Mood of the Global Elite: Bullish on Asia, Hopeful for Europe, Worried by Egypt
The world's power elite was somehow unable or unwilling to react in real time to the unfolding events in Cairo
The world's power elite was somehow unable or unwilling to react in real time to the unfolding events in Cairo
DAVOS, Switzerland - So the five-day annual meeting of the World Economic Forum is over, more than 2,500 top politicians, bankers, business leaders, media, and academics have packed up and left, and the ethereal atmosphere of this global power elite retreat has evaporated and been replaced by the more mundane charms of a regular posh Alpine ski resort.
Veterans of this annual talkfest came away for the most part with a smile on their faces, either because they were corporate titans sitting on healthy balance sheets, or because they were government ministers who had accomplished their mission, whether it was to sell their country to foreign investors, reassure markets they knew what they were doing, or network and bond with the other power brokers to better position themselves on the international political stage.
And to be truthful, after 18 consecutive years at Davos, I would judge this to have been one of the better sessions, in terms of substance, meaning the quality of the discussions and the ability to come away with a reasonable idea of how to accurately predict global events during the coming year. In other words, a good year at Davos, for me at least, means one has had at least 50 or 60 brief conversations with people who rule or influence the planet, and then one can reasonably judge the mood of the global elite.
The mood as Davos ended can be summed up as very bullish on the economic growth story across Asia, both strangely sanguine and ultimately cynical about how the European debt crisis (meaning Greece, Ireland, Portugal and Spain) will play out, and utterly frightened about what could happen next in Egypt and across the Middle East, in terms of both security and counter-terrorism efforts and the knock-on effects of the Egypt crisis on the world economy.
Notice that I didn't mention much about the United States. That is because there was remarkably little discussion of either the recent Republican victories or the prospects for the U.S. economy. The visit of U.S. Treasury Secretary Tim Geithner was low-key and low-impact, while the most prominent schmoozer in the corridors was Senator John Kerry, a perennial attendee at Davos who always looks like a man who enjoys the good life.
Or, just maybe, the focus of the Davos community was, as one Asian politician put it to me, "not on a big country that is still broke and has lots of problems, but on the places where the money, growth and optimism really can be found."
A Three-Speed Global Recovery
So let's see what the highlights were this year: In terms of the macro-economy, there was a distinct air of cautious optimism. There was outright enthusiasm for China, India, and the ten-nation ASEAN bloc of Southeast Asian nations growing at an average rate of 6 percent, led by Indonesia and Malaysia.*
Zhu Min, the World Bank's Special Adviser, offered the pithiest prediction when he spoke of a "three-speed recovery in which the emerging markets would grow by more than six percent this year, the U.S. by three percent and the anemic and beleaguered euro-zone by less than two percent." That seems about right.
The Chinese were out in force, doing deals, listening to proposals, and yes, throwing their weight around in that inimitably delicate yet forceful Asian way. But they were taken very, very seriously by everyone here.
The Indians were the second biggest delegation, throwing parties, boasting of their rising economy, and also doing deals and taking part in leadership debates in the most classic Davos tradition. The Indians know they have arrived. It has been five years since they made their first big splash at Davos, and they are now part of the global establishment.
Anand Sharma, the trade minister, offered his own spin on world economic history, and objected to the term "emerging economies." He told delegates: "I would not call China and India 'emerging'. We are 're-emerging', because together we contributed 52% of the GDP of the world, until the 17th century. It is a re-balancing of the world economy. It is historical distortions getting corrected."
The "Statesman of the Year" award at Davos went, by informal acclaim, to the debut of mild-mannered President Susilo Bambang Yudhoyono of Indonesia. He presented his country, with its 6 percent growth rate and market of 235 million consumers, with restrained pride, and behaved the way a G-20 leader is supposed to, offering vision and humility.
After years of noisy talk about globalization, the Indonesian president's speech included this moderate and well-considered passage: "We will need to work together to manage the world economy so that it functions to meet our needs, rather than satisfying our greed. This means we will need to inject more compassion into our economic and social policy; that is not only fixated on growth, but on achieving growth with equity."
Compare that with the opening address of President Dimitri Medvedev of Russia, who went on and on about the need for "a more fair and just world of meritocracy" and "a world free of hypocrisy and double standards" and then proceeded to claim there was no proof Iran had nuclear ambitions, and you get the picture.
Nicholas Sarkozy of France and Angela Merkel of Germany spent most of their energy and time here defending the euro and lashing out at speculators and bankers.
True to their nature, Sarkozy was theatrical and emotional, wildly gesticulating and exaggerating to prove his point, while Merkel was concrete, straightforward, and direct, sort of ...German.
"Chancellor Merkel and myself never - and listen to me carefully here - never will turn our backs on the Euro," said the mercurial Sarkozy. "We will never drop the Euro. The Euro spells Europe. The Euro is Europe. We couldn't even possibly entertain the idea - not even play with the idea of entertaining the idea. Have I been clear enough?"
Merkel, by contrast, told the Davos crowd more succinctly that "We will defend this euro. We must keep it durably stable." And she warned that "Debt is the greatest threat to prosperity on our continent."
Having said that, it looks like the Germans intend to continue to object to throwing much more new money at basket case countries like Greece and Ireland, but will prefer to simply stretch out the maturities of the bonds used to rescue these eurozone members, perhaps to as much as 30 years. Some would call that cynical; I would call it realistic, especially since debt rescheduling looks like a necessity for Greece and rather soon, whether Prime Minister George Papandreou wants to admit it or not.
The only other standout debutante (aside from Indonesia's president) at Davos this year was the articulate new prime minister of Britain, David Cameron.
He talked common sense, saying: "Yes, recovery has begun. But while economies like India, Brazil and China are steaming ahead, in Europe, the drag on growth has persisted. Indeed, Europe's share of world output is projected to fall by just under a third in the next two decades. And no one is immune."
And he said things the Euro-crowd doesn't really like to express so forthrightly, or at all: "We've got to recognize that Europe has got to earn its way. The world doesn't owe us a living. So let's make the choice to do things differently, to fight for our prosperity. If we set our sights high, if we take bold decisions in deregulation, on opening up the single market, on innovation and on trade...then together we can defy the pessimists."
Cameron impressed. He conquered the crowd with his realism.
Egypt Shocks Davos
These were the highlights of what I would call the "normal" part of the Davos proceedings. But then, in the last 48 hours of the annual meeting, the video screens and ubiquitous portable iPads starting filling up with images of tear gas and crowds of protestors and violence. The Egypt crisis had gone from uprising to potential revolution, and a frisson of fear spread through the meeting halls.
At first the Egypt crisis caught the Davos gathering off guard. Organizers scrambled to put together a panel for Saturday, business leaders kept quiet lest they rock the boat. One chairman of a multi-billion dollar company told me in hushed tones that "we have substantial interests in Egypt, but we are staying out of this one so we can continue to work with whoever takes over from Mubarak."
Put simply, the world's power elite was somehow unable or unwilling to react in real time to the unfolding events in Cairo. Last Friday, normally confident leaders behaved like rabbits caught in the headlights of an oncoming automobile.
The exception, of course, was the Arab delegates, whether ministers or sheikhs or private sector executives. They could speak of nothing else on Friday, a condition that finally spread a day later to many of the other delegates, including Americans, Europeans and Asians.
At first the chatter was about what this could mean to the oil price (which spiked on Monday above $100 a barrel!) and the Suez Canal and shipping, and the dollar, and the economy and equity markets. And then, as Davos drew to a close, the talk shifted to a debate about the biggest opposition party in Egypt, the Muslim Brotherhood.
Who were the Brothers really? A moderate Islamic grouping that had renounced its sympathy with terrorists, despite the fact that its spiritual leader Yusuf Qaradawi was known to have been an inspiration for Osama bin Laden and Al Qaeda? A repressed opposition party in Egypt that had been martyred by Mubarak's vote rigging? A peaceful group of philanthropists and charitable social workers, as many like to style themselves?
As Davos ended, the consensus was moving toward fear and anxiety that a revolution or transition which eventually leads to the Muslim Brotherhood taking power, whether directly or though the vehicle of a respectable technocrat like Mohammed al-Baradei as front man, could be extremely dangerous. But the global media only started waking up to the subject on Monday, while it began to look as though both Hillary Clinton and the White House had written off Mubarak, and were now backing "an orderly transition".
A day after Davos ended, with the protests still mounting, the newly installed Vice President Omar Suleiman announced plans to open a dialogue with all opposition parties.
On Monday, White House spokesman Robert Gibbs offered a statement that was diametrically opposed to the Davos consensus when he said that in dialogue with the opposition the United States has not ruled out the involvement of the Brotherhood. But Gibbs insisted that before it could be involved, the Brotherhood had to demonstrate "an adherence to the law, adherence to nonviolence, and a willingness to part of that democratic process."
Perhaps the most outspoken skeptic in U.S. foreign policy circles on Monday was Leslie Gelb, the former State Department official and Pulitzer Prize winning New York Times reporter who now serves as President Emeritus of the Council on Foreign relations. In an interview with The Atlantic on Monday, Gelb voiced deep concern about the Muslim Brotherhood (see separate article), but there was, alas, no debate at Davos, which by now had closed up shop for this season.
So the hoopla in Switzerland is over, and it remains to be seen if Davos 2011 was prescient or got things wrong, on the global economy, on the euro and on Egypt. The good news is that one way or another, we won't have to wait too long to find out. All three of these big Davos subjects should play out in real life in the very near future.
*Update, August 25, 2011: The editor's note below was amended to more accurately reflect the period during which FBC represented the government of Malaysia.
Editor's Note, August 22, 2011: FBC Media, the public relations and communications firm chaired by Alan Friedman, was representing the government of Malaysia at or around the time Friedman wrote this post. According to our arrangement with Friedman, he should not have written about any clients of his company. After he did so, The Atlantic should have disclosed that relationship in a more timely manner. Recent media reports also suggest FBC may have been representing the government of Indonesia at the time Friedman wrote this post. We are reviewing Friedman's posts mentioning Indonesia. We will update this note with information regarding any business relationship we discover between FBC and the government of Indonesia.