Davos Man Looks East

January 29, 2010 - The official title of this year’s World Economic Forum is “Rethink, Redesign, Rebuild,” a clear reference to the need for fundamental reforms in the wake of the financial crisis. But to judge by the mood of the business chieftains and bankers at the forum, a better slogan might be, “Go east young man (and woman).”

The shift in economic power and confidence from the West to the East has been a running theme throughout the meeting’s first three days. Evidence is tangibly on display, from the lavish receptions thrown by India and by the Chinese city of Tianjin to the major address on Thursday by Li Keqiang, the Chinese vice premier who many believe will succeed Wen Jiabao as premier in 2012.

Li didn’t exactly make news, faithfully reiterating Beijing’s stated policy of aiming to shift to a more consumer-oriented society, but he did so in a confident fashion that seem designed to underscore China’s claim to economic leadership. “As we stand at a historic juncture, we must change the old way of inefficient growth and transform the current development model that is excessively reliant on investment and exports,” he said. “The growth in domestic consumption in China will not only drive growth in China but also provide greater markets for the world.”

By contrast, European leaders spent much of Thursday trying to rebuff market speculation about a possible debt default by Greece. The U.S. government, meanwhile, was notable only by its virtual absence. Ahead of an appearance later Friday by Lawrence Summers, President Barack Obama’s chief economic adviser, the only real U.S. spokesman here was Barney Frank, the chairman of the House of Representative’s Financial Services Committee.

Frank has appeared on numerous panels, making the case for tough financial regulation and expressing wholehearted support for the administration’s latest plan to sharply restrict the investment and trading activities of big banks. More sriking, he repeatedly criticized U.S. military spending at one session on Friday, offering comments that seemed to reflect a new sense of doubt and introspection by the world’s superpower. At a televised BBC debate, he said the U.S. had wasted $1 trillion on the war in Iraq and had limited resources to combat the economic downturn. Washington needs to cut military spending and tell the rest of the world, “Don’t look to us to maintain the order,” he said.

For their part, the talk among business leaders here is all about opportunities in fasts-growing markets like China, India and Brazil. In the West, cost-cutting rather than investment is still the order of the day. Even news that the preliminary estimate of U.S. fourth quarter growth came in at 5.7 percent did little to lift spirits.

“The underlying story is a shift in the balance of power,” said Gerald Lyons, chief economist at Standard Chartered Bank. “Wealth creation is now going to the East. That is where the jobs are likely to be created.”

A Frank Exchange
An odd couple shares the stage during Wednesday’s global macroeconomic policy debate.

A Banker's Warning
Bankers and regulators square off at Davos. Round one goes to the banks.

Shifting Fortunes in Davos
Emerging markets take center stage while bankers fight a rearguard battle against tigher regulation.

Raising the Curtain at Davos
The World Economic Forum’s theme this year – “Rethink, redesign, rebuild” – is tailor-made for business leaders and government officials.

A Breakdown In Our Values
Klaus Schwab, WEF Executive Chairman: Bonuses are a symbol of business's bigger problem - an eroded sense of duty to the wider community.