Davos – What is it good for?

24th January 2012

Davos – the annual get-together of top economic movers and shakers – starts on Wednesday. The ski resort meeting, more properly known as the World Economic Forum, now into its fifth decade, is set to attract over 2,500 delegates. But will the event move and shake financial markets?

As well as captains of industry, cabinet ministers and international investment bankers, Davos attracts a regiment of lobbyists, an army of  journalists, and protesters (plus up to 10,000 police, Swiss Army and security guards). 

And there are more than 100 corporate sponsors or "partners", lawyers, accountants, bankers, management consultants, insurers and fizzy drink makers but no charities or development organisations   – you can see a list here

The total costs of those attending the four day event are not known but there is probably little significant change out of $100m – it's bonanza time for local hotels, private jet firms (and first class travel for those without their own plane), and – apparently – for "high end escorts".

The media treat it as an opportunity to go to a mountain they consider made sacred by those attending.  And even if the end result may be a little less than God handing down the law to Moses, it is treated as holy writ. Last year, the BBC organised a minute by minute account as well as tweeting from its top staff.

But what does all this expenditure and activity achieve? Increasingly, investors say it is all a waste of time. President Obama will be conspicuous by his absence – he refuses to go as he sees the event as divisive.

Objectives 

Certainly the ambitions are big. "Besieged capitalism will be the subtext. CEOs recently polled on the biggest global risks did not cite terrorism or soaring commodity prices but responded that income inequality posed the most severe threat to economic stability."

The star attraction will be German chancellor Angela Merkel. But does she need to go up a mountain when she can address Europe from Berlin any day of the week?  The Davos gathering has been criticized for being a meeting of rich and powerful people disconnected from the world, but connected with each other.

Davos is a waste of time sums up the opinion of Mohamed A. El-Erian, CEO and co-CIO of hedge fund group Pimco and author of "When Markets Collide" (2008).

He says: "Over the years, and in the context of an increasingly unsettled and uncertain world, Davos has not had much impact. I get a range of responses when I ask attendees why so few, if any, of the interesting discussions that have taken place in those beautiful Swiss Alps have led to change that improves the lives of most people. 

"Some say the strength of the typical Davos agenda is also a weakness. The topics are overly ambitious. In trying to cover too much for too many, breadth trumps depth. Others cite the inherent difficulty of distilling the opinions of such a varied group of people into specific action points. This is never an easy endeavor, and it becomes a virtually impossible one when it involves so much wealth and so many egos.

"Then there are those who believe that too much time is spent arguing about what has happened-especially when things have gone horribly wrong-and too little time is devoted to what lies around the next corner, and the one after that.  But most of the Davos devotees I talk to say the problem is more fundamental. They say that many of the attendees who truly matter are not interested in the organizers' higher ambitions, and some are even suspicious of them. In either case, these key players do not want to give up control of their narratives, and they certainly do not wish to delegate any meaningful part of their personal agenda to Davos."

This blog goes further. US investment author Paul B Farrell says: "Davos is a secret society, a Conspiracy of the Super Rich, more than half the 2,500 attending the event. They've got trillions. And it's not enough. Right now, many are cruising to Davos at 50,000 feet, enjoying caviar, foie gras, filet mignon and Dom Perignon in the comfort of their tax-exempt Gulfstream 5 jets.

"For them a Davos invitation is not just a status symbol, not just proof of their power. An invitation confirms the illusion that their Conspiracy of the Super Rich is the main engine driving global economic progress the past 40 years … so they think they deserve all the wealth they've accumulated, including their $60 million jets."

If you want more, Nassim Taleb, author of The Black Swan also regards Davos as a waste of time as does UK blogger David Stevenson while this piece from the Wall Street Journal pokes fun at some of the pretensions.

Davos has its fans

Davos has its fans – Parag Khanna is among the more vocal. He sees the face to face contact as a return to a better form of discussion w
hile berating those who attack it for jealously because they are not invited.

Each year, there are protests – with demonstrators usually outnumbered at least twenty to one by security. This year, it will take the form of igloos as activists inspired by the Occupy Wall Street movement have set up an igloo camp outside the meeting buildings. None of the protesters have been invited to the panels, but the Geneva-based forum's organizers say activists can join the public at certain parallel events being held.

For some, Davos is a conspiracy, although admittedly not as elusive as the shadowy Bilderberg Group. Investors will have to wait for May (exact date and venue unconfirmed) for a meeting of the secretive group, consisting of about 5% of those  attending Davos and as well as others who never emerge into the light.

 

More from Mindful Money:

Occupy Wall Street: Carnival or Protest?

Capitalism vs. Climate Change: The Big Debate

Are global corporations a safer bet than governments?

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