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DAVOS FORUM: Two Different Worlds Overlap

Gustavo Capdevila

DAVOS, Switzerland, Jan 21 2004 (IPS) - The World Social Forum, which ended Wednesday in Mumbai, seemed to have a lingering after-effect on the corporate executives, financiers and government leaders gathered in the alpine resort of Davos for the World Economic Forum (WEF), which began that same day.

The forum in India, the continuation of the massive annual conferences that began in the southern Brazilian city of Porto Alegre in 2001, drew activists from around the world who are concerned about the endemic inequalities found in global society.

The annual Davos Forum, meanwhile, attracts participants who are more interested in how business and the economy are going.

A comparison of the two forums came from an unexpected source. Former U.S. president Bill Clinton contrasted the two events for the ‘crème de la crème’ of international executives and neoliberal economists meeting in Davos through Sunday.

Clinton mentioned that the participants in the World Social Form describe themselves as opponents of “imperialist globalisation”. Clinton said he respects the beliefs of people who are against economic globalisation.

But, based on the differences between the two forums, the former president said “the world is divided, politically, socially and economically,” and backed his statement with social statistics, including gender-related indicators, which show the exclusion of large sectors of the global population.

The diagnostics offered by the economists attending the Davos Forum, however, are focused more on society’s “symptoms” in terms of prosperity and security, the main concerns of this year’s meeting.

WEF chairman and founder Klaus Schwab, says, “We will not have strong, sustained economic growth across the world unless we have security. But we will not have security in unstable parts of the world without the prospect of prosperity. And this is the Davos equation: security plus prosperity equals peace.”

As for prosperity, the economists confirm that the world is experiencing an incipient recovery, led by the economic performance of the United States and China’s “phenomenal” growth.

The Asian giant grew 8.5 percent in 2003 and, despite a long bonanza period, the economy has not “overheated”, says Jun Fu, associate dean of the University of Beijing.

But the U.S. economic performance merits some contrasting interpretations.

Jacob Frenkel, who heads the financial consultant group Merrill Lynch International, said he is optimistic because of the flexibility, deregulation and competitiveness that characterise the world’s leading economy.

The banker places a great deal of weight on the growth of U.S. productivity. It is a factor that influences the educational system, the mood of the business sector, and job recovery, he said.

In the past, the U.S. economy has undergone periods in which productivity and employment have grown simultaneously, so the current lack of job creation is an unprecedented phenomenon, and could be critical, said Stephen Roach, chief economist at the Morgan Stanley consultancy.

The experts pointed to other weak points in the United States economy.

Frenkel acknowledged that the U.S. current account deficit (which stood at 135.4 billion dollars in the third quarter of 2003, equivalent to five percent gross domestic product, GDP) is one of the greatest threats to the global economy.

Laura Tyson, a former adviser to Clinton and current dean of the London Business School, commented that the United States has exacerbated the world’s economic problems with its spending habits, which lack fiscal backing.

The opinion widespread among the experts gathered in Davos is critical of the extremely slow economic growth in Europe, particularly the 15-member European bloc, which faces an overvaluation of its currency, the euro.

In this respect, Tyson questioned the European Central Bank, saying it maintains a flawed policy.

As for Japan, economist Takatoshi Ito, professor at Tokyo University, said it is likely that the growth trend of 2003 – of two percent – will be maintained in the upcoming quarters.

But Japan faces a budget deficit of six percent GDP, suggesting that, without fiscal stimulus, the country will not be seeing recovery, says Ito.

The cautious descriptions of the economic analysts contrasted with the optimism of the more powerful business sector – banks, insurance companies and auditing firms – that 2004 will bring a growth rate double that of the global product.

This financial services sector reports that the market value of its activities expanded to 6.7 trillion dollars in 2003, surpassing the threshold reached in 2001, when crisis struck as a result of the Sep. 11 terror attacks in New York and Washington.

Even here, in this relatively remote alpine town, the corporate world does not escape the vigilance of non-governmental organisations, which are holding an alternative conference, “Public Eye on Davos”.

The dominant theme there is the social responsibility of the private sector. The activists demand binding rules to control corporate behaviour.

Mary Robinson, former United Nations High Commissioner for Human Rights and former president of Ireland, called on the civil society movement to work in a rigorous and disciplined way to ensure that businesses act responsibly.

In particular, Robinson asked them to support the U.N. subcommittee on human rights that is dedicated to the social responsibilities of transnational corporations.

Governments must establish a legal framework to ensure that transnationals respect human rights, she said.