The Players

Richard Branson's Davos Report

2009-01-31T16:25:37Z

Davos Dispatch: 'Every Time a Bell Rings...'

2009-01-30T18:05:04Z

Davos Dispatch: What Davos and 'Star Wars' Have in Common

2009-01-30T18:03:05Z

Davos Dispatch: Day Two

2009-01-30T18:01:57Z

The Spirit of Davos

2009-01-30T15:22:37Z

Like the carpet in my room at the Club Hotel, the Spirit of Davos is getting a little frayed this year. The overwhelming mood here is one not so much of gregarious friendship—this is Switzerland, after all—but of civility and politesse, a certain consideration. In the real world, when a CEO or private equity bigshot doesn't want to talk to a reporter, his PR person will (sometimes rudely) say no. Here, they'll make pleasant chit-chat, give you an off the record quote or two, and move on. Davos is like a large, mobile country club. And there are certain things country club members just don't do to one another—like embarrassing one another socially or financially. (Ahem, Mr. Madoff)

But the rising financial and geopolitical stress have made it difficult to maintain the veneer of civility. The big news from last night? A well-attended forum on the Middle East, featuring Shimon Peres of Israel and Turkish Prime Minister Recep Tayyip Erdogan, ended in a storm of controversy. Erdogan left the stage in a fit of pique, arguing that Peres's impassioned defense of Israel's Gaza offensive—at one point he asked Erdogan how Turkey would respond if it were attacked in a similar manner—was "in a manner not in line with. . . the spirit of Davos." He was also angered that moderator David Ignatius of the Washington Post had tried to keep him within prescribed time limits while Peres had spoken at length. Erdogan said he'd never return. Two things: First, Turkey and Israel, it will be recalled, are supposed to be allies. Second, droning on beyond allotted time frames isn't rude at Davos. It's a sign of Davos Man's virility. That's what people do here. They talk—a lot, and at length. If people angered at the inadequate speaking time allotted them and the over-generous speaking time allotted rivals were to start boycotting the World Economic Forum en masse, next year's edition could safely be held in a Starbucks in Cambridge, Mass.

The less-than-generous spirit could be seen elsewhere. I had dinner with a group of executives in the airline, shipping, and auto industries, where (ALERT!: NAME DROP WARNING!) I was seated near Nissan's worldly and sharp CEO Carlos Ghosn. During the evening, an Indian industrialist, prefacing his remarks by saying that he didn't want to be on the record criticizing competitors, went on to make the case as to how one of India's most well-known industrial names had made a series of poor decisions and would probably need a bailout.

Make no mistake, the Good Time Charlies are still here. At a paparazzi-packed lunch on philanthropy, Bill Clinton and Tony Blair provided a double-shot of charisma, bonhomie, and humor. But they made introductory remarks and quickly left together. Shorn of their offices, Clinton and Blair have been reduced to bit players on the global stage. And so the spirit of these cuddly politicians, who craved affection, no longer dominates. Instead, the large geopolitical presences here are brooding, stand-offish—Chinese premiere Wen Jiabao and Russia's Vladimir Putin. Putin has proven himself to be not particularly clubbable. A few weeks ago, in the dead of winter, he essentially turned off the supply of heating fuel to much of Europe.

Even though we're in the German-speaking part of Switzerland, schadenfreude is a sentiment that is generally frowned upon. At Davos, the powerful and wealthy congratulate themselves for taking time out of their busy schedules to ponder the plight of the less fortunate. One of the events organized by a non-government organization is the "Refugee Run," a simulation of life as a refugee, complete with hostile, armed rebels, power outages, and barbed wire. (My politically incorrect first thought on reading about the event: I don't need to travel 4,000 miles to see shell-shocked people living hand-to-mouth. I work for a media company.) And yet, in the hallways and in the plenary sessions at the private dinners and in the informal cocktail hours, there has been an avalanche of schadenfreude over the travails of Wall Street. At a dinner Wednesday night, as noted, "Black Swan" author Nassim Nicholas Taleb, his gray beard set off by a black turtleneck, was positively giddy over the failure of Lehman Brothers—not just because he may have profited from the volatility in the financial sector but because it gave this preening smart guy great pleasure to see so many stupid people who had enjoyed unwarranted success prosper. His next book should be a memoir: The Gray Peacock. Ah, the spirit of Davos.

One Bright Spot

2009-01-30T07:34:56Z

There has been much hand wringing here about the specter of protectionism, and in particular about the "Buy American" plan in Barack Obama's $819 billion stimulus package, which passed the House of Representatives this week. The fear is that it will trigger a round of protectionist policies in countries throughout the world, and it only added to the sense of economic gloom that has pervaded this year's forum. But there is one bright spot amid the despair: executives here from the renewable energy sector are confident that business will be just fine. After all, built into the stimulus package are billions of dollars worth of tax credits and incentives for solar, wind and other alternative energy companies.

One Countercyclical Business

2009-01-29T18:33:42Z

Spend a day or two here, and it seems that every business, in every sector, in every geographic area, is suffering. There seem to be no safe havens, and few truly countercyclical industries this time around. But I think I may have found one: white-collar networking. Reid Hoffman, the CEO of LinkedIn, says that the site, essentially a networking site for yuppies, is expanding rapidly. It has 34 million members, and is adding one million every 17 days. Advertising is holding up. Hoffman expects revenues and employment to rise in 2009, and expects the company to be profitable. “Networking is cycle resistant,” Hoffman said. “In an environment with lots of jobs and few free employees, people feel a need for LinkedIn and the access it offers. And in a market with lots of employers and few jobs, members feel like they need it.” Membership growth, in other words, is tied in part to white-collar job anxiety. “It was interesting to see all the people from Lehman Brothers join” after the company went bankrupt in September, Hoffman said.

The World According to Putin

2009-01-29T16:39:58Z

There were two views on Russian Prime Minister Vladimir Putin's speech at the World Economic Forum Wednesday evening (text posted below). The first, expressed in this morning's International Herald Tribune, was that Putin "struck a conciliatory tone" with the West, talking about "mutual interests" and "mutual dependencies" rather than pounding the drum against the West. The second is that the speech was essentially a pack of lies coming from a man who has proved time and again that any talk of mutual dependence and foreign investment masked the vast human rights abuses in his own country, a history of pushing foreigners out and his aggression toward neighbors and other world leaders. According to the Financial Times, he "mocked the American delegates" in attendance.

Both views are wrong. If anything, Putin's speech yesterday was surprising because he had an audience of some of the most important people in the world, yet managed to say virtually nothing that hadn't been heard before. He sounded familiar themes about energy security, the need for regional reserve currencies and his desire to build new international structures that are better equipped to deal with the crises like the one now at hand. Indeed, his only tough remark was aimed at Michael Dell, in response to a question from Dell about how his company (and the technology sector more broadly) could help Russia. "We don't need help. We are not invalids," Putin said.

But those who walked away with the view that Putin's tone was either conciliatory or mocking missed the point of the Russian prime minister's speech altogether. What he was stating in bold, sometimes blunt terms, is his view that Russia is a big, confident player in the world and therefore ought to receive respect from other sovereign nations. In this view, what's needed to solve Russia and the world's problems is more cooperation among all the big countries -- Russia included. In other words, as Putin told Dell, Russia does not want "help"; it wants its interests to be understood and taken into account. A simple message, and those who try to read more deeply into it do so at their peril.

Prime Minister Vladimir Putin’s speech at the opening ceremony of the World Economic Forum

Davos, Switzerland

January 28, 2009

Good afternoon, colleagues, ladies and gentlemen,

I would like to thank the forum’s organisers for this opportunity to share my thoughts on global economic developments and to share our plans and proposals.

The world is now facing the first truly global economic crisis, which is continuing to develop at an unprecedented pace.

The current situation is often compared to the Great Depression of the late 1920s and the early 1930s. True, there are some similarities.

However, there are also some basic differences. The crisis has affected everyone at this time of globalisation. Regardless of their political or economic system, all nations have found themselves in the same boat.

There is a certain concept, called the perfect storm, which denotes a situation when Nature’s forces converge in one point of the ocean and increase their destructive potential many times over. It appears that the present-day crisis resembles such a perfect storm.

Responsible and knowledgeable people must prepare for it. Nevertheless, it always flares up unexpectedly.

The current situation is no exception either. Although the crisis was simply hanging in the air, the majority strove to get their share of the pie, be it one dollar or a billion, and did not want to notice the rising wave.

In the last few months, virtually every speech on this subject started with criticism of the United States. But I will do nothing of the kind.

I just want to remind you that, just a year ago, American delegates speaking from this rostrum emphasised the US economy’s fundamental stability and its cloudless prospects. Today, investment banks, the pride of Wall Street, have virtually ceased to exist. In just 12 months, they have posted losses exceeding the profits they made in the last 25 years. This example alone reflects the real situation better than any criticism.

The time for enlightenment has come. We must calmly, and without gloating, assess the root causes of this situation and try to peek into the future.

In our opinion, the crisis was brought about by a combination of several factors.

The existing financial system has failed. Substandard regulation has contributed to the crisis, failing to duly heed tremendous risks.

Add to this colossal disproportions that have accumulated over the last few years. This primarily concerns disproportions between the scale of financial operations and the fundamental value of assets, as well as those between the increased burden on international loans and the sources of their collateral.

The entire economic growth system, where one regional centre prints money without respite and consumes material wealth, while another regional centre manufactures inexpensive goods and saves money printed by other governments, has suffered a major setback.

I would like to add that this system has left entire regions, including Europe, on the outskirts of global economic processes and has prevented them from adopting key economic and financial decisions.

Moreover, generated prosperity was distributed extremely unevenly among various population strata. This applies to differences between social strata in certain countries, including highly developed ones. And it equally applies to gaps between countries and regions.

A considerable share of the world’s population still cannot afford comfortable housing, education and quality health care. Even a global recovery posted in the last few years has failed to radically change this situation.

And, finally, this crisis was brought about by excessive expectations. Corporate appetites with regard to constantly growing demand swelled unjustifiably. The race between stock market indices and capitalisation began to overshadow rising labour productivity and real-life corporate effectiveness.

Unfortunately, excessive expectations were not only typical of the business community. They set the pace for rapidly growing personal consumption standards, primarily in the industrial world. We must openly admit that such growth was not backed by a real potential. This amounted to unearned wealth, a loan that will have to be repaid by future generations.

This pyramid of expectations would have collapsed sooner or later. In fact, this is happening right before our eyes.

* * *

Esteemed colleagues,

One is sorely tempted to make simple and popular decisions in times of crisis. However, we could face far greater complications if we merely treat the symptoms of the disease.

Naturally, all national governments and business leaders must take resolute actions. Nevertheless, it is important to avoid making decisions, even in such force majeure circumstances, that we will regret in the future.

This is why I would first like to mention specific measures which should be avoided and which will not be implemented by Russia.

We must not revert to isolationism and unrestrained economic egotism. The leaders of the world’s largest economies agreed during the November 2008 G20 summit not to create barriers hindering global trade and capital flows. Russia shares these principles.

Although additional protectionism will prove inevitable during the crisis, all of us must display a sense of proportion.

Excessive intervention in economic activity and blind faith in the state’s omnipotence is another possible mistake.

True, the state’s increased role in times of crisis is a natural reaction to market setbacks. Instead of streamlining market mechanisms, some are tempted to expand state economic intervention to the greatest possible extent.

The concentration of surplus assets in the hands of the state is a negative aspect of anti-crisis measures in virtually every nation.

In the 20th century, the Soviet Union made the state’s role absolute. In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.

Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.

And one more point: anti-crisis measures should not escalate into financial populism and a refusal to implement responsible macroeconomic policies. The unjustified swelling of the budgetary deficit and the accumulation of public debts are just as destructive as adventurous stock-jobbing.

* * *

Ladies and gentlemen,

Unfortunately, we have so far failed to comprehend the true scale of the ongoing crisis. But one thing is obvious: the extent of the recession and its scale will largely depend on specific high-precision measures, due to be charted by governments and business communities and on our coordinated and professional efforts.

In our opinion, we must first atone for the past and open our cards, so to speak.

This means we must assess the real situation and write off all hopeless debts and “bad” assets.

True, this will be an extremely painful and unpleasant process. Far from everyone can accept such measures, fearing for their capitalisation, bonuses or reputation. However, we would “conserve” and prolong the crisis, unless we clean up our balance sheets. I believe financial authorities must work out the required mechanism for writing off debts that corresponds to today’s needs.

Second. Apart from cleaning up our balance sheets, it is high time we got rid of virtual money, exaggerated reports and dubious ratings. We must not harbour any illusions while assessing the state of the global economy and the real corporate standing, even if such assessments are made by major auditors and analysts.

In effect, our proposal implies that the audit, accounting and ratings system reform must be based on a reversion to the fundamental asset value concept. In other words, assessments of each individual business must be based on its ability to generate added value, rather than on subjective concepts. In our opinion, the economy of the future must become an economy of real values. How to achieve this is not so clear-cut. Let us think about it together.

Third. Excessive dependence on a single reserve currency is dangerous for the global economy. Consequently, it would be sensible to encourage the objective process of creating several strong reserve currencies in the future. It is high time we launched a detailed discussion of methods to facilitate a smooth and irreversible switchover to the new model.

Fourth. Most nations convert their international reserves into foreign currencies and must therefore be convinced that they are reliable. Those issuing reserve and accounting currencies are objectively interested in their use by other states.

This highlights mutual interests and interdependence.

Consequently, it is important that reserve currency issuers must implement more open monetary policies. Moreover, these nations must pledge to abide by internationally recognised rules of macroeconomic and financial discipline. In our opinion, this demand is not excessive.

At the same time, the global financial system is not the only element in need of reforms. We are facing a much broader range of problems.

This means that a system based on cooperation between several major centres must replace the obsolete unipolar world concept.

We must strengthen the system of global regulators based on international law and a system of multilateral agreements in order to prevent chaos and unpredictability in such a multipolar world. Consequently, it is very important that we reassess the role of leading international organisations and institutions.

I am convinced that we can build a more equitable and efficient global economic system. But it is impossible to create a detailed plan at this event today.

It is clear, however, that every nation must have guaranteed access to vital resources, new technology and development sources. What we need is guarantees that could minimise risks of recurring crises.

Naturally, we must continue to discuss all these issues, including at the G20 meeting in London, which will take place in April.

* * *

Our decisions should match the present-day situation and heed the requirements of a new post-crisis world.

The global economy could face trite energy-resource shortages and the threat of thwarted future growth while overcoming the crisis.

Three years ago, at a summit of the Group of Eight, we raised the issue of global energy security. We called for the shared responsibility of suppliers, consumers and transit countries. I think it is time to launch truly effective mechanisms ensuring such responsibility.

The only way to ensure truly global energy security is to form interdependence, including a swap of assets, without any discrimination or dual standards. It is such interdependence that generates real mutual responsibility.

Unfortunately, the existing Energy Charter has failed to become a working instrument able to regulate emerging problems.

I propose we start laying down a new international legal framework for energy security. Implementation of our initiative could play a political role comparable to the treaty establishing the European Coal and Steel Community. That is to say, consumers and producers would finally be bound into a real single energy partnership based on clear-cut legal foundations.

Every one of us realises that sharp and unpredictable fluctuations of energy prices are a colossal destabilising factor in the global economy. Today’s landslide fall of prices will lead to a growth in the consumption of resources.

On the one hand, investments in energy saving and alternative sources of energy will be curtailed. On the other, less money will be invested in oil production, which will result in its inevitable downturn. Which, in the final analysis, will escalate into another fit of uncontrolled price growth and a new crisis.

It is necessary to return to a balanced price based on an equilibrium between supply and demand, to strip pricing of a speculative element generated by many derivative financial instruments.

To guarantee the transit of energy resources remains a challenge. There are two ways of tackling it, and both must be used.

The first is to go over to generally recognised market principles of fixing tariffs on transit services. They can be recorded in international legal documents.

The second is to develop and diversify the routes of energy transportation. We have been working long and hard along these lines.

In the past few years alone, we have implemented such projects as the Yamal-Europe and Blue Stream gas pipelines. Experience has proved their urgency and relevance.

I am convinced that such projects as South Stream and North Stream are equally needed for Europe’s energy security. Their total estimated capacity is something like 85 billion cubic meters of gas a year.

Gazprom, together with its partners – Shell, Mitsui and Mitsubishi – will soon launch capacities for liquefying and transporting natural gas produced in the Sakhalin area. And that is also Russia’s contribution to global energy security.

We are developing the infrastructure of our oil pipelines. The first section of the Baltic Pipeline System (BPS) has already been completed. BPS-1 supplies up to 75 million tonnes of oil a year. It does this direct to consumers – via our ports on the Baltic Sea. Transit risks are completely eliminated in this way. Work is currently under way to design and build BPS-2 (its throughput capacity is 50 million tonnes of oil a year.

We intend to build transport infrastructure in all directions. The first stage of the pipeline system Eastern Siberia – Pacific Ocean is in the final stage. Its terminal point will be a new oil port in Kozmina Bay and an oil refinery in the Vladivostok area. In the future a gas pipeline will be laid parallel to the oil pipeline, towards the Pacific and China.

* * *

Addressing you here today, I cannot but mention the effects of the global crisis on the Russian economy. We have also been seriously affected.

However, unlike many other countries, we have accumulated large reserves. They expand our possibilities for confidently passing through the period of global instability.

The crisis has made the problems we had more evident. They concern the excessive emphasis on raw materials in exports and the economy in general and a weak financial market. The need to develop a number of fundamental market institutions, above all of a competitive environment, has become more acute.

We were aware of these problems and sought to address them gradually. The crisis is only making us move more actively towards the declared priorities, without changing the strategy itself, which is to effect a qualitative renewal of Russia in the next 10 to 12 years.

Our anti-crisis policy is aimed at supporting domestic demand, providing social guarantees for the population, and creating new jobs. Like many countries, we have reduced production taxes, leaving money in the economy. We have optimised state spending.

But, I repeat, along with measures of prompt response, we are also working to create a platform for post-crisis development.

We are convinced that those who will create attractive conditions for global investment already now and will be able to preserve and strengthen sources of strategically meaningful resources will become leaders of the restoration of the global economy.

This is why among our priorities we have the creation of a favourable business environment and development of competition; the establishment of a stable loan system resting on sufficient internal resources; and implementation of transport and other infrastructure projects.

Russia is already one of the major exporters of a number of food commodities. And our contribution to ensuring global food security will only increase.

We are also going to actively develop the innovation sectors of the economy. Above all, those in which Russia has a competitive edge – space, nuclear energy, aviation. In these areas, we are already actively establishing cooperative ties with other countries. A promising area for joint efforts could be the sphere of energy saving. We see higher energy efficiency as one of the key factors for energy security and future development.

We will continue reforms in our energy industry. Adoption of a new system of internal pricing based on economically justified tariffs. This is important, including

for encouraging energy saving. We will continue our policy of openness to foreign investments.

I believe that the 21st century economy is an economy of people not of factories. The intellectual factor has become increasingly important in the economy. That is why we are planning to focus on providing additional opportunities for people to realise their potential.

We are already a highly educated nation. But we need for Russian citizens to obtain the highest quality and most up-to-date education, and such professional skills that will be widely in demand in today’s world. Therefore, we will be pro-active in promoting educational programmes in leading specialities.

We will expand student exchange programmes, arrange training for our students at the leading foreign colleges and universities and with the most advanced companies. We will also create such conditions that the best researchers and professors – regardless of their citizenship – will want to come and work in Russia.

History has given Russia a unique chance. Events urgently require that we reorganise our economy and update our social sphere. We do not intend to pass up this chance. Our country must emerge from the crisis renewed, stronger and more competitive.

* * *

Separately, I would like to comment on problems that go beyond the purely economic agenda, but nevertheless are very topical in present-day conditions.

Unfortunately, we are increasingly hearing the argument that the build-up of military spending could solve today’s social and economic problems. The logic is simple enough. Additional military allocations create new jobs.

At a glance, this sounds like a good way of fighting the crisis and unemployment. This policy might even be quite effective in the short term. But in the longer run, militarisation won’t solve the problem but will rather quell it temporarily. What it will do is squeeze huge financial and other resources from the economy instead of finding better and wiser uses for them.

My conviction is that reasonable restraint in military spending, especially coupled with efforts to enhance global stability and security, will certainly bring significant economic dividends.

I hope that this viewpoint will eventually dominate globally. On our part, we are geared to intensive work on discussing further disarmament.

I would like to draw your attention to the fact that the economic crisis could aggravate the current negative trends in global politics.

The world has lately come to face an unheard-of surge of violence and other aggressive actions, such as Georgia’s adventurous sortie in the Caucasus, recent terrorist attacks in India, and escalation of violence in Gaza Strip. Although not apparently linked directly, these developments still have common features.

First of all, I am referring to the existing international organisations’ inability to provide any constructive solutions to regional conflicts, or any effective proposals for interethnic and interstate settlement. Multilateral political mechanisms have proved as ineffective as global financial and economic regulators.

Frankly speaking, we all know that provoking military and political instability, regional and other conflicts is a helpful means of distracting the public from growing social and economic problems. Such attempts cannot be ruled out, unfortunately.

To prevent this scenario, we need to improve the system of international relations, making it more effective, safe and stable.

There are a lot of important issues on the global agenda in which most countries have shared interests. These include anti-crisis policies, joint efforts to reform international financial institutions, to improve regulatory mechanisms, ensure energy security and mitigate the global food crisis, which is an extremely pressing issue today.

Russia is willing to contribute to dealing with international priority issues. We expect all our partners in Europe, Asia and America, including the new US administration, to show interest in further constructive cooperation in dealing with all these issues and more. We wish the new team success.

* * *

Ladies and gentlemen,

The international community is facing a host of extremely complicated problems, which might seem overpowering at times. But, a journey of thousand miles begins with a single step, as the proverb goes.

We must seek foothold relying on the moral values that have ensured the progress of our civilisation. Integrity and hard work, responsibility and self-confidence will eventually lead us to success.

We should not despair. This crisis can and must be fought, also by pooling our intellectual, moral and material resources.

This kind of consolidation of effort is impossible without mutual trust, not only between business operators, but primarily between nations.

Therefore, finding this mutual trust is a key goal we should concentrate on now.

Trust and solidarity are key to overcoming the current problems and avoiding more shocks, to reaching prosperity and welfare in this new century.

Thank you.

Davos Dispatch: 'Somber and Grim'

2009-01-29T16:38:16Z

The Financial Crisis and the Underworld

2009-01-29T16:33:29Z

Trying to get a break from all financial crisis, all the time, I went to a dinner discussion about global organized crime last night. The worry among international prosecutors, crime-fighting agencies and anti-corruption NGOs was that the world’s attention is shifting away from drugs smuggling, human trafficking or the $1 trillion sucked up by bribes and corruption each year. Paris, London and Geneva continue to be shopping paradises for kleptocrat dictators, their families and cronies. With roughly 20 percent of global GDP produced by criminal activity, there was agreement that the situation wasn’t getting any better – even though efforts to fight international crime and corruption have multiplied since the 1990s.

And it turns out that even the underworld is feeling the effects of the crisis – but unfortunately, it’s not exactly cyclical decline. Leisure activities such as prostitution and recreational drug use usually do decline in a downturn, as disposable incomes drop and unemployment rises. For the same reason, counterfeiters should see a boom as consumers economize with cheap fakes in clothing, electronics or medicines. Another big worry among some of the experts was that the giant spigots of government cash (bailouts, subsidies, stimulus programs) opening up in more and more countries around the world are sure to encourage all kinds of illicit rent-seeking, such as bribes or political “donations” in return for subsidies.

If anything, the crisis seems to have already sparked the creativity of criminal organizations. With credit in such short supply, guess who’s stepping in to provide it? According to a November survey by Confesercenti, the Italian association of small-business owners, the crisis has led to a surge in mafia loan sharking, as Italian shopkeepers and restaurant owners find they can’t get loans from their local banks. In just the past year, the number of Italian businesses getting loans from mafia organizations like the Camorra or ‘Ndrangheta is up by 20 percent, from 150,000 to 180,000. In the underworld, there is always fresh cash that needs a place to go. And defaults don’t seem to be much of a problem, either.

Redefining Terrorism

2009-01-29T12:49:58Z

Turkish Prime Minister Recep Tayyip Erdogan has taken heat from Jewish groups and others for his tough remarks about Israel, remarks that his critics say helped spark a recent upsurge in sometimes violent anti-Semitism in Turkey. At a briefing this morning, Erdogan said Israel used "disproportionate force" in its campaign in Gaza, but insisted that those people who have tried to portray him or his country as anti-Semitic are doing an "injustice." He also said something that is perhaps more provocative, although in a different way. He called upon Barack Obama to "redefine" the meaning of terrorist and terrorist organizations in the Middle East, and develop a new U.S. policy in the region based on this definition. What should this definition be? Erdogan sidestepped the question--one of the most politically emotional questions one can pose--but merely by raising it again, this time in the context of Gaza, he has perhaps ensured that it won't go away anytime soon.

Wall Street Bigshots: Conspicuous By Their Absence

2009-01-29T00:59:56Z

At a large mid-day session hosted by CNBC’s Maria Bartiromo – think of a combination of the old Phil Donahue show and a hanging party – groups of Davosers (Davosites?) sat around tables and tried to affix blame for the debacle. The group was asked to assess questions such as: What was the greatest market failure? And what was the greatest regulatory failure. There was a lot of talk about failed models and regulatory regimes with poor incentives. But there was little talk of who was to blame.

At one point, somebody stood up and said, “It’s intriguing nobody is to blame. In other industries, there are consequences if you make toxic products that hurt people. Policy makers need to make it clear that there are serious consequences for that type of behavior.”

Big applause!

And yet aside from the odd mention of Alan Greenspan and an oblique reference to Robert Rubin, the former Treasury Secretary who became a senior executive at Citigroup, there was little talk of individual players who bore responsibility. Of course, you can make the case that the people who caused the damage have been punished: they didn’t’ get to go to Davos this year. Last year, Davos was thick with investment bankers and hedge fund managers. This year, the only true Wall Street bigshot I’ve seen is Stephen Schwarzman of the Blackstone Group.

It's OK, We're With The Government

2009-01-28T16:01:37Z

One of the big themes emerging from the World Economic Forum this year is the reemergence of the state. Wall Street titans are noticeably missing here and forum promoters boast of the record number of heads of state and government in attendance. But if these folks are meant to come up with solutions to the financial mess, one striking problem keeps emerging: they are not trusted by the electorate. Ukraine faces one of the steepest drops in economic growth in all Europe, while its president, Viktor Yushchenko, reportedly suffers from something on the order of a 2 percent approval rating. (He apparently bowed out of coming to Davos at the last minute; draw your own conclusions as to why.) In a panel on the state of Europe, Latvian President Valdis Zatlers said his country is going to go from 12 percent growth in 2007 to a 5 percent drop this year. According to one recent report, "the Latvian government's approval ratings have dropped to 10 percent, the worst in the EU," and Latvians have already taken to the streets in violent protest. The question now, for countries both small and large, is just how much time governments have to start turning things around before things start to turn ugly. Aside from the possibility of more widespread protests, the big fear voiced here in Davos is a turn to populism, protectionism and beggar-thy-neighbor policies, which may have a short term political benefit, but will only worsen the underlying economic problems.

LOOKING FOR THE GREEN

2009-01-28T14:49:35Z

Every year, Davos is about the green (i.e. money). In recent years, with the rise of eco-consciousness, alternative energy, sustainability, and concerns about global warming, it’s also been about the other type of green (i.e. the environment). Last year, for example, the large British bank Barclays offered to purchase an offset for the carbon emitted by people traveling to attend the conference. (It didn’t offer to do anything about all the hot air emitted in the Congress Center). But this year, showy displays of green thinking have declined sharply. Barclays, hit hard by the credit crisis, is saving pence to offset the toxic emissions of bad debt. And with the price of oil and coal having plummeted, there’s less concern about how reliance on fossil fuels hinders development.

But one of the leading advocates of a global response to climate change says this is now time to shift priorities. I ran into Nicholas Stern, the British academic and former chief economist at the World Bank who headed up a huge investigation into the costs and economics of climate change. While the attention being paid to emissions and global warming is down this year, he’s convinced the focus on recovery can advance the fight against emissions. “All the evidence over the last year suggests that the problem is more worrying than we thought, that it’s getting worse,” he said. “But the evidence also shows that if we use opportunities and technology, and if we act strongly, we can manage the risks.” As governments contemplate a global coordinated stimulus, Stern argued “we should use this moment to invest in what would be the growth story in the next 20 years – low carbon, efficiency.” Insulating homes and buildings and stepping up investments in carbon capture make even more sense now that the price of many materials have fallen. “It makes eminent sense to make the recovery green,” he said. “I would suggest that if the world needs a $2 trillion fiscal boost, that something around $400 billion could be in the green area.” In the scheme of the problems being discussed at Davos this year, $400 billion actually doesn’t sound like that much money.

Looking for Mr. Goodnews -- 2

2009-01-28T14:18:33Z

As Dan Gross posted on this blog yesterday, optimistic CEOs are going to be hard to find at Davos this year. How hard is what PricewaterhouseCoopers tried to answer last night with their traditional pre-Davos release of the Annual Global CEO Survey. The key results from 1,124 CEOs surveyed between September and December 2008 in over 50 countries and across all major industries:

- CEOs are focusing on survival, not growth. Only 21 percent of CEOs worldwide are confident that their companies’ revenues will grow in the next 12 months, a plunge from 50 percent last year. Seventy percent say their companies are affected by the credit crisis, 70 percent of those are delaying investment as a result.

- Decoupling (one of the now-defunct themes discussed at Davos last year) is dead. Just 15 percent of U.S. and Western European CEOs had confidence in revenue growth, compared to 31 percent in Asia, 21 percent in Latin America, and 21 percent as well in emerging Europe. The plunge in confidence from a year ago was much sharper among emerging-market CEOs than in the developed world. The only break in the gloom is India, where 70 percent of CEOs still have high confidence in growth.

- CEOs clearly expect a slow recovery at best – three years from now, only 34 percent of CEOs are confident in revenue growth, down from 43 percent last year.

- The one surprising piece of good news: only a quarter of CEOs said they plan to cut staff in 2009.

It’s a grim backdrop for this year’s gathering.