Monthly Archives: January 2010

The story of Davos


When Davos Newbies was launched in 1999, it was all Davos, all the time. I haven’t been back to Davos since 2001 (and the New York “Davos” in 2002), and so the blog has understandably drifted into other areas.

But reading some of the reports from this year’s Davos there are some things that I think deserve comment.

My friend Felix Salmon posted a very critical view of Davos and the World Economic Forum the other day:

Is anybody here seriously examining the idea that Davos was institutionally responsible, at least in part, for the economic and financial catastrophe which befell the world in 2008? I’ll be on the lookout for that over the next few days. But I suspect that the preening potentates will be far too busy giving themselves the job of rebuilding the world to stop and ask where they went wrong in building the last one, and whether they might actually owe the rest of us a large collective apology.

There’s a more pointed critique by James Gibney on one of The Atlantic’s blogs:

Here’s what’s potentially dangerous about the Forum’s worthy-sounding ventures on climate, global education, corruption, and health etc. For starters, they reflect the needs and goals of the Forum and its members, not the world. The sponsors of the Global Redesign Initiative (GRI), for example, are Qatar, Singapore, and Switzerland. Why them? Will the emerging grand master plan pay extra attention to the priorities of a sharia-bound absolute monarchy, a one-party state that bans chewing gum, and a minaret-bashing, tax-dodger-protecting bastion of chauvinism, or did those countries  just happen to have some no-strings-attached money to burn? Schemes like the GRI are spawned and shaped outside the public view. The biggest job for the staff members running them is to keep the people paying the bills happy.

I have sympathies with Felix’s view, but I think it’s a stretch to hold the Forum “institutionally” responsible for what happened. For me, that’s overrating the Forum’s influence and power.

As Gibney makes clear, there’s a lot that has changed at the World Economic Forum since my time. When I first became involved with the Forum, there were 60-70 staff members. A decade later, when I left, there were perhaps 120. Now, from what I hear, there are more than 300, and the numbers continue to grow. But that’s still a very small organization. Whatever the Global Redesign Initiative concludes, I think it is a very good bet that it will have no impact whatsoever on anyone.

Part of Klaus Schwab’s brilliance in creating and developing the Forum over the years has been sustaining the illusion of power and influence. I remember some newspaper article calling Klaus the world’s greatest concierge. People within the Forum bristled. But there’s no shame in being the world’s greatest concierge. The Forum is great at bringing business and political power together, with a leavening of intellectual power (the dancing bears, as some of the academic superstars called themselves in my day). The Forum has always worked incredibly hard to be more than that, with its endless stream of initiatives and agendas and councils. But, as far as I can tell, there’s not a lot of there there, even today.

There’s another reason why I hesitate to wholeheartedly endorse the more dramatic criticisms of Davos and so-called Davos Man. The biggest noise, particularly in the last decade, may have been made by the American financiers and the advocates for a capitalism red in tooth and claw. But the roots of Davos are very firmly in what some call Rhineland Capitalism.

Gibney, in his Atlantic post, notes that Jack Welch was a long-time Davos holdout. True. (When Welch finally came, I recall he had a session where his staff had really taken over the design and presentation. It was cheesy and over-rehearsed. Very non-Davos.) But that’s partly because the “spirit of Davos” was not the mantra of shareholder value espoused by Welch, but a more nuanced, socially oriented vision of value and values exemplified in that era by a Welch competitor, Percy Barnevik. Barnevik’s creation, ABB, never did become the great rival to GE that it was hyped as, but that was the model that most of the Davos Men wanted to follow.*

That more socially conscious capitalism has been in relative retreat for quite some time. But it never really went away in Davos. It’s very easy to mock the Forum’s grandiose aspirations to “improve the state of the world”, but it’s sincerely held. To my observation, in the world of giant corporations and large financial groups — the Davos crowd — it’s pretty rare to find people who have a primary motivation to do good. It may be overstated, misguided, even delusive, but the Forum is a holdout against the more corrosive elements of that world.

*An aside. I remember attending some cocktail party at The Belvedere one Davos with my wife, who was wearing her spouse’s badge. In the hierarchy of Davos badges, the spouse’s badge hardly ranks at all. But when we struck up a conversation with Barnevik, it was notable that he paid as much attention to her as to anyone else in the group. He didn’t judge on the basis of titles and badge designations. That’s rare.

The Prince of currencies

I recently finished Liaquat Ahamed’s wonderful Lords of Finance, which hardly needs my encomium on top of the many great reviews it received (you might want to try Joe Nocera or Jonathan Davis).

But I suspect I’m one of the few readers who had an extra frisson when I read the following paragraph, about part of the response to FDR’s 1933 closing of all the banks in the country:

More than a hundred cities and towns, including Atlanta, Richmond, Knoxville, Nashville, and Philadelphia, issued their own scrip. The Dow Chemical Company coined magnesium into alternative coins. That prominent undergraduate newspaper, the Daily Princetonian rose to the occasion by assuming the role of central bank of Princeton and issuing $500 of its own currency, in denominations of 25 cents, which local merchants agreed to accept — a reflection of how adaptable and elastic the notion of money can be.

Thirty-two years ago (yikes), I was the Chairman of The Daily Princetonian, or the Prince as we called it (the post has now been sensibly renamed Editor-in-Chief). But I never knew that I was at the helm of a central bank. Just think, I could have put Central Bank Governor on my resume for all these years.

Would the real Romano Prodi please stand up?

I’m looking forward to reading Brad DeLong and Steve Cohen’s new book, The End of Influence, sometime soon. But I was struck by one of the blurbs from former Italian prime minister and president of the European Commission Romano Prodi (who is also a former economics professor):

I started reading this book and could not stop until I arrived at the last sentence. Really splendid: rigorous, scientifically perfect, and politically accurate.

It’s not the blurb that gave me pause. It was encountering Prodi for the second time in a week, after not really thinking about him since his largely ineffectual tenure as Italy’s leader (although he was certainly infinitely preferable to the odious Berlusconi).

Prodi pops up briefly in the hugely entertaining A View from the Foothills, the diaries of Chris Mullin, which I read over the holiday break. Mullin was a Labour MP who made a few brief forays into the bottom rungs of government during the Tony Blair premiership. His diaries give a wonderful sense of British politics and government from a modest perch, where encounters with The Man (Mullin’s name for Blair) are at best fleeting. Here’s the brief mention of Prodi:

Monday, 29 March 2004

To Carlton Gardens for a ‘political’ lunch. The party pollster Greg Cook gave us the lowdown on the latest polls. The news is not good. Levels of dissatisfaction and cynicism are approaching those of the Major years. There was a discussion on Europe, [Foreign Secretary] Jack [Straw] said that the EC had had ten years of ‘seriously crud’ leaders — Santerre and Prodi. Prodi, he said, would be lucky to hold down even the lowliest government post in this country and yet in Italy he was considered prime ministerial material.

Incidentally, here’s one of the many funny passages on low ministerial rank:

I am besieged with invitations to address conferences organised by obscure but no doubt worthy organisations. Mostly they are the crumbs that fall from the tables of my many superiors and my first instinct is to reject the lot. However, they usually come with notes from officials advising acceptance and, reluctantly, I concede. Before long my whole life will be eaten up by pointless activity. One such invite, originally addressed to Nick Raynsford, came with a note from his Private Secretary still attached. It read: ‘This is very low priority. I suggest we pass it to Chris Mullin.’