

***Alan O wrote:
It is simple my friend. Allow the USA to swallow its bitter medicine. The belief that an economy can have continuous growth is absurd. Non-stop growth is called Cancer.
***************

Ha ha … You think the USA is in trouble? We are doing fine here when compared with folks in Europe, Asia and Africa. When the USA sneezes, the rest of the world catches cold (no, make that flu) still holds true.

Posted by Hopper | Report as abusive