BY SEAN HEALY
Suddenly all the triumphalism is gone and the erstwhile "Masters of the Universe" are sounding like whining rich kids whose snowboards have been taken away from them.
Over the last decade, the World Economic Forum's annual meeting, held in the Swiss ski resort town of Davos each January, has become the world capitalist class's foremost mutual appreciation society — the place where the CEOs of the big corporations and capitalist politicians can get together to praise each other's cleverness, entrepreneurial spirit and beneficence.
And why not? Capitalism has seemed invincible: it has seen off its Soviet rival, smashed open all barriers before it, whether in the form of trade regulations or capital controls or inconvenient governments, and has been booming, at least in its US and European heartlands. There has been no serious political challenge to it; there seemed to be no chance the dividend cheques would stop rolling in.
In the last two or three years, to be sure, the tone of Davos has evolved somewhat. Mounting evidence that the business elite's globalisation of "free market" policies was impoverishing the world's working population, the messy end of the Asian "miracle" and ever-louder campaigns against corporate misrule have forced a shift of emphasis. It was still triumphant — but was now tempered by homilies about concern for the poor ("Let's not forget the little guy", said Bill Clinton at Davos 2000) and the realisation that transnational corporations needed to pay a little bit more attention to their public image.
Mood swing
Davos 2001, then, indicates a considerable mood swing in the psychology of the world's business elite. While they're not jumping out of windows (yet), they were an altogether gloomier bunch, far more defensive and nearly totally bereft of their usual exuberance for all things with the words "global", "technological" or "profitable" in them.
If the financial elite's emotional state eternally oscillates between either greed or fear, then, at this meeting, they were definitely fearful.
The reasons for the mood swing are several. Foremost among them is a wintry world economic outlook, caused especially by the lingering sickness of Japan's economy and the mounting evidence that the United States is sliding into an economic recession.
At the meeting, International Monetary Fund deputy managing director Stanley Fischer announced the fund was planning to officially downgrade its world economic growth estimates for 2001 from 4.2% to 3.5%, largely due to a steeper than expected US slowdown. Others argued even this re-estimate was overly optimistic — JP Morgan's estimate is for growth of 2.5%.
The US economy was the source of much debate. Most Davos panellists predicted it would slow down to 2.2% annualised growth in the first two quarters of 2001 and then pick up later in the year as the two consecutive 0.5% cuts in US interest rates kicked in. Abby Joseph Cohen, the managing director of Wall Street investment bank Goldman Sachs, even predicted a return to a booming stock market by year's end.
But others were far less sanguine, predicting a "hard landing", i.e., a full-blown recession, and considerable global economic dislocation as a result. Some, such as prominent currency speculator George Soros, even put the spotlight on points of extreme stress which could turn a downturn into a crisis, such as US private debt. US households now have negative savings and the ratio of household debt to equity rose from 84% to 105% during the 1990s.
There wasn't even limited enthusiasm about Japanese prospects. "The only way you can be optimistic about Japan is to look at the charts upside down", said Goldman Sachs' Asian vice-chairperson Kenneth Courtis. Desperate assurances by Japanese Prime Minister Yoshiro Mori, during a barnstorming five-hour trip, that the world's second largest economy was finally on the up and up were dismissed with derision.
As for Europe, the only bright spot on the world economic horizon, the Davos consensus followed the blunt prognosis of German economist Jurgen von Hagen that the EU is not in any position to replace the US as the world's growth engine.
The rosy, high-tech glow added to previous years' gatherings by fleets of Californian software engineers and internet salespeople has also turned to steely grey.
The bursting of the speculative information technology bubble on the US NASDAQ share market in April has ended financiers' love affair with the IT sector and, consequently, the hype was turned down to minimum ("In the end, the internet is another tool — it is a medium just like the others", declared Tim Koogle, chief of Yahoo!). Even the nifty iPAQ pocket computers, distributed to conference participants by Microsoft and Compaq, malfunctioned.
But the Davos mood swing was only partly prompted by such cyclical economic factors. Their defensiveness was primarily political; they no longer feel unchallenged.
Backlash
Again and again, corporate heads and politicians alike returned to worries about what they termed the "backlash against globalisation" — the rising global anti-capitalist movement.
UN secretary-general Kofi Annan, for example, was blunt about his fears. "If we cannot make globalisation work for all, in the end it will work for none... How do you explain, especially to our young people, why the global system of rules, at the dawn of the 21st century, is tougher in protecting intellectual property rights than in protecting fundamental human rights?" His solution was more prosaic: if we acknowledge the problem, he hoped, maybe our critics will cool down.
The epicentre of this sense of near-panic was worries about the future of the World Trade Organisation and its planned new round of global "free trade" talks.
Since the first attempt to launch a new round was scuttled by mass protests and a Third World government revolt in Seattle in November 1999, the WTO's prospects have looked decidedly bleak.
As a precondition for a new round, Third World governments are demanding considerable concessions on such issues as easier access to rich country markets and a re-evaluation and lessening of the burdens imposed upon them by the previous Uruguay Round of talks. Europe and the United States also appear unable to reach agreement on what the talks should and shouldn't include.
Desperation in business circles is increasing, therefore, with everyone at Davos pinning much hope on the ability of the WTO's next major summit, which will be held in the Persian Gulf emirate of Qatar in November, to launch a new trade round.
In an unprecedented move, three former directors-general of the WTO launched a public statement at Davos saying the "public undermining" of the free trade body had gone on long enough and calling on national governments to "stand up for the WTO".
"The most dangerous misconception — at least to the extent that it is taken seriously — is that the system amounts to a conspiracy between large multinational firms and certain governments... It is simply not true", said the statement signed by Peter Sutherland, Arthur Dunkel and Renato Ruggiero.
At a meeting on the fringes of the Davos summit, ministers from Japan, Europe and Australia backed the call for an all-out effort to launch a new round at Qatar, as did current WTO director-general Mike Moore, even while admitting to the Davos gathering that "the playing field is no more level than the world is flat".
Japan's deputy minister for foreign affairs, Yoshiji Nogami, warned: "Nobody wants another Seattle". EU trade commissioner Pascal Lamy even went so far as to tell the conference that the future of the entire multilateral trading system would "probably be decided this year".
But that wasn't the end of it. Corporate leaders complained bitterly that their efforts to be "good corporate citizens" weren't decreasing the heat under their feet.
Monsanto chief Henrik Verfaillie told of how much his company had done to placate its critics but also that they still continued to demonise his company. "Some NGOs always want more and more and keep on moving the borders, so we can never reach understandings", he whined.
Not even the extreme methods used by the Swiss police and military worked very well — sure, the policing made the corporate fat cats feel safer but it was a public relations disaster.
The corporate heavyweights even ended up being taunted about it in their own halls. "Turning Davos into something close to a near police state creates a wonderful press opportunity for us", said Lori Wallach of the US public interest group Public Citizen. "It demonstrates the lack of legitimacy of the globalisation elite."