A year ago, denial was still very much in the air at the World Economic Forum and, dare we say, in key meetings industry forums, with most believing that any sharp recession would be confined to the US. And those who did mention the ‘R’ word in Europe were not really given the time of day.
A US cyclical recovery was presumed to be just around the corner, yet we have seen the first outright contraction in overall global GDP in the post-World War II period.
The leaders of China and Russia used the rostrum of the World Economic Forum in Davos this week to lecture their previously complacent Western counterparts for policy failures which, they said, had led to the global financial crisis.
Wen Jiabao and Vladimir Putin, the prime ministers of China and Russia respectively, argued that the two rising powers must play a bigger role in a new economic order,
Mr Putin embarrassing US delegates who had talked at last year’s Davos gathering about the US economy’s “fundamental stability and its cloudless prospects”, while Mr Wen criticised the “unsustainable [Western] model of development characterised by prolonged low savings and high consumption”. He attacked some financial institutions’ “blind pursuit of profit” and their “lack of self-discipline”.
Their confident speeches contrasted with the gloomy predictions emanating from the Western speakers.
Russian President Dmitry Medvedev has questioned the scale of the new US administration’s economic rescue package and projected budget deficit, saying it would “suck liquidity from other global markets”.
A $1 trillion deficit could mean that all the free liquidity in the world running into American Treasury bills, his economic adviser Igor Yurgens told the Davos conference, and likened the US policy to the “beggar thy neighbour” protectionist policies of the 1930s.
On the other hand, China, said Mr Wen, had “the confidence, conditions and ability to maintain steady economic growth”, and “continue to contribute to world economic growth”.
Just as China’s economy was one of the main motors pulling up the price of oil, steel and chemicals last year, it also instigated demand for large convention and exhibition infrastructure projects.
The Gulf and the other BRIC countries are also increasingly powerful voices in a world that is becoming multi-polar.
It is also a week that has seen statistics come out of Europe predicting the UK economy likely to post a 2.8 per cent drop in GDP, the worst among any G8 nation. Even more reason for the UK’s enterprising companies to cast the net further afield.
Earlier in the week Rupert Murdoch had told Davos delegates they would be “very foolish” if they assumed that the crisis was over, believing the binge the Western word had been on had come to an end. People around the world were “depressed and traumatised” by the damage done to their personal wealth, he said.
World Trade Organisation director-general Pascal Lamy, in his address, said that Western government bailouts ran the risk of putting developing countries at a disadvantage.
“There are planes that won’t fly, ships that won’t sail, cars that won’t be sold: does this mean that open trade is wrong? No, it means that there is an adjustment problem between supply and demand,” he said. He may well have added, ‘and there are meetings and events that won’t take place’, for our sector is also feeling the economic impact from disappearing business in automotive, finance and construction. Financial conferences and automotive trade shows have been some of the hardest hit in recent weeks.
Former UN secretary general Kofi Annan, warned that the institutional architecture for managing global affairs was broken and called for reform. “We cannot continue to run the world based on countries that won the war 60 years ago.”
Time for complacency and waiting for the cycle to turn is up; we need new economic models and new thinking, on a global scale.
Things just ain’t what they used to be.