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.

995 comments

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Dear Mr. Schwab,

I believe we need to have children, families,and the most vulnerable people at the centre of all decisions of government and business. Attachment science (the neuroscience of early childhood development and the neuroscience of trauma for any human being of any age) and the “social determinants of health and recovery” are the two key sciences that help create intelligent, loving and creative human beings and communities.

Once we have some “emotional intelligence” happening in communities where there is adequate social infrastructure, then and only then will we truly be able to make wise decisions about the natural environment.

When economies are disconnected from the children and the vulnerable then we will pay dearly. Fear and violence grows, addiction, etc. Although money seems to be the answer to everything, in the end, we want love, belonging, to be valued, to have people that will take care of us when we’re sick or dying. To have true prosperity we need to know that we are powerful and vulnerable. True security lies in loving relationships and a sense of magical connection to our lives, our spirits, with meaning and purpose.

Maslow’s hierarchy of needs says we must meet people’s basic needs first before our most creative functions can develop. Poverty often means living in crisis, severe anxiety and distress.

The very very wealthy seem to find ways to not pay taxes. We will all benefit if we can understand attachment science (see “Why Love Matters” by Sue Gerhardt) and the social determinants of health (see the World Health Organization “The Solid Facts” on the social determinants of health, google that and Sir Michael Marmot’s work).

Thank you for this opportunity. And enjoy Davos. It has been many years since I was in Davos. Gruesi to the Swiss folks and Auf Wiedersehen.

Posted by Shannon Lavell | Report as abusive

The likes of which I hope I never see.

Posted by Damian Palmares | Report as abusive

Please disregard that last comment.

Posted by Damian Palmares | Report as abusive

Mr Schwab

The first step to to tell people not to panic because you and the governments are going to provide economic relief in the way of coupons for food.rent.mortgage payment and medical treatment where needed.The second step is to encourage employers to downsize their productivity while still maintaing the staff numbers at pre crash levels.The employers should not put people off work and where this cannot be avoided the government must pay the difference.Third step is to assist employers to get smaller businesses going while keeping original staff on. The fourth step is to regulate the banks and to encourage small community banks run for the people by the people and overseen by the government.

Posted by suzie marston | Report as abusive

Hello Dr. Schwab:

In response to your request for suggestions for potential solutions to the current worldwide economic woes, may I humbly submit the following items for your consideration.
1. Obtain worldwide diplomatic agreement to the effect that foreign currency exchange rates will not be artificially manipulated to gain perceived international advantage, which could itself destroy the world economic systems.
2. Agree that nationalization of banking systems should be avoided at almost all cost. This is to ensure that financial professionals are running the banking and insurance systems, not government bureaucrats.
3. Agree to prosecute ALL financial scofflaws to the fullest extent of national laws. This will help restore public trust in financial systems, without which there is no functional financial system, as we now observe all around the world.
4. Rescind or greatly modify the current “mark to market” accounting philosophy, which is currently garroting capitalism. Replace this with a realistic “mark to model” accounting process. Recognize that these financial instruments have value above the current 0 mark to market value. For example, real money is currently being paid on mortgages contained in boxes valued currently at $0 due to lack of trust. Use a capitalization theory to support reality of value in capital accounting.
5. Move the GOOD assets OUT of the current failed “banks” and place these good assets in new bank entities headed by competent financial managers. Let the pre-existing bad bank fail along with its failed management. This action will firmly restore moral hazard.
6. Seize the failed bad banks and timely auction the assets to the highest bidder, a la Resolution Trust Corp, 1980′s.
7. Don’t forget the rating agencies’ management sanctions for their role in violating the public trust and their pivotal gross dishonesty.
8. Set up an international settlements corporation and require that ALL financial instruments clear through this corporation. This will provide transparency and allow econometric analysis and evaluation of financial actions in areas such as CDOs, MBS, etc., for future systemic changes.

These are but thumbnail thoughts as an outline for action to restore the public trust and create honesty in this exceedingly important area of life.

Godspeed and Best Regards. The world prays for your success.

Posted by Michael Petro | Report as abusive

1: Increase benefits for those who are jobless, or in financial distress.

2: Government funded projects to increase jobs and investment opportunities.

3: Banks need to write off the bad debt, or freeze them in order to maximise the chance of repayment.

4: Pass regulations to prevent sub-par loans, and to make sure the banks keep their risk ratio correct.

5: Slap the public over the head. They have to do their part too.

6: Where is the tax dollars going? If the government is going to throw billions down the maw of the financial crisis, ask where it is going and what it will do.

7: Stop the blame game. People wanted loans they couldn’t repay. The republicans wanted a free market. The democrats wanted the lower class to have access to loans. The banks thought they were invincible.

8: This recession will end in good time, not a second before. Trying to stop it or slow it down will only waste money which could be spent mitigating the effects on real people.

Posted by Spooky | Report as abusive

Dear Sir,

For reasonable input, please contact the Mont Pelerin
Society and Professor Walter E. Williams of George Mason University. These people know economics and can give
advice to those capable of understanding.

Time is ticking.

Posted by Trude Blomsoy | Report as abusive

Great suggestions everyone.

Posted by Damian Palmares | Report as abusive

In order to solve this global crisis we need to reverse what caused the problems.

Glass Steagall or the Banking Act of 1933 was Roosevelts way to regulate the financial industry. This Law provided a stable system of finance until tampering started in 1980.

During the early 80s’ and early 90′s steps were taken by Robert Rubin,Bill Clinton’s treasury secretary to deregulate the Banks.

He, Rubin, hired the economist Fischer Black.
In order for Black’s ideas on deregulation to work, Glass Steagall needed to be repealed.

The Gramm-Leach-Bliley Act in 1999 took its place.

In order for the Banks/global system of finance to regain trust and confidence all laws having to do with deregulation such as:

Depository Institutions Deregulation and Monetary Control Act passed in 1980,

the Garn-St. Germain Depository Institutions Act deregulating the Savings and Loan industry in 1982, and

the Gramm-Leach-Bliley Act in 1999

be repealed and Glass Steagall re-enacted.

By only throwing money at the problems will NOT regain confidence in the credit market

Posted by john raaff | Report as abusive

Incentives are exorbitant and not based on “benefits to all”, just benefits to the “me and right now”. They must be restructured.

Politicians, Executives, etc– all have incentives that are almost entirely self centered, and ever increasingly exorbitant. It motivates everyone to “out do the last guy, and get more– go farther,get more faster– make more, and the ego leads them to become detached from common realities… and more importantly risks…and the last guy gets stuck as everything falls apart…and the extinction burst mentality takes hold and he risks it all usually to no avail.

Executives and Politicians must be compensated more for what they leave behind and its success as measured after they are gone…rather than the last quarterly report or election cycle. There is too much gamesmanship,not enough leadership being rewarded.

If I was President, I should be measured more by what I left behind for the success of the future..not boost everthing now and hand off the “time bomb” to the next guy.And Why should executives get an immediate lump sum bonanza based on their best/last 3 years?..Why not defer based on the success of their successors– and pay later with proven long lasting term results.. We have geared & incentivized ourselves “to boom and bust and pass the buck”– not build and deliver the future. And I don’t believe we all benefitted from Hedge fund managers making a Billion dollars a year…for that kind of money– they ought to at least “save mankind” or “build a stairway to heaven”

World central banks would do well to follow the upcoming example of the Fed here in the USA. Once deflationary pressures bring the inflation rate down below an ideal growth-fostering 2.2%, begin periodically inflating (or not) their currencies just enough to keep inflation at this ideal growth-promoting level. This will work for much the same reason that maintaining just the right PH level in a petrie dish will foster biological growth.

Watching the crisis unfold I could not help but notice that the banks were hit first by alleged subprime loans. These loans were ridiculously low in the beginning then when the ARM kicked in people could not afford to pay and started defaulting. Millions started defaulting. Banks then went into crisis and refused to lend to Businesses which started to cut back production and lay off people. When the bailout happened, banks still held back and the government was telling them they need to start lending. Consumers are scared to spend because credit terms are still too stringent and banks are being very conservative, and there is the fear of losing your job.

1. Shore up the banks with capital but make sure they continue to lend to businesses and individuals and penalize for hoarding.

2. Extend unemployment benefits so that some income is flowing back into the system. Quick retraining programs into government defense or security related jobs may help unemployment and increase infrastructure, rather than just construction.

3. Economists, CEOs, and government should work together to avoid this in the future. Banks and finance institutions should be better regulated to avoid this in the future also.

Posted by isaac matua | Report as abusive

The world needs to consume, and consumers need to consume. For the developed economies, they need to regulate better, and catch up with financial innovations, but at the moment help viable businesses. For the developing nations it is very important to provide health and education safety nets to their societies, and have a big thrust towards microcredit to ensure consumption starts at the grassroots.

Posted by Vivek | Report as abusive

1) Analyse what led to economic revolution in the past – In the current scenario, I think innovation is one the best tool to create new jobs and confidence in the society and economies in general.
2) Analyse the reason that caused crisis in the past and how those causes were addressed and overcomed. The current credit crisis is mainly due to unstructured and ill regulated lending and the misuse of lended funds by capitalist to meet their greed. Best way to address could be proper regulations and investors discipline and self-education.

Posted by Hozefa Rashid | Report as abusive

History is clear on how a nation become rich and how it becomes poor. The key is 100% that of wages. High wages yields a wealthy nation, low wages keeps a nation poor or takes a rich nation into poverty. Look at India, good education and wages and it’s wealthy. Look at China. Wages rise and the economy booms. Hit taxes don’t inhibit wealth, only the ultra wealthy. National wealth requires high progressive taxes. We know all this, we just like to pretend otherwise. Right now, if Americans had not had 40 years of stagnant wages, the amount of credit would have been minimal and savings would have been high and this whole disaster would have been avoided. Low wages caused this. Join a union, you idiots and get decent wages! You have to be a true idiot to work two or three jobs to be able to live! One worker should be able to support a family. If not then the wages are to low. It’s really honestly that simple. Since Reagan American has been dying economically and we’ve finally hit bottom Demand high wages and that those responsible for this disaster lose their jobs, not yours! THEY are guilty, not you! Get some guts and demand your politicians hold those responsible to task for what they have done to America.

Posted by robert1234 | Report as abusive

It is a battle between Good and Evil people!

Greed will cause you to loose everything, just look at the Economic situation, people in the news, wars, and you rarely hear any good news.

Read the Holy Bible and let the Word of God fill your mind, heart, and soul and NOT your denomination’s man made rules!

Time is running out and YOU need to choose who you will follow God or Satan as this will be an ETERNAL decision.

The events happening now can be found in the Holy Bible as it describes everything you need to know!!!

Posted by Jeff | Report as abusive

the basic elements of life food clothing shelter should be secured for everyone. Look at the model of land use in israel and perhaps in reverse in zimbabwe. Israel produced nothing was a desolation for centuries, now it is an exporter of the essential element of food. zimbabwe was productive and went the other direction. in this period of crisis the idea of kibutz living for the displaced while we allow the bad debts to be liquidated is an option. invest in renewable water in desalization plants irrigation. get rid of central banks, give land grants to small communities to farm and raise animals. Dont let large corporation monopolise the lands and create artificial shortages of staples needed for mankind to survive. store surpluss fod and seed for days of drought and shortage, return to common sense, government need to be smaller and i fear larger dominant central planning and dread a new world order…

Posted by brian mcnamee | Report as abusive

Greenspan, in defending his actions or the lack of, against accusation that they caused the market troubles that we have now has said “I always believed if you leave the market free, it will correct itself”. Well, he was correct again, and now the market is correcting itself through a painful long process. The market is correcting all the excess and ignorance that we are/were in for many years. With all the huge spending plans and pouring money on failed banks we are hoping to put the economy “back” into the shape and status that it has before the collapse. We should let the economy change and reflect the reality of the new world. A world that is very interdependent where money, goods, and information flow so easily and sometimes instantly. A world with new giants and talents but not much equality in rights, dues or salaries and services. We should stop trying to engineer the economy and let it be a “free” market.

As for how to use all the new tools that the new information age has given us to further democratization and solution to problems, I would just point out that elections, making laws, taking decisions even for war and peace have not really changed for more than a century. ALL the new gadgets are being used/abused to further the old ways and purposes.It seems like we can always change the gadgets, but do the gadgets change human (inside)? For sure gadgets change man economically. Good enough.

Posted by Omar Minyawi | Report as abusive

Governments should create new “clean” banks with own and private funds. Then they should announce that there’s gonna be no more bank bailouts. When a bank goes broke, the Gov should reimburse private depositors and auction the broken bank’s assets. This method should provide a fast way to clean the financial mess. I believe within 6 months all banks that are sick would disappear and the world could start fresh. Most investment banks will probably go, but hey they deserve it. Others will appear in the future.
This would be like quickly removing a band aid. The pain is sharp and short lived.
The alternative is for the Govs to slowly bleed taxpayers money over the coming years whilst also bailing out other businesses and “stimulating” the economies.

Klaus, some thoughts:
Since the banks, mortgage brokers, insurers and other financial organizations in large part caused most of the problems through their own greed and excessive risk-taking over many years, let them bear the price over the coming years, even if it takes them many years to recover.
1. Let the governments LEND them whatever money is required to stablize the situation at reasonable cost, such as 2% over Fed cost of borrowing. All toxic assets should remain with the originators aka like the government walling off of parts of C and BAC toxic assets. The expertise for dealing with these failed assets lies with the banks and others who originated them and the responsibility for cleaning them up should also remain with the originating organizations. Does not matter if if it takes them 10+ years to clean up the mess. In effect give the financial organizatons unlimited loans or like a long-term mortage with time to deal with the toxic assets. If they have time to get it cleaned up they will and they should bear the cost of doing this. If they want to write all toxic to zero and in effect take out a 10-20 year “government-backed mortgage” at 2% over Fed cost to cover the entire amount of the write off then give them the 5-trillion or 50 trillion or whatever it is as a loan. Amortize the “bailout” loans and minimal interest over some agree upon time frame just like we all as individual all have to do.
2. Let the banks, troubled financial organizations, automakers, etc. start paying their employees/management at least partially in company stock. Part of the problem for investors/owners is that employees and management interests are not truly aligned with investors/owners interests. The only way to really create this is to “force” employees/management of public companies to have significant longer term stakes in the interests of these public companies. Surely there is a way to have public company employees and management maintain some reasonable stake in their own business..maybe 10% or more. Surely they would be more prudent and responsible if significant parts of their own personal weath and future was tied up in their own public company.
3. Executive compensation is by any reasonable persons standard grossly excessive for public company management. Public company management is supposed to be a “fiducary duty” for the benefit of the owners and stakeholders. In fact the reality is that public companies are today run for the primary benefit of the elite level management. Now if you are a private company that is not taking investors money, then I have no qualms about how much management/owners make..it could be a billion dollars a year/each for management, because it’s their money and they are entilted to earn whatever they can produce. However in the case of public companies..it is the shareholder’s money they are taking. Thus the solution FOR PUBLIC COMPANIES is to tax away any excess compensation. For example, set a standard of maximum Public Company compensation IN TOTAL (salary,options, golden parachute..everything) at say the bottom level of the 99% percentile of US reported taxable income. Say for example this is $1 million/year. Then if Public companies want to pay more than this to any individual…fine just make it non-deductible on their corporate tax returns. Or alternatively, use the concept that professional sports teams use of a “luxury tax” of some type and heavily tax excess public company compensation above some reasonable level. Public companies will argue that they cannot attract the management talent they want unless they can pay “excessive compensation”. Fine let them pay whatever they want so long as they are willing to pay the penalty of non-deductible excessive compensation or alternatively the “luxury tax” on excessive compensation. Maybe the luxury tax can be accumulated in a special dividend account and paid out to shareholders on an annual basis so that the true owners can benefit the same as excessively paid Public Company management and at the same time actually see the excess compensation they are truly paying to typically underperforming public company management.
4. All public companies should be required to pay at least a minimal dividend. Just the corporate pressure of having to pay at least a minimal dividend might go some ways towards getting public companies to manage for the benefit of shareholders. Public companies that cannot meet at least this minimal standard probably do not really deserve the privilege of being called a public company and have the right to access public investor funds. Perhaps companies that cannot or will not meet such a minimal standard would be better off in hedge funds, private equity funds,venture capital funds and other such risk-taking organizations as opposed to being granted the right to trade as a public company.
5. And lastly…fraud, manipulation, deceit, etc…will not be minimized on Wall Street until such time as the criminal and civil penalties are made so severe that it will no longer pay to undertake them. Just go back to the Enron, WorldCom, Qwest and other scandals and fraud of just a few short years ago. If appropriate CRIMINAL and CIVIL penalties had been handled correctly at that time or set in place for the future…then we would not be where we are today. A handful of individuals were blamed and a tiny number paid a relatively minor price. Yet the reality is that the wealthy elite who aided and abetted these and other frauds and deceptions paid fairly minor monetary penalties and yet made billions on their manipulation. Think Merrill, Citi, brokerage firms, investment banks, law firms and accouting firms supporting them, analysts, etc….all made far more than they ever paid in penalties. The fact is if Merrill, Citi, etc. Board of Directors and senior management had been held accountable and lost all their personal wealth and gone to JAIL for considerable periods of time, then we would not continue to have the what we have today. The reality is elite investment bankers, elite public company management, etc have and will continue to manipulate the financial system until such time as the penalties become so severe that it is no longer worth the risk to do so. By way of example consider murder…arguably the worst crime in society. At least with murder there are only a few hundred people possibly affected such as the families, friends, and relations. With these large scale wall street deceptions, manipulations there are millions of people affected and many in effect ruined or in the current case virtually the entire world seriously affected. Thus in my view this is many respects as bad as murder except that it now affects hundreds of millions/billions of people. And for what…just so some greedy and irresponsible relative handful of “elite” finance and public company executives could enrich themselves at the expense of everyone else in the world. The answer….25 years to life with no possibility of parole…then maybe 100 billion or so ill-gotten profits will no longer seem so appealing.

Just an investor who is mighty sick and tired of the same wall-street and elite manipulation and greed over and over again.

Posted by Corey Ham | Report as abusive