What the titans of Wall Street didn’t learn at Davos
For years, the World Economic Forum in Davos, Switzerland, has been ranked as the No. 1 gathering place for the smart and the powerful in business, politics, and the media. The annual sessions attract the creme de la creme, all vying to put forth their ideas and burnish their images before an eagerly awaiting world.
Now, it turns out that the WEF has amounted to little more than a glorious public relations exercise for the investment bankers, hedge fund wizards, and insurance gurus who paced the halls of the Swiss city’s fancy hotels, competing to put on the biggest parties to impress prospective clients.
“We gave them a soapbox. It was all political,” confesses Kevin Steinberg, chief operating officer of the WEF.
“They were told that we were in an unstable condition,” adds WEF founder and chairman Klaus Schwab. “But the financial community didn’t listen.”
The tragedy, according to Bloomberg News, was that Davos organizers opted to accept the funding of financial industry barons ($750,000 a year per company) and “let them turn Davos into a rave-up for Wall Street excesses.”
This revelation is just one more example of the failure of the management class to practice responsible stewardship of the companies on whose fate rests the welfare and prosperity of millions of people.
The game that the Davos boys have been playing is all about debt. The greatest debt binge of all has been the sub-prime mortgages into which millions of Americans were lured, it being quite evident that most would be unable to meet their payments when interest rates were ratcheted up.
For a disarming but thoroughly readable assessment of what debt means in our society, one can do no better than turn to Margaret Atwood’s new book, Payback: Debt and the Shadow Side of Wealth. The book is based on her Massey Lectures. They combine personal reminiscences with economic theory, political history, and literary commentary, delivered with the readability of a great novelist.
The organizers of the World Economic Forum could benefit by reading Atwood before the next Davos meeting. They’ve announced the theme of their January 2009 conference will be “Shaping the Post-Crisis World.” Does that mean they expect us to be out of crisis by then?
As far back as 2003, the over-leveraging of the financial system was a serious topic of conversation at Davos. The WEF’s corporate members never had an understanding of how big a problem it was, adds Kevin Steinberg. “We had assembled the world’s greatest economic experts to confer with them, and the financial community was not aware of that expertise.” Most passed up the key sessions.
The Bloomberg report is one of the most devastasting take-downs of hubris and egotism one can read. Basically, the senior executives of the financial world were too busy partying and prepping their sales pitches for big clients to listen to dire warnings.
The first World Economic Forum on Central Asia starts October 30 in Instanbul. It’s advertised as a meeting that will concentrate on how to “overcome the challenges brought about by the recent financial crisis.”
There’s to be no “merry-making,” Schwab promises. Let’s hope not.
