Thursday, February 2, 2012

World Economic Forum at Davos: Old Capitalism is Dead. Long Live… Capitalism? by Hala Hanna

Hala Hanna, MPP '12 and former WAPPP summer fellow, attended the World Economic Forum's meeting in Davos last week. Here are her thoughts:

Posted on January 31, 2012 by Hala Hanna

Last week, 2,600 of the world’s most powerful gathered in the recluse ski resort of Davos for the 42nd World Economic Forum. Amidst the lavish parties (Mick Jagger!), limousine/helicopter rides, and icy sidewalks, the general mood was a somber one.



The Eurozone sovereign-debt crisis monopolized much of the discussion. This 3-minute video is a good summary of the stance of billionaire investor George Soros, German Chancellor Angela Merkel, International Monetary Fund Managing Director Christine Lagarde and U.S. Treasury Secretary Timothy Geithner on the issue. At the conference, France, Germany and the UK publicly disagreed over the size of the “firewall” needed to insulate European economies from further effects of the crisis. Merkel tried to spin some humor on it: “in the EU we have to remain competitive and prosperous. Otherwise, we are just a very nice place to visit.” But the remedy is a bitter one to swallow. Moreover, the Eurozone crisis is costing the world about 1% of its GDP, estimated Vikram Pandit, CEO of Citigroup. In our hyperconnected reality, “no one is safe until everybody is safe” Paulo Coehlo tweeted. “The crisis could have spillover effects around the world”, warned Lagarde. To summarize the situation, “if the world is a table with four legs (US, Eurozone, China/India, and the Arab world), right now, all four legs are shaky”, said Thomas Freidman, New York Times columnist. “I have never been as frightened as I am now”, echoed Donald Tsang of Hong Kong who was in the eye of the storm during the ’97 Asian crisis.

So, one thing is clear: old capitalism is dead. And thanks to the Arab revolutions and the #Occupy movement, the have-lots can no longer ignore the have-nots’ pain and the disfunctionality of the current system. The elite community gathered in the Alpine resort did not even pretend to have silver bullet solutions to fix the state of the world.

In an effort to make steps towards the “Great Transformation” touted in the title of the forum, issues of inequality and inclusion were central to the agenda. WEF organizers put into practice their call for a shift from shareholder capitalism to stakeholder capitalism by increasing the representation of the youth, women, and the disenfranchised in the discussion. Some 200 youth were invited to join the forum through the Young Global Leaders and the newly established Global Shapers communities. The future is for those under 40 – and that is good news: according to a recent survey, 76% of the millennia generation believes the value of a company should be measured by the positive contribution its core business makes to society – not only by its profits. One (old) speaker urged the younger crowd to “forget about titles, about money. Don’t hold back; don’t let anyone stand in your way. Don’t wait. Step up and do it right now”. The future is also to women; but gender parity remained abysmal despite a newly introduced quota for corporate delegations, dictating that one in every five (!) of their attending representatives be a woman. (Guess what? A fifth of them decided to bring just four people.) Women were only 17% of attendees (up from 9% some years ago). Only 20% of the panelists participating to the 260 sessions were women. Thankfully women’s representation was more equal among the younger crowds. For more inclusive viewpoints, #OccupyDavos protesters were invited to join one of the sessions. There was also a (gentle) simulation of life in a refugee camp, sponsored by Crossroads and UNHCR, followed by testimonies from former refugees and Nobel Peace Prize winner Leymah Gbowee (one of my favorite Davos moments).

Given its now proven impact on stability, unemployment was highlighted as everyone’s major concern: the International Labour Organization estimates that there are 200 million unemployed worldwide today, 75 million of them youth. The hope for a better future lays in innovation, technology, and entrepreneurship, which are seen as the main drivers of job creation. The statistics are telling: for every one job lost due to technology, 2.6 jobs are created due to technology (McKinsey). Facebook and its platforms alone have created 230,000 jobs, Sheryl Sandberg said. In contrast to SMEs, big traditional corporations destroy 70 jobs for every 100 jobs they create. To drive these factors (innovation, technology, and entrepreneurship), many speakers highlighted the need for disruptive, bold leadership that is horizontal and connected rather than traditional leadership that is top-down and slow.

Davos doesn’t solve problems. However, it does cite the key issues that will shape the coming 12 months, and challenge some of the attendees’ pre-existing assumptions. It also offers face-to-face encounters in an age when people are all-too often stuck behind their laptops. And while it remains an exclusive gathering, a special effort has been made to make it a little more inclusive this year, both in participation and in content. As Neil Gershenfeld from MIT pertinently remarked, “perhaps the conference mission should not be Committed to improving the state of the world but rather Committed to improving the ability of the world to improve itself.”

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