By IPS Correspondents
DAVOS, Jan 23 2008 (IPS)

Movers and shakers of global business and politics appeared crestfallen over the financial and banking crisis at the World Economic Forum meeting that began at Davos Wednesday.

The financial crisis began in the United States, and hit the markets in other rich and emerging economies.

Having encouraged market-driven economic policies and unimpeded financial sector liberalisation all these years, the big actors in the global corporate world for whom Davos is an annual pilgrimage are unable to say whether there would be any soft landing from the meltdown that began due to reckless monetary policies adopted in the United States.

Despite the unusual step of reducing interest rates by 75 basis points on Tuesday and a likely stimulus package of over 150 billion dollars to prevent the growing recessionary storms in the U.S. economy, the chances of any easy recovery seem somewhat grim.

“What we have now are the foreseeable consequences of bad economic management,” Nobel Prize winner Joseph Stiglitz told a meeting here. Former U.S. treasury secretary Lawrence Summer said that central banks have lost their focus in addressing “bubbles and the ability to address them.”

The crisis in the financial sector has exposed the double standards and hypocrisy of the dominant countries and how they view their problems in contrast to the life-and-death struggle in poor countries, said Kumi Naidoo, head of the civil society group Civicus.

“If the United States were a poor country it would have been declared an HIPC (heavily indebted poor country) candidate by now,” Naidoo told IPS.

While the poorest nations in Africa are being handed conditionality-ridden policies by the World Bank and the International Monetary Fund, all attempts are now being made to ensure that the U.S. consumer is provided more credit at soft interest rates to persist with consumption, said Naidoo.

“There is no accountability or responsibility in the manner in which the sub-prime crisis was started, and strangely there was no mention of this looming threat to the U.S. economy during the Davos meeting last year,” said Naidoo.

In sharp contrast to the Asian financial crisis which started in 1997, when Thailand, Indonesia and South Korea among others were subjected to stringent fiscal and monetary policies by the International Monetary Fund, the current spate of financial problems in the U.S. is being treated with kid gloves, analysts argued.

Stiglitz had said earlier that the Fund’s policies in Indonesia in 1999 further exacerbated the humanitarian crisis. But now easy credit is being offered in the United States to spend on consumer goods so as to prevent recession.

George Soros, the billionaire philanthropist, warned on Wednesday of a “moral hazard” and “loss of control” in financial sector liberalisation. He said the central banks and regulators failed to see the underlying risk of the new financial instruments that were created through so-called securitised assets.

The Davos elite thundered last year that the global economy would move ahead despite economic problems. But there is a déjà vu now after the credit crisis brought on by massive exposure to sub-prime mortgage securities.

“I don’t know whether there will be a recession in the United States, but I do know that one year ago, at this time, things were very rosy,” said Rahul Bajaj, chairman of Indian industrial group Bajaj Auto.

The Indian market was among those hit hardest by the crisis, but some say there will be no long-term damage.

“India will not be affected adversely by the current crisis,” Nandan Nilekani, head of the information technology company Infosys told IPS. “The economic fundamentals are strong, and India will continue to grow at about 7-8 percent. But poor countries will be affected by the U.S. economic crisis.”

The WEF, which has become synonymous with the dialogue of the rich and the powerful, will meanwhile continue to focus on other issues affecting the world in 2008 and beyond.

Its agenda includes insecurity stemming from terrorism, pursuing a workable peace process in the Middle East, and focusing on how technology is ushering in a new age of social networking that knows no borders.

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