The mood at the annual summit of the World Economic Forum at Davos, Switzerland last month could not have been more different from earlier years. Until last year, not many political or business leaders, of any nationality or political dispositions, missed the poster event of globalization and free markets. Despite the freezing weather, they have flocked every year without fail to grasp the ultimate opportunity to network among those in high places. Session after session, they talked eloquently about the increasing irrelevance of national borders and nationalities, and how the world is becoming, or has already become, flat.
The relatively thin attendance and the striking change in topics discussed this year were a testimony to the dramatic change in the global economic environment over the last year. In the midst of one of the most difficult phases the global economy has faced in decades, when every government is scrambling to kick-start stimulus measures and bailout big firms, it would have been anachronistic to talk about self-discipline in free markets, or creating shareholder wealth. So the debate topics reflected the current thinking that free markets do need active intervention from governments; that stricter regulation need not be bad for the markets; and even nationalization of large financial firms may be necessary for a while.
As expected, most political leaders favored increased protectionism to save their domestic economies, though there were a select few who continued to argue for free trade and increased globalization. Some leaders from emerging countries took the opportunity to take potshots at the western free market model, conveniently ignoring the fact that their economies did benefit enormously from the global economic expansion and high commodity prices in the recent past. Apart from the few who expressed their frustration about the slow pace of government actions, most business leaders chose to swim with the flow.
Yet, it would be a mistake to abandon much of what Davos stood for until last year, embracing trade protectionism, and slowing the pace of global economic integration. Many who attended the summit this year realize that this crisis is an opportunity to fine-tune the globalization process and make it more sustainable. We need not revert back to higher trade barriers. How to present this case and argue in its favor in the face of unfavorable public opinion is a dilemma that may preoccupy Davos next year as well.
Postcards from Around the World
Subscribe to get our global publications by email.