Sunday, January 25, 2009

Davos Economic Forum? Why bother

There is not inconsiderable hype in the business world and among some in governments about the annual exercise in mutual onanism called the Davos Economic Forum in Switzerland. Like many conferences of high profile people, one of the key objectives is to get people to agree and put out nice sounding statements that will offend no one and look like some enormous intellectual capital has been applied to the economic issues of the world.

Quite simply if you look at the 2008 World Economic Forum it will speak to you in abundance about how little intellectual capital is applied - after all, that Forum hardly predicted the worst recession since WW2. You can get the Summit report yourself here (pdf) and read it.

The most it said was "the unfolding financial crisis should be viewed as a chapter in a much larger, more profound story – the rebalancing of global wealth away from the West and toward the emerging economies of Asia and the Middle East" except, of course, that the recession is global. Oops didn't see that coming, that export led economies can't grow without anyone buying their goods.

If you don't like buzzword cliche phrases, then don't read this with a meal. This statement should be enough to provoke cynicism:

"Fourteen global CEOs and company chairmen representing a range of industries and regions
issued a call to their peers to join collaborative efforts to strengthen public governanceframeworks and institutions as a core element of their approach to corporate citizenship."

However, what's most telling are the "achievements" of the forum, which, barring one initiative, would do next to nothing for the global economy. These are:

- Japanese Prime Minister Yasuo Fukuda unveiled a five-year, US$ 10 billion fund to support efforts in developing countries to combat global warming (apparently forgetting this is an economic forum);
- Agility, TNT and UPS, three leading logistics and transport companies, are joining forces to help the humanitarian sector with emergency response to large-scale natural disasters (nice, but this isn't economic is it);
- The World Economic Forum launched a landmark report on the interfaith dialogue between Muslim and Western societies. Islam and the West: Annual Report on the State of Dialogue (oh nice, a book);
- The World Economic Forum released the first part of the most comprehensive investigation into private equity: "The Globalization of Alternative Investments Working Papers Volume 1: The Global Economic Impact of Private Equity Report 2008" (nice another book);
- Mayors, regional governors and the private sector launched the World Economic Forum’s SlimCity Initiative, an exchange programme between cities and companies to support action on resource efficiency in urban areas, focusing on energy, water, waste, mobility, planning, health and climate change (yes noticed how well cities run anything they touch? Yep congested roads, undermaintained water supplies, first class health care systems);
- British Prime Minister Gordon Brown, Microsoft Chairman Bill Gates, Irish musician Bono et al issued a joint statement vowing to make 2008 a turning point in the fight against poverty. (well it certainly turned out to be a turning point. Just as politicians, businesspeople and musicians get together, economies start folding inwards);

Ok enough. Besides a few privately led development initiatives, it was onanism on a grand scale.

What the forum COULD do is be a platform to actually point the finger at some of the most appalling actions by government globally. So while the Davos Forum gets ready to be held, here are a few tips for those who are going- if they can put away their onanistic business consultant speak for a few days:

1. For many developing countries it is corruption, rank, explicit, corruption that destroys the ability of citizens to produce and retain wealth. War needs to be declared on this, as this IS unfair distribution of wealth, because it is governments granting privilege to those who pay them off. Failing to note this corruption, which also exists in wealthy countries, is ignoring one enormous elephant in the room.

2. It is property rights that need defending and protecting, but the World Economic Forum says nothing about that, as so many countries either have little notion of it (as in African kleptocracies) or sacrifice it for expediency (US concept of eminent domain). Without property rights, creating and producing wealth becomes a momentary exercise for immediate consumption. The lack of property rights, protected by a free, open and uncorrupt government, is the number one reason so many countries stagnate.

3. It is free trade that needs advancing and yes, protection. The damnable procrastination of the EU and Japan, and to a lesser extent the USA, in protecting agricultural markets, subsidising farmers and dumping their subsidised goods on world markets helped exacerbate the crisis in food prices in 2008. If governments could push for a multilateral liberalisation of trade in primary products and services, then it could spark off some recovery - like the GATT did in liberalising trade in manufactured goods in the 1950s and 1960s. Forget collaboration, businesses need to tell governments to get the hell out of the way - let those inefficient French farms fail.

4. Finally, it is the wealth shredding obsession with unpriced environmentalism, that is sucking productivity out of economies in developed countries. Recycling commodities that are worth little, taxing car parks to discourage car ownership, in essence spending more directly or indirectly for the environment than the benefits people get from that spending. It is an abominable trend in policy that the evangelism of environmentalism has hardly been challenged by objective analysis.

However, that would require confronting the countless vested interests, NGOs, businesses, governments and labour leaders who wouldn't like it. So instead Davos will be a lot of nice words, and talk about collaboration, working together, synthesis, co-operation, understanding, investing, refocuses, refreshing, rebuilding, blah blah. You see it is explicitly politically neutral, which of course can only take you so far when politicians and their lackeys are the problem.

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