Optimism in Davos snow, but do dark clouds loom?

It is hard not to be a bit jolly when you are surrounded by peers in a Swiss ski resort, but the world’s business leaders have been remarkably optimistic at this week’s World Economic Forum (WEF) in Davos.

The problems of the future that more than 2 400 company executives, politicians, academics and others have gathered to discuss at their annual meeting are taken seriously, but there is little in the way of hand-wringing.

This may be because the global economy appears relatively robust and business is doing fine.

A poll issued at the meeting, which began on Wednesday, showed that more than 90% of 1 100 chief executives expect revenues to grow over the next 12 months and a similar number see sales continuing to expand during the next three years.

In all, 92% said they were either “very confident” or “somewhat confident” about their business in the year ahead.

“In the past few years, people spoke a lot about crisis in one way or another ... This year, up to now, I did not sense the short-term crisis but long-term challenges,” Aaron Frenkel, vice-chairperson of insurance group AIG, told Reuters.

On a micro level, firms such as world-leading gemstone dealer De Beers are far from glum.

Executive Director Stephen Lussier told Reuters in Davos that demand for diamond jewellery around the world was strong over the critical Christmas period and that growth in the United States, where the economy is supposed to be slowing, was about 5%.

“We’re pretty pleased with the reports we hear from the leading retailers around the world,” he said in an interview.

Economists, however, have been doing what they do best and what many are paid for—worrying.

They admit that the Goldilocks global economy, neither too hot nor too cold, remains in place. But some point to dark clouds ahead.

Nouriel Roubini, economics consultant and professor at New York University, warned a Davos panel that the widely assumed soft landing for the US economy was far from guaranteed.

“In the case of the US, Goldilocks is being threatened by three ugly bears,” he said, pointing to a potential housing recession, higher interest rates triggering a possible credit crunch and still high oil prices.

Other participants noted that a major crisis caused by financial derivatives is taking over as top worry from interest rates driving asset markets to unstable levels.

Trade and weather

The most eye-popping number to come out of Davos so far is that WEF organisers calculate that the turnover of companies represented at the meeting amounts to about a quarter of world gross domestic product.

Given this, it is more than noteworthy that some of them are getting decidedly nervous about the possibility that the stalled Doha Round of trade talks will not restart.

Microsoft’s Bill Gates, for one, had a private chat with World Trade Organisation director general Pascal Lamy on the sidelines.
He wouldn’t say what about, but it came as others started to take the gloves off over trade.

Fifteen heavy hitters, including chairpersons or chief executives from Unilever, British Airways, Alcoa and Goldman Sachs put out a joint statement demanding that talks restart immediately and finish within six months.

Warning of the threat to global commerce, they peppered their statement with words such as “damage”, “destruction” and “failure”. The language was seen as pretty pointed.

Climate change has been the other big item. Although some have complained that it is simply a trendy subject, it has dominated much talk over the first two days.

In an informal vote, participants said climate change was both the major issue facing the world and the one that the world was least ready to deal with.

Chinese officials have been quick to pledge that their huge developing market will become more efficient in energy use, although they say the main problem is with the West.

The focus on climate, meanwhile, has upset some NGOs, who feel it is stealing the thunder from the debate on poverty.

But activist rock star Bono shows up later on Friday so Africa and the poor developing world is likely to get its moment in the snow.—Reuters

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