The annual power-broker confab in Switzerland touches lightly on what caused the financial crisis
"There was a period of remorse and apology for banks; that period needs to be over." Thus Bob Diamond, the chief executive officer of Barclays (BCS), tried to draw a line under the credit crisis during a 2?-hour grilling by Members of Parliament at the House of Commons Treasury Committee on Jan. 11. The "blame game," he told the MPs, has hamstrung the finance industry for long enough: "Now, we need to build some confidence." Never mind that most of us must have blinked and missed the bankers' self-excoriation; Diamond would like to return to business as usual, without pesky regulators hobbling risk-taking.
So when Diamond travels to Davos to hobnob with his fellow Masters of the Universe at the World Economic Forum's annual shindig, the theme set by the event's organizers—"Shared Norms for the New Reality"—will be wildly inappropriate. While there may be a new reality, the norms arising from the financial disaster's aftermath aren't shared by Davos Man.
The Davos agenda—which runs to 110 pages in a Word document, even shrunk to a font size of 10-point Arial—doesn't ignore the parlous economic backdrop that the mishaps of the banking fraternity created. Yet the questions posed by the event's organizers don't seem particularly challenging. One workshop asks whether the international financial system is "back on track." The panel, featuring Gary D. Cohn, the chief operating officer of Goldman Sachs (GS), is hardly likely to conclude that the financial system is still headed in the wrong direction with regards to transparency, bonus culture, and making sure a crisis doesn't happen again. Also featured are cybersecurity (a hot topic now that The New York Times has presented evidence that the U.S. and Israel deployed a computer virus to hobble Iran's nuclear programs); the environment (a bit rich, given the carbon footprint caused by shipping thousands of executives and media hangers-on to the Swiss Alps); the future of employment (how many Davos panelists cut jobs in the recession?); and a session on "Doing Better With Less" (or, how the public sector is paying for the private sector's misadventures).
Diamond, who will sit on a panel examining the global economic outlook, is the archetypal Davos Man. An American presiding over one of Britain's great banks, he was at the eye of the credit-crunch storm. He's not alone in urging the world to move on. "We've got to work for the balance, rather than just say let's get revenge on these people," British Prime Minister David Cameron said earlier this month.
Barclays vigorously defends its chief's recent comments. "Mr. Diamond made it perfectly clear that the role of banks in the U.K. and elsewhere is to support businesses and households, and that is exactly what Barclays is doing," says spokesman Giles Croot. Still, the Barclays CEO's desire for closure is a lot easier to understand once you know that Diamond—who pocketed more than $32 million between 2005 and 2007, when the seeds of the crisis were sown by banks like his—has had to forgo his bonus for the past two years.
The WEF, which kicks off on Jan. 26, has also defined four "thematic clusters" for the gathering. "Responding to the New Reality" focuses on the fear factor; new players are competing for finite resources, the agenda says. In other words, China is snapping up coal mines, farmland, and more worldwide. "The Economic Outlook and Defining Policies for Inclusive Growth" riffs on the risks of double-dip recession as economists debate whether deflation or inflation is the bigger threat. "Supporting the G-20 Agenda" comes with the caveat that achieving financial stability "will require significant engagement from economies outside the G-20." That comment gives at least a nod to the ascendancy of emerging economies as the drivers of growth. The fourth item promotes "Building a Global Risk Response Mechanism," which seems to ignore the sad truth that nations have proved unwilling to cede sovereignty even as globalization gathers pace.
Implicit in the agenda is the idea that while the West has fouled its economic sandpit, other nations are speeding ahead. The inclusion of Indian Finance Minister Pranab Mukherjee on Diamond's panel, the talks promising "Insights on China" and "Insights on India," and the appearance of Chinese and Indian executives on the panel opening the whole event—all suggest that Davos Man must look East to see the future.
A survey conducted by the Pew Research Center for the People & the Press on Jan. 5-9 showed 47 percent of Americans now consider China the top economic power. In a similar poll in 2008, 41 percent named the U.S. top dog. While Davos Man didn't switch the pecking order, the crisis he triggered surely accelerated the change.
That shift, in a way, was clearly acknowledged on Jan. 19, when President Barack Obama held the first state dinner for a Chinese President since 1997. When the guy who has loaned you $907 billion comes calling—China has about a third of its foreign-exchange reserves parked in the U.S. government bond market—it makes sense to put out the welcome mat.
The bottom line: Davos promises to look at "shared norms for the new reality." Many participants would rather return to the realities of a few years back.