Eurozone debt crisis dominated Davos forum
The mountain resort of Davos pictured during the last day of the 42nd Annual Meeting of the World Economic Forum, WEF, in Davos, Switzerland, Sunday, Jan. 29, 2012. (AP Photo/Keystone/Laurent Gillieron)
Published Sunday, January 29, 2012 8:48PM EST
DAVOS, Switzerland - Europe's crippling debt crisis dominated the world's foremost gathering of business and political leaders, but for the first time the growing inequality between the planet's haves and have-nots became an issue, thanks largely to the Arab Spring uprisings, the Occupy movement and other protests around the globe.
The mood at the end of the five-day meeting in Davos was sombre, and more than 2,500 VIPs headed home Sunday concerned about what lies ahead in 2012. Plenty of champagne flowed in this alpine ski resort -- but the atmosphere was flat and the bubbling enthusiasm of some past World Economic Forums was noticeably absent.
Despite some guarded optimism about Europe's latest attempts to stem the eurozone crisis, fears remain that turmoil could return and spill over to the rest of the world. And there were no answers to the widening inequality gap, but a mounting realization that economic growth must include the poor, that job creation is critical, and that affordable food, housing, health care and education need to part of any solution.
Just before the forum began, the International Monetary Fund reduced its forecast for global growth in 2012 to 3.3 per cent from the 4 per cent pace it projected in September. Many other economic forecasters also predict a slowing economy, including New York University's Nouriel Roubini, who is widely acknowledged to have predicted the crash of 2008 and who said he might be "even slightly more bearish" on the new IMF forecast.
Asia is expected to remain the engine for global growth though at a slower rate, with China leading the way at more than 8 per cent, followed by India and Indonesia.
IMF Managing Director Christine Lagarde warned that the eurozone crisis is not the region's problem alone.
"It's a crisis that could have collateral effects, spillover effects, around the world," she said. "What I have seen, and what the IMF has seen in numbers and forecasts, is that no country is immune and everybody has an interest in making sure that this crisis is resolved adequately."
The IMF is the world's traditional lender-of-last-resort and Lagarde is trying to increase its resources by $500 billion so it can help if more lending is needed in Europe or elsewhere. European countries have said they're prepared to give the IMF $150 billion, but that means the rest of the world will have to come up with $350 billion.
At a closing panel Sunday, Paul Polman, CEO of Unilever, said a readjustment in Europe is essential "because, if you want to really simplify it, we've lived above our means, and we've done that for too long, and the moment of truth has arrived."
Vikram Pandit, CEO of the global bank Citigroup Inc., said the euro crisis "is costing us about 1 per cent in GDP around the world. You do the math. You do the math and say: 'How many jobs is that? How many people are not working because of that? What can we do to go after the biggest question we've got for this decade which is jobs?"'
The world needs 400 million new jobs between now and the end of the decade, not counting the 200 million needed just to get back to full employment, so "that should be our number one priority," he said.
To keep the spotlight on jobs and poverty at the forum, the Occupy movement that began on Wall Street and spread to dozens of cities around the world set up a protest camp in igloos in Davos. They demonstrated in front of City Hall.
In a separate protest, three Ukrainian women were arrested when they stripped off their tops -- despite temperatures around freezing -- and tried to climb a fence surrounding the invitation-only gathering holding banners saying: "Poor, because of you" and "Gangsters party in Davos."
Citi's Pandit said to create the conditions for growth, economic uncertainty must end and that means quickly resolving the eurozone crisis, ending regulatory uncertainty, and getting the public and private sector together to build infrastructure that can create jobs.
Unilever's Polman said it's unacceptable that more than 1 billion people are hungry every day while another billion are obese.
"How do we pull up the people that are excluded from the work force, at the bottom of the pyramid?" he asked. "That we haven't quite figured out yet."
Sheryl Sandberg, CEO of Facebook, said the Internet sector has been creating hundreds of thousands of jobs and to keep up innovations in technology "great scientists" need to be educated all over the world, investment in infrastructure is critical, and regulations must not stifle growth or access.
Nobel economics laureate Peter Diamond, an economics professor at the Massachusetts Institute of Technology, said in an Associated Press interview that in the U.S. there is "an unemployment crisis," especially among young people who aren't accumulating experience. He said the government should fix the Social Security system, fix aging infrastructure, spend on research, and start fixing the education system.
When the forum opened, its normally upbeat founder Klaus Schwab said he remained a deep believer in free markets but that capitalism is out of whack and needs to be fixed "to serve society." He welcomed critics' ideas of how to fix it -- including from the Occupy protesters, though they walked out of a side event where a representative had been invited to talk.
This year for the first time, the forum invited about 60 "Global Shapers" -- young leaders under 30 -- to the forum to try to address issues confronting the generation that will be running the world in decades to come.
Among the younger generation also at Davos were Chelsea Clinton, daughter of the former U.S. president and present secretary of state, who moderated a panel on philanthropy and philanthropist Howard Buffett, son of Warren Buffett, whose foundation focuses on promoting agriculture and fighting hunger, especially in Africa.
The possibility of Iran developing nuclear weapons was among top concerns at Davos this year. There were also several follow-up panels on the Arab Spring and a session moderated by Schwab with Israeli President Shimon Peres and Palestinian Prime Minister Salam Fayyad, which demonstrated the deep divisions over getting peace negotiations back on track.
But although the conflict in Syria -- where the U.N. estimates a crackdown on anti-government protesters has killed some 5,400 people over the past year -- came up in the Arab Spring panels, it wasn't a hot issue.
Julia Marton-Lefevre, director general of the International Union for the Conservation of Nature, said that this year for the first time at Davos "the environment is not treated so much as separate topic, which I think is a good thing."
"We are moving towards a more integrated approach to the world's challenges," she said. "Environment is not a side issue, it's really a part of everything. For me, of course, nature is a life support system -- and finally it is being recognized as being a part of the solution."