At Davos, Is the Party Over ???

New Slogan for Davos,...The Beds Are NOT Burning...In previous years, Friday night of World Economic Forum was always filled with big dinners and blowout parties. Certain bashes were among the most coveted. Google held standing-room only party at Steigenberger Belvedere Hotel, complete with bands flown in from New York and beyond. Across the street, Accel Partners, venture capital firm behind Facebook, held a wine tasting at the Kirchner Museum, often flying in cases of vintage wine from California. And Nike held a huge dinner with the slogan, “No Speeches. No Powerpoint. And no ties.” This Friday, however, the operative slogan could be “No dinner. No parties.” All three companies, Google, Accel and Nike, are not holding events this year. Perhaps more important, virtually all of the senior people from all three companies are not attending Davos, either. Eric Schmidt, Google’s executive chairman, had been an regular attendee. Also missing this year are the Google co-founders, Larry Page and Sergey Brin, who often flouted the dress code and wore jeans and shirts to proceedings. Accel, which usually sends a delegation of venture capitalists in search of the next big thing, is virtually missing in action, with the exception of Joe Schoendorf, a partner at the firm, who started the party almost two decades ago. And the Nike contingent is now a shell of itself without any of its most senior people attending. Have those companies given up on Davos for good? Is there something bigger here at play than just parties? Those are some of the questions being asked, however, answers have been forthcoming, at least not yet. Those executives are not the only ones skipping Davos this year. Bono, a regular, is not in attendance, nor is former President Bill Clinton. Also not here is Niall Ferguson, the historian who typically leads multiple panels. For those worried there won’t be any parties on Friday, fear not: Marissa Meyer, ex-Google who now heads up Yahoo, has stepped in to sponsor a cocktail party. Rumors are rampant that Sean Parker, Internet entrepreneur, is holding an exclusive party Friday night. (NYTimes – 23/01/2013)


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6 Responses to At Davos, Is the Party Over ???

  1. In certain ways, the very setting of the World Economic Forum reflects the restless, challenged state of human affairs. Our footing is uncertain, as on this ski resort’s slithery streets, and we have steep slopes to climb, as the Magic Mountain will remind the global elite this week. Barely into 2013, Mali and Algeria are new sites of hot war and chilling fear. Where the tumult that began in the Arab Spring will end is still as unclear as when it erupted — far from Davos — two years ago. The challenge posed by the free flow of information in China went to the New Year streets in Guangzhou. Washington’s feuding politicians walked up to the brink before resolving not to jump off the so-called fiscal cliff. Europe seems to have averted a collapse of the euro, but even in Germany, growth is anemic.

    Crisis, in short, is the new normal.

    And while the business community determinedly seeks opportunity in troubled times, even many an entrepreneur views the years since the financial crisis of 2008 as what Rich Lesser, the new chief executive of the Boston Consulting Group, called “a higher period of turbulence and uncertainty in the global economy than we have experienced in a very long time.” The days in which “quants” and algorithms reigned supreme are gone, their increasingly untrackable results having helped the financial system spin out of control in 2008 and 2009. The heady triumph of capitalism after 1989 is also a distant memory, although its chief effect — that capital went global — remains a driving force of our age. But global capital does not solve big world issues: debt and financial crisis, political paralysis or gridlock, the transformative effects of the digital revolution, climate change, resource shortages, shifting demographics. For those tasks, we must rely either on the nation state — an aging collective unit that does not readily serve transnational action — or on international institutions whose effectiveness is regularly questioned by the Davos crowd. “The global economy has integrated, but global society is as fragmented as ever,” said Dennis J. Snower, president of the Kiel Institute for the World Economy. In that fragmentation, there is an increasing lack of consensus about the global way forward. A few years ago, the inexorable rise of China led to talk of a new Beijing consensus, replacing the Washington consensus that epitomized the confident domination of the United States (…..)

    In the United States, recent books have argued that the country’s status as a debtor nation is curbing its global reach. After the last-minute fiscal deal this month, a commentary of the kind believed to reflect high government thinking on the state-run Chinese news agency Xinhua noted tartly: “The American people were once better known for their ability to make tough choices on difficult issues.” It went on, “The Americans may be proud of their mature democracy, but the political gridlock in Washington really looks ugly from an outsider’s view” (…..)

  2. Professor Uziel Nogueira says: From a Brazilian-LA perspective, the World Economic Forum was the culmination of US-led global economy, dominated by London-Wall Street financial firms. A sort of Carnival ball taking place in beautiful snow covered Davos where politicians, business-financial leaders and well paid academicians and lobbyists got together to praise the achievements of a new era of prosperity. The raison d’être of Davos ended abruptly in 2009 when Wall Street took the world economy closer to another 1929 economic-financial era depression. The US economy has not recovered yet from the negative effects of such financial debacle, particularly in the area of employment and wages.

    In times of deep economic crisis and uncertainty among the G-7 countries — most indebted developed economies — Davos 2013 will be debating whether the capitalism system is the right economic model for the 21st century.

    China’s highly successful state led-one party economic model will certainly be the focal point of debate among experts and participating public. The sensitivity issue for political neutral Swiss forum’s organizers is whether the Chinese model wins the debate. The Chinese model attracts a lot of attention from emerging countries, including the Worker’s Party now in power in Brazil. If China wins the debate, political neutral Switzerland is the ideal place to announce a change in the world’s economic paradigm. Good by NY-London, welcome Shanghai could be the main conclusion of Davos 2013.

  3. Christine Lagarde, the managing director of the IMF, has warned that “corrosive” inequality was hindering the world’s economic recovery. In a combative speech to an audience of some of the world’s wealthiest financiers at the World Economic Forum, Ms Lagarde said that bankers’ pay should be cut to close the gap between the rich and poor. “Excessive inequality is corrosive to growth; it is corrosive to society. I believe that the economics profession and the policy community have downplayed inequality for too long” she said. Ms Lagarde, a former French finance minister who was appointed head of the International Monetary Fund in 2011, added that it might be necessary for nations to impose minimum wages in order to reduce income gaps. “I believe policies such as robust social safety nets, extending the reach of credit, and – in some cases – minimum wages can help” she told the audience of business and political leaders in the Swiss ski resort of Davos. Ms Lagarde also warned that necessary reforms of the multinational banking sector, which plunged the Western world into recession in 2008-09, were being watered down by industry lobbying.

    “We can already see too many signs of waning commitment – dilution of reforms, delays in implementation, inconsistency of approaches. And we can see the risks – a further weakening in capital and liquidity standards; and not enough progress on key areas like cross-border resolution, shadow banking, and derivatives” she said. Ms Lagarde told delegates that bankers’ pay is too high. “We must move in the direction of more prudent compensation practices” she said.

    “Ultimately, this is all about accountability: we need a financial sector that is accountable to the real economy– one that adds value, not destroys it” Ms Lagarde was speaking after Jamie Dimon, chief executive of US bank JP Morgan, launched a scathing attack on banking regulators, who he accused of botching attempts to protect taxpayers from future bailout costs. “We’re trying to do too much too fast, we should just focus on the basics” he told delegates in Davos. He added that regulatory attempts to cut large banks, such as his, down in size was wrong-headed and that the sector had been the subject to a campaign of “scapegoating and misinformation”. Mr Dimon also apologised to JP Morgan shareholders for the “London Whale” fiasco which saw the Wall Street giant rack up trading losses of $6bn last year – but added that “life goes on” (…..)

  4. Angela Merkel, the German chancellor, on Thursday warned her fellow euro zone leaders not to falter in their efforts to reinvigorate their economies now that they face less pressure from financial markets. She gave voice to widespread concern here that a tentative European recovery could be undercut by political complacency. Measures in recent months by the European Central Bank to help banks and struggling euro zone countries have calmed markets but have not solved the euro zone’s underlying economic problems, Ms. Merkel said in a speech to participants at the World Economic Forum. “The E.C.B. has done a lot,” she said. Now, she added, “there is a political duty for us to do our homework” (…..) Separately, a report from Madrid on Thursday showed that Spanish unemployment rose to a record high of 26 percent at the end of 2012, with six million people out of work. Mr. Marchal of Bain & Company said many of the businesspeople he had talked with remained cautious and reluctant to invest. “Many of them are either postponing strategic moves or preparing for things to get worse,” he said. During her speech, Ms. Merkel described herself as “conditionally optimistic” and said, “The investment climate in Europe has improved.”

    But she went on to lament the high level of youth unemployment.

    The Spanish data released Thursday showed that the jobless rate among people from 16 to 24 years old was 55 percent in the last three months of 2012, up from 52 percent in the previous quarter. “Our biggest burden is youth unemployment,” she said. Europe needs to better exploit its status as the world’s largest market, Ms. Merkel said. “We can make a lot of that if we remain open, innovative and when we don’t take it for granted that Europe has a right to be the leading continent on the world.” While Germany is considered healthier than other large economies in Europe, growth is hardly dynamic. Output shrank in the last three months of 2012. This year, the German economy will grow by about 1 percent, according to numerous forecasts. “Things are better,” Thomas J. Donohue, president of the United States Chamber of Commerce, said in an interview here. “But there’s a big distance between things being better and having the growth we need to start hiring people.” Mr. Donohue noted that the United States, Europe and China had become highly dependent on trade with one another. “If the E.U. has even a little bit of negative growth, that’s not going to be good for any of the three of us,” he said. Ms. Merkel praised Mario Draghi, the president of the European Central Bank, for insisting that countries improve economic performance as a condition for his help containing market pressure (…..)

  5. Professor Uziel Nogueira says: Chancellor Angela Merkel is absolutely right in her assessment. The euro zone is now entering the second phase of the debt crisis. That is, time to start (unpopular) structural economic reforms to improve long term competitiveness. A process that will take years to (eventually) yield positive results if reforms are sustained over time. The main challenge to structural reforms is whether mainstream politics in countries with high unemployment + slow economic growth can survive social pressure and not disintegrate. Spain is a good example. The debt crisis has engulfed the political system and challenge its legitimacy. PSOE and PP are fighting for survival amid corruption scandals and social unrest. Soon, fringe radical parties will be moving into Spain’s political scene. The European crisis was never about the integrity of the integration process or survival of the common currency.

    The crisis revealed the main vulnerability of the euro zone. That is, whether certain member countries are capable of developing an economic structure to sustain the euro as their currency. This is the challenge facing Portugal, Spain, Ireland, Greece and Italy from now on. Unfortunately, the golden years of easy money and good life in those countries are long gone.

  6. The American Century is dead. Long live the next American Century. The subtext of political debate these days is that the United States is in decline — a proposition often portrayed as self-evident. The economy lacks dynamism; unemployment near 8 percent remains at recession levels. The president and his Republican critics barely talk to each other; stalemate seems unending. But what if America isn’t in decline? A powerful rebuttal comes from an unlikely place: Wall Street (…..) Up to a point, this is convincing. America’s strengths have been underestimated. Compared with Europe and Japan — the world’s other enclaves of affluence — our prospects are brighter. But the Goldman report, which advises investors where to put their money, is an incomplete guide to the future. It may explain why U.S. stocks have recovered to near pre-crisis records. But it’s not how most people view national “decline.” If your neighbor’s house burns down and only half of yours does, you are relatively better off than your neighbor — but you’re worse off than you used to be. It’s in that sense that America’s prospects exceed Europe’s and Japan’s. But this advantage doesn’t erase the huge economic losses suffered by millions of Americans. Most will reasonably conclude that their country is in decline. Demoralized, they will be less supportive of U.S. economic, political and military leadership abroad. This is how domestic disappointment translates into global retreat.

    But “Is America in decline?” may be the wrong question. The truth is that most of the affluent world — again, the United States, Europe and Japan — faces similar threats.

    First: Their welfare states are overwhelmed. Aging societies face a collision between promised benefits and acceptable taxes. Either the first must be cut, or the second must be raised. The politics are poisonous. As the Goldman report notes, how the United States handles its debt creates enormous uncertainty. The same is true elsewhere. Second: Economic management is breaking down. Before the 2007-09 financial crisis, most economists thought they could avoid deep slumps and engineer acceptable recoveries. Confidence has given way to contentious disagreements. Policies are improvised.

    Third: Global markets have run ahead of global politics. Countries depend increasingly on international trade and money flows. But globalized commerce is menaced by nationalistic, ethnic, religious and political differences among nations.

    A second American Century, though possible, seems a stretch. The harder question is whether the affluent world can defeat these deeper and more persistent threats to political and economic stability.


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