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Missed Opportunity: Davos' Empty Words
The bright lights at the big confab had plenty to say about the global economy--but was anyone listening?
By DON MORRISON Davos

The Titanic was sinking, and there weren't enough lifeboats. So the captain had to persuade male passengers to jump into the icy waters to make room for women and children. To the British he said, "You must act like gentlemen." They jumped. To the Americans he said, "You can be heroes." They complied. To the Germans he said, "It's the rule." They obeyed. But the Japanese weren't budging--until he came up with this appeal: "It's the consensus."

Masayoshi Son, founder of the Japanese software firm Softbank, told that story during a panel on the Asian financial crisis at last week's annual meeting of the World Economic Forum in Davos, Switzerland. He advised that the United States could get the Japanese to do what it wants by creating a consensus for action, or at least convincing the Japanese that one exists. Yet U.S. officials at the Davos talkfest seemed to have missed that message. Though Japan has in recent weeks finally begun to take the kinds of steps its critics have demanded--curbing the power of bureaucrats, spending heavily to strengthen its banks, generally reflating the economy--the U.S. continued to bash Japan. When Eisuke Sakakibara, the vice minister of finance known as "Mr. Yen," proudly enumerated his country's recent moves, U.S. Deputy Treasury Secretary Larry Summers sniffed that he had been hearing such promises for years and would believe them only when he saw results.

Was anybody listening to anybody at Davos? For much of the past three decades, the World Economic Forum has invited the crowned heads of business, government and academe to discuss the world's problems in a week of seminars, brainstorming sessions, plenary addresses, press briefings, breakfasts, lunches, dinners, teas, nightcaps and bilaterals (Davos-speak for private meetings between two important people, as if there were any other kind). This year more than 2,000 such worthies descended on this snow-draped Alpine town (pop. 13,000) and its quaintly austere lodgings. "This is a one-star hotel," a proprietress told a U.S. newspaper columnist when he complained about the absence of amenities in his closet-sized room. "If you want soap, that's a two-star hotel."

In past years, true dialogue has been known to break out at Davos. The modern global consensus toward free trade and open markets got its start, or at least a significant nudge, at earlier Davos confabs. Israelis and Palestinians have held helpful bilaterals in the town's hotel suites, as have many civil war combatants, trade war disputants and commercial rivals. But this year everybody seemed to be talking past each other. The U.S., bursting with hubris over its booming equity markets and its just-announced 5.6% fourth-quarter growth figure (was that disclosure timed to coincide with Davos?), wouldn't give anybody else any credit, least of all Japan. The Europeans were busy congratulating themselves over last month's successful introduction of the euro. Stanley Fischer, the International Monetary Fund's first deputy managing director, was preoccupied with defending the IMF's bumbling at the outbreak of the Asian financial crisis. Malaysia's Prime Minister Mahathir Mohamad repeated his call for controls on short-term capital flows, and this time his audiences were supportive. But they were divided on how to accomplish that task--and unhappy at Mahathir's disparaging remarks about his jailed former deputy Anwar Ibrahim, a favorite among the Davos crowd, and at Mahathir's suggestion that Jews played a role in Malaysia's financial crisis. Soviet Prime Minister Yevgeni Primakov summed up the shortage of listeners: "A man is handed a letter from his wife. He opens it to find a blank page. 'How can that be?' he is asked. 'That's all right,' he replies. 'We never talk.'"

Much of the talk at Davos was about the need for a new global financial architecture, but nobody seemed to know where to begin. Bundesbank President Hans Tietmeyer announced he would recommend that the Group of Seven industrial nations form a committee of financial regulators to exchange information and track potential problems before they hit. U.S. Treasury Secretary Robert Rubin seemed to back away from that notion and denounced several other suggested fixes, like creating target zones for major currencies and pre-qualifying shaky economies for aid. "There are currently no good answers," the former Wall Street trader said helpfully. Quipped Charles Dallara, managing director of Washington's Institute of International Finance: "Nobody seems to know whether we need an architect, a carpenter, an electrician or a plumber."

Or a traffic cop. Much of the seeming lack of consensus may have stemmed from the sheer size and star-power that Davos now attracts: in addition to the aforementioned luminaries, the cast this year included U.S. Vice President Al Gore (who called for freer trade and an end to farm subsidies), Singapore's Senior Minister Lee Kuan Yew (dispensing wisdom on a wide range of topics), Hong Kong Chief Executive Tung Chee-hwa (a hit in his Davos debut, though without offering many ideas), Sri Lankan President Chandrika Kumaratunga (valiantly selling her war-hobbled country as an investment destination), South African President Nelson Mandela (who could get a standing ovation just by walking into a room), unemployed politician Newt Gingrich (a Davos regular, ever full of ideas), Time Warner honcho Ted Turner (charmingly outrageous in his role as United Nations booster), Monaco's Prince Albert and Britain's Princess Anne (promoting various good causes), Nobel Prize-winning economist Amartya Sen and U.N. chief Kofi Annan (each warning of globalization's heavy toll on the poor) and a host of entertainment-industry figures, including Warren Beatty, Jane Fonda and movie producers Volker Schlondorff, David Putnam and Michael Medavoy.

PAGE 1  |  2




Daily

February 15, 1999

The Committee to Save the World
Does superpower status now mean keeping the globe's financial systems on track? And is the trio of Greenspan, Rubin and Summers up to the task?


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