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The czars and kings of Europe could not grasp why the people revolted against the high taxes, low wages, and hunger inflicted upon them by those who knew only opulence and self-aggrandizement. The Davos mentality still cannot fully understand the resentment of a public saddled with massive unemployment and a bill for bailouts and social costs that soars into the trillions.
The annual winter parade of the puffed-up peacocks of privilege has come and gone at Davos. The dire state of the world once again showed the courtesy not to intrude upon the gathering of major élites from business and government, permitting them to descend in their private jets and frolic at the best-catered parties in Europe. Reality, as it generally does at the World Economic Forum each January, seemed to pass by, as well.
Last year, they missed the extent of the global financial meltdown – a big miss given that it is widely seen as the worst crisis in 70 years. This year, they had trouble seeing what reforms are necessary to prevent such calamities in the future – or even that any are necessary. In 2000, Enron CEO Ken Lay declared to his fellow Davos participants that his company was the “21st century corporation.” In 2003, the gathering was abuzz over U.S. Secretary of State Colin Powell’s rock solid assertions that Saddam Hussein controlled “hidden weapons of mass destruction meant to intimidate Iraq’s neighbors.” In 2008, former Treasury Secretary John Snow announced at Davos that any U.S. recession would be ”short and shallow.”
Reality, to those inclined to view it from the cloud-fringed temples of great heights or beyond the attended gates of deference and privilege, often appears fuzzy and ill-defined.
As it was with the monarchs of early 20th century Europe who presided over one calamity after another, those responsible for the failures and excesses that led up to the great financial crisis of the 21st century lack the vision to figure out the solution. The czars and kings of that earlier era could not grasp why the people revolted against the high taxes, low wages, and hunger inflicted upon them by those who knew only opulence and self-aggrandizement. The Davos mentality cannot fully understand the resentment of a public saddled with massive unemployment and a bill for bailouts and social costs that soars into the trillions that stems directly from the abuses, failures and negligence of those in charge of the world’s financial ship. Like myopic despots who seldom bothered to read history, and inevitably stumbled into catastrophe over its unheeded lessons, these modern misguided princes of finance have already forgotten the events of the past year and seem headed for further anticipated collisions with the future.
Instead of striking an uplifting tone that shows the titans of Wall Street and its counterparts (or, perhaps, counterparties) actually “get it,” the spirit of Davos produced the grating sound of ingratitude and obliviousness. Josef Ackermann, CEO of Deutsche Bank AG, talked about the “noble role” of banks and announced that the world should “stop the bank bashing, the blame game.” Mr. Ackermann was chairman of this year’s forum at Davos. Billionaire Stephen Schwarzman, a regular attendee at Davos, warned there could be costs to the public’s jaundiced attitude toward the banking system. “My biggest concern is that, as a result of either proposals or tone, that financial institutions are going to feel under siege and their [sic] going to retreat with their extension of credit,” he told CNBC. Lord Peter Levene, chairman of Lloyd’s of London, mocked government’s role in bailing out the financial system: “I’m from the government — I’m here to help. You guys in the industry don’t know what to do, so we’re going to fix it for you.”
How quickly they forget. Citigroup, Bank of America, Wells Fargo, Bear Stearns, Lehman Brothers, Merrill Lynch, UBS, RBS, Lloyds, Fannie Mae, Freddy Mac, AIG and so many more, were all crumbling under the massive weight of writedowns and losses and a withering credit market that only government was able to repair.
Change, especially for those in the Davos world, often comes not in the reform that reality demands, but in the fantasy that overly indulged egos command. Not surprisingly, there is a resistance in the world of high finance to adopting or supporting widespread financial reforms. A reliance upon extended methods of liquidity and a zero Fed funds rate seems ingrained in business plans. And in a culture where obsession with bulging bonuses still prevails, you have to wonder what kind of screwy financial Frankensteins are being assembled that may once again place institutions, and the public, at risk. Paul Volcker, please take center stage.
Perhaps the irony is not entirely lost on the world that while many of its citizens shell out for the misjudgments of these Alpine participants, they also pay, as taxpayers, shareholders and customers, for this annual march into the snow drifts of élite folly.
When it comes right down to it, there are few thoughts the big players mount at Davos that could not be distilled into a simple Tweet. Their use of technology and methods of transportation have changed, but in most other ways they are little different than the princes and grand dukes who trotted themselves out every so often to remind the people that they still existed, confusing – as receding fragments of supremacy so often do – vanity with relevance.
The World Economic Forum may have found its way onto YouTube. But in most respects it is still a silent movie involving people whose attire might seem modern but whose sense of originality and connection with much of the world is as unfashionable and out of date as the Hapsburg dynasty. One might have thought that the most costly financial crisis since the 1930s and the highest unemployment rates in decades would have produced a paradigm shift at Davos, too. Instead, the world was treated to an encore performance of over-hyped élites desperately struggling to cling to any vestige of credibility and respect. They have forgotten even the most recent past. They have shown little vision for of the future. This is not leadership. It is an outrage.
As in previous years, we have included a YouTube film that gives an uncanny portrayal of the Davos mindset of another era.
What the regulars at this fabled Swiss resort did not appear to grasp is that the breezier than usual air this year was the cold wind of change brought on by the bitter storm of betrayal and personal devastation that millions around the world have felt as a result of Wall Street’s greed and the failures of those expected to regulate it.
The Davos Style from Another Era
The annual procession of the pantheon of the overrated, otherwise known as the World Economic Forum, concluded this week.It ended with a bulletin:The forum’s members have not quite figured out how to get themselves (and us) out of the worst economic crisis since the Great Depression.
But Davos was never about ideas or innovation. And it has never been about vision. This is a group that can’t see ahead even a few months, much less the years they would like to profess.Today, it is about the desperately discredited attempting to flee the apocalypse of their own creation. Fearing, as others have during times of transition when the touchstones of power and privilege were crumbling and a new order was beginning to arise in their place, these CEOs and princes think that if they just stick together they might be able to survive. Somehow they hope that the trillions that have vanished on their watch, and the trillions more that have had to be injected into their companies to avert Armageddon, will recede from the public consciousness and their previous status of unquestioned deference and unchallenged compensation will resume. This is what the Davos crowd took from President Barack Obama’s inaugural address (loosely borrowed from Jerome Kern’s song of the same name) that it is in such times that America picks itself up, dusts itself off and starts over again. A more contemporary songwriter might advise this group that you can’t always get what you want.
Having been escorted to the brink of ruin by the leaders who insisted they had all the answers (and made most of the rules), the public is not soon likely to entrust its fate to multimillionaires whose idea of tragedy is to be left off the A-list party circuit at Davos, and whose notions of governance and oversight are reflected in the fox-guarding-the-hen house board structure of the New York Federal Reserve, where, for instance, Richard Fuld Jr. was a director until the collapse of Lehman Brothers. What the regulars at this fabled Swiss resort did not appear to grasp is that the breezier than usual air this year was the cold wind of change brought on by the bitter storm of betrayal and personal devastation that millions around the world have felt as a result of Wall Street’s greed and the failures of those expected to regulate it.
Two years ago on these pages -and much longer ago in other media- we talked about how visionless and out of touch this group had become. It is, in many ways, symbolic of the leadership deficit that created the circumstances of greed and over-leveraging, ineffective governance and inept regulation that brought the world to its economic knees.
Since the pampered, pumped-up participants at Davos predictably added few, if any, insights that were new, different or particularly hopeful this year, we thought we would reprint our observations from 2007.
Tell me one major sea-changing event that has been anticipated or predicted at Davos in the past two decades. Show me a crisis that has been averted. Everything takes place in rear-view time… In many respects the image is one of myopic leaders still sitting atop the overreaching and unsustainable and who refuse to recognize the existence of icebergs until the Titanic calamity occurs.
Of all the deficits and shortages in the world today, it is the lack of genuine character in so many leaders and the absence of truly transformative leadership that is the most striking. In this, Davos is an apt mirror. One sees in this annual Alpine pilgrimage to Davos fragments of the grainy black and white movies showing the imperial families of Europe gathering in their toy soldier costumes and opulent surroundings, oblivious to the marshalling clouds of change and discontent that would bring their primacy to an end.
It seemed to catch a glimpse of the wreckage to come.
The chic thing to do this year at the World Economic Forum was for top leaders to answer what was called the “Davos question:” What one thing do you think that countries, companies or individuals must do to make the world a better place in 2008? The answers were posted on You Tube. No investment banker, or Wall Street tycoon, answered the question. Many were at the Google to-die-for party, however, where there was the obligatory dancing with the stars.
Given the current unsettling state of the world’s economy, we think a better question might be: If all the high-priced investment banking talent which attended the WEF last year was unable to foresee the subprime disaster that was brewing under its nose, why should the world think this group will get it right for anything else? We don’t expect many responses from Wall Street to this question, either.
How much further will it go to appease the non-democratic holders of oil wealth or American debt? After its major banks and corporations have succumbed to the influence that multi-billion dollar investment stakes invariably enjoy, will American foreign policy someday become a commodity to be bought and sold like offshore-made pieces of patio furniture at a local Wal-Mart?
There have been many voices at the World Economic Forum this week. There were the voices for combating climate change and the fight against poverty in Africa. There was the voice of Bill Gates, who, judging by media reaction and the response at Davos, single-handedly invented the concept of responsible capitalism. All these are worthy objectives. But one voice seemed notably muted: the voice for democracy. (more…)
This is a group, like the aloof royal families of early 20th century Europe, that seems chronically incapable of responding to reality until devastation arrives on stilts.
The timing was remarkable. In the same week that began with the world’s credit-battered capital markets falling off a cliff, the world’s rich and powerful opened their annual summit at Davos. But that’s not all the subprime investment vehicles that caused the commotion and the World Economic Forum have in common. Both were incredibly over-hyped. And both have been shown to be totally incapable of delivering what was promised. (more…)
One sees in this annual Alpine pilgrimage of Davos fragments of the grainy black and white movies showing the imperial families of Europe gathering in their toy soldier costumes and opulent surroundings, oblivious to the marshaling clouds of change and discontent that would bring their primacy to an end.
Fortunately, the annual spectacle known as the World Economic Forum at Davos has folded its tent for another year. It occurred not a moment too soon, as my supply of antacids was running dangerously low. There is, of course, nothing wrong or surprising about elites from business and government getting together. Having worked with these types for many years, I am well aware that many need constant reassurance and affirmation of their significance. Being among other CEOs or heads of government is the way these people remind themselves of their importance and remind the world that they are still running the show –even in en era of YouTube and WordPress. Such vanity is best taken with a large grain of Swiss salt, I suppose. As Philip Barry sardonically observed: “One of the prettiest sights in this pretty world is the privileged classes enjoying their privileges.”
What is galling is the pretense that these events are actually transforming the social and economic landscapes. It is the disguise of social gravity, the spin that seeks to turn global CEOs into crusading St. Georges slaying the world’s evil dragons, that makes these events so offensive. These forums have become the CES (Consumer Electronics Show) of CEOs –a gigantic trade show of, by, and for the self- impressed who visit one another’s booths to see how each measures up. Sure, there are earnest proclamations about the problems of the world. And everybody has to be seen embracing Bono. The Irish have that effect on people. Everybody loves embracing my Irish Setter, too. But real change requires constancy of effort, not candlelight and wine. What affronts the reasoned mind is the idea that this gathering actually makes a difference. Restating the obvious about the problems of the world does not make a difference. Talking about issues long ago advanced by others does not make a difference. Listen, if Davos actually had the level of influence it claims over CEOs and kings, presidents and dictators, the world would rightly be jumping up and asking who elected these people and how are they held accountable for their decisions. And if it doesn’t –which is my thesis– why do we, and especially the world’s media, encourage the pretense of these people by paying so much attention to them year after year?
Tell me one major sea-changing event that has been anticipated or predicted at Davos in the past two decades. Show me a crisis that has been averted. Everything takes place in rear-view time. That’s more than a little disappointing. Because I and many others have a lot invested in these companies and in the CEOs who head them. I’d like to believe that such high-priced talent is capable of leading in a way that will avoid catastrophes. In many respects the image is one of myopic leaders still sitting atop the overreaching and unsustainable and who refuse to recognize the existence of icebergs until the Titanic calamity occurs.
Here’s an idea: Since so much discussion at Davos seems outwardly, at least, to center on issues of Africa and global poverty, how about a World Economic Forum that takes place in an impoverished region so that it can be experienced first-hand. True, there might not be the luxurious surroundings of Davos or the glittering parties, but surely that’s not really the purpose, as the organizers of the event take regular pains to point out. And if the growing economic divide is really as troubling as some Davos participants argue, how about the wealthiest CEOs at Davos volunteering to freeze their own pay for a few years as a sign of leadership and as a model for others? These things won’t happen because Davos is not really about correcting terrible wrongs. And it is certainly not about leadership. It is about contacts and connections, knowing the right number to call and how new deals can be won.
As German steel baron Jürgen Großmann admitted, “The spirit of Davos doesn’t just float around. You have to look for it in the conversations…Furthermore, we’re interested in wealthy clients. The richer our client countries are, the more stuff we sell them, especially cars and machines that Germany makes lots of.”
Of all the deficits and shortages in the world today, it is the lack of genuine character in so many leaders and the absence of truly transformative leadership that is the most striking. In this, Davos is an apt mirror. One sees in this annual Alpine pilgrimage to Davos fragments of the grainy black and white movies showing the imperial families of Europe gathering in their toy soldier costumes and opulent surroundings, oblivious to the marshaling clouds of change and discontent that would bring their primacy to an end. Those who are trying to make the world better are doing it anyway, regardless of Davos. And for those who are not so inclined, going to Davos won’t likely make any difference.
This year, Davos organizers attempted to make use of social media –blogs, videos, podcasts and the like- to bring ordinary people into the tent –but at a safe cyber-distance, of course. The effort bombed. Did they really think that people back on planet Earth would be impressed by the opportunity of clicking on the comment button of a blog in order to send back a short message in small font to some big poobah? YouTube can do many things. But making imperious titans more trustworthy or sympathetic as they schmooze or answer an amateur videographer’s questions on the fly are not among them. By the way, the really big players didn’t bother to post on any blogs. And very few mortals at the bottom of the mountain bothered to send any comments. This one certainly hits a note:
The Davos Conversation was a total failure. The end of a demagogue is when the mob pulls a no show.
And so the overfed princes and business potentates exited as they came, in a mist of mutual admiration and private jets, all the while lamenting the vexing issue of global warming –this year’s topic du jour. What is saddest about Davos is that these leaders have a chance to make a real difference. Some would argue, and I count myself among them, that they have a moral obligation to do so. Instead, they have become actors in a predictable side show of self-indulgence and extravagance –two vices which one might think would be incompatible with the ills they claim to be fighting.
Which is why the spectacle known as the World Economic Forum at Davos is the Outrage of the Week.
