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Tue January 24, 2012
Davos: A Super Bowl For Smart, Rich People
When winter reaches its dreariest depths each year, Americans cheer themselves by planning Super Bowl parties. They want to reconnect with friends, eat, drink and share observations about who is likely to win — or lose.
But if you are very smart or very rich or even better, both — then you break up the mid-winter blahs by going to Davos.
That's the Swiss town where the financially, intellectually and politically powerful convene each year to reconnect with friends, eat, drink and share observations about winning and losing.
The event is not intended to produce immediate results, but to spark conversations about how to fix big problems. This year, much of the focus will be on how to handle Europe's debt crisis, which threatens global growth.
A Weaker Global Outlook
On Tuesday, the International Monetary Fund released its 2012 global forecast, predicting growth of just 3.3 percent, down from the 4 percent it projected in September and the 3.8 percent growth seen in 2011.
The IMF says big cuts in government spending in Europe will slow growth for the whole world, a message that undercuts the budget austerity plans being pushed by German Chancellor Angela Merkel.
Merkel is giving the opening address at the 42nd annual meeting of the World Economic Forum, a private, Swiss foundation. Also in attendance will be IMF Managing Director Christine Lagarde. The two should have plenty to discuss.
Other participants include U.S. Treasury Secretary Timothy Geithner, British Prime Minister David Cameron, Israeli President Shimon Peres, U.N. Secretary-General Ban Ki-moon and Arab League Secretary-General Nabil Elaraby.
They will be joined in the glamorous ski resort town by about 2,600 conferees, including billionaires, dozens of heads of state, 18 of the world's central bankers, chief executive officers, investment bankers, scientists and top economists. The gathering lasts from Wednesday through Sunday.
"It's an important event because you do have a lot of high-level people here," said Nariman Behravesh, the chief economist for IHS Global Insight, a forecasting firm. He spoke by phone from Switzerland, where he is attending the gathering as he does every year.
For those who participate, "you can put a finger on the pulse of the people who can make a difference" in the global economy, Behravesh said. "You get a sense of what they are worried about."
Lots of economic conferences are held by various prestigious organizations, but "this one has been going on the longest, and it attracts more people," he said.
'The Great Transformation'
The participants will not be coddled — at least not intellectually.
The theme at Davos 2012, which runs through Sunday, is: "The Great Transformation: Shaping New Models." Forum founder Klaus Schwab said in a statement that participants must face the reality that "capitalism, in its current form, no longer fits the world around us. We have failed to learn the lessons from the financial crisis of 2009. A global transformation is urgently needed and it must start with reinstating a global sense of social responsibility."
The program is so packed it covers 62 pages. Participants' days will be filled with official conference-center presentations, as well as informal breakfast sessions, dinner discussions and nightcaps.
Yes, there will be furs and diamonds in the evenings — and lots of skiing the following week, but Behravesh said that during the daytime this week, dark wool suits with boots will rule.
"There's a certain formality to it, so it's suits and ties," he said. "But you're slogging through snow, so there are a lot of boots too."
The corporate executives come to seal deals with each other, scout talent, hear about investment opportunities and learn about the latest important tech gadgets. The political leaders come to meet each other and build relationships away from the direct media spotlight of a formal diplomatic event like a G-20 summit.
Raising Uncomfortable Questions
Steve Clemons, Washington editor-at-large for The Atlantic, has been to Davos and attended other events sponsored by the World Economic Forum. He says that years ago, the Davos gathering attracted Europeans and North Americans participants, but now also draws leaders from Asia, Latin American and elsewhere. Nearly a hundred countries will be represented this year.
"Yes, there are parties and rich people. There is caviar eating, and champagne sipping," he said. But there also are many presentations where the wealthy and powerful hear about the environmental impact of their decisions, and the stresses caused by income inequality, he said.
"It's a real convening of those who are looking at the other side of the balance sheet," and raising uncomfortable questions about pollution, poverty and human rights, he said. "Davos gets a lot of credit for interjecting these questions into the discussions."
In fact, some members of the Occupy Wall Street movement have built igloos in the snowy outdoors of Davos. In those chilly quarters, they will continue their campaign to call attention to income inequality.
In the luxurious indoors, the parties will be warm and sumptuous, but the participants will have to deal with a lot of very depressing news. The Forum's Global Risks 2012 report, released last month, discussed the gloomy possibility of "a downward spiral of the global economy fuelled by protectionism, nationalism and populism."
Behravesh himself is not exactly Mr. Sunshine. He says the world is facing three enormous risks this year: 1) uncertainty over Europe's long-running debt crisis; 2) fears that China's troubled real estate market will drag down the global economy and 3) that growing tensions with Iran will lead to an event that causes a spike in oil prices.
He says he doesn't expect to be the only economist feeling jumpy amid the luxury. Even the richest people will be worried because when they look out at the global economy, they still see winter. "The level of uncertainty is still so high," he said.