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.
It was, after all, a credit market controlled by some of the most handsomely paid titans of Davos that allowed the subprime toxins to brew under their noses. The promise of ever more fees and profits made the allure of these concoctions irresistible. Even last year, noted economist Nouriel Roubini warned about the dangers of subprime credit vehicles and the risk they posed to the wider economy. He did this at Davos. But conventional wisdom was not prepared to entertain an end to a gravy train that was so profitable, regardless of the train wreck that might ensue. And nothing defines conventional wisdom more powerfully than the patricians at Davos.
This is a group that seems chronically incapable of seeing a crisis through anything but a rear view mirror and long after the carnage has littered the road. Global climate change, poverty in Africa, terrorism, the growing wealth gap that now puts the United States in about the same place it was in 1929 -these did not appear on the Davos radar screen until years after they had been the subject of animated discussion in more mortal surroundings. Even last summer, the gathering credit storm was not enough to get the subject onto the formal agenda this year. Since they call themselves the World Economic Forum, that omission is rather striking. Now that those clouds have burst throughout much of the industrialized world, the Davos crowd is scrambling to catch up. It’s a little like seeing Henry Kissinger making his first Davos posting on YouTube. Some things are just too painful to watch.
How is it possible that these movers and shakers are not exactly on top of what’s happening? One needs only to have spent a short amount of time around them (as I have occasionally over the years) and see how surrounded they are by a constant wall of deference and adulation to understand that reality and power sometimes don’t travel in the same time zone. Moses went up the mountain alone to receive the word of God. The elites of Davos descend in their private jets with an entourage of acolytes in the belief that the world hangs on their every word. It often does. Such adoration can produce an intoxicating sense of self-importance. Like most intoxicants, it tends to distort one’s impression of how well one is dancing -and one’s view of the world.
As they meet at Davos, there will be the usual proclamations of concern. Earnest seminars will hear reassuring words designed to give the world a sense that those presumably in charge are on top of the situation. Getting a ticket to the hottest Google party will also be a priority, as will expanding one’s contacts and Rolodex. It remains as predictable as Alpine snow in January that whatever the cause, however grave the crisis, a party is seldom far away for this group. This year, one of the world’s most sought after chefs has been flown in to make sure the Davos dignitaries dine like kings. Anything less would be unthinkable for those whose gatherings are more and more reminiscent of Europe’s aloof royal families in the early 20th century. The misguidedly self-serving ideas of that group also became somewhat problematic for much of the world at the time, it will be recalled.
Davos does, of course, attract its occasional conscientious and thoughtful individuals. Even many chambers of commerce do that, too. But as an institution, and a leadership institution, at that, with all the financial political horsepower it boasts, this group underperforms in any role other than as a kind of trade show for the rich and powerful trotting out their wares in order to impress one another.
As they dine upon their culinary splendors, one can only imagine what new seeds of disaster they are sowing, which, like the subprime debacle, they will also fail to see until calamity has struck.
Dr. Frankenstein, as the tale goes, also created something that went a little beyond his original intentions. At least he had the decency not to profess surprise, ask for a bonus or attend a week of party-going at a five star resort while the full effects of his mishap were unleashed upon the rest of the world.