The MT Diary

Davos debates the global economy: ski-jump or slalom, whirling Dervishes or foie gras?

by Howard Davies
Last Updated: 31 Aug 2010

In the early years of New Labour, the World Economic Forum in Davos was a no-go zone. Tony Blair was unsure of its relevance: Gordon Brown was entirely sure that it was not for him. Like the Mansion House dinner, it was redolent of ceremonial and privilege.

At the Mansion House do, an easy solution was available. Brown could attend, but not in black tie, so that the television coverage would highlight his simultaneous presence and detachment. At Davos, where the dress code is vague - from Ghanaian national dress to salopettes - no such strategy was available. So he didn't go.

Those scruples are now as much part of history as Peter Hain. Blair is a member of the forum's board. This year, Brown had a starring role, and half of his flock of Goats (government of all the talents) were at the gig: David Miliband, John Hutton, Digby Jones, Douglas Alexander, Shriti Vadera, the Duke of York, David Cameron and George Osborne. The last two seemed a little off-piste in their remarks: maybe the Treasury brief did not get through to them in time.

The big issue of the year was, of course, the direction of the global economy. Will it be a ski-jump or just a downhill slalom? That made the debates far more interesting than usual. When the unavoidable topic is geopolitical, like Iraq, there is debate after debate in which the blind discuss solutions with the partially sighted. Business folk are no more expert in foreign affairs than anyone else. But when it comes to the economic prospect, the Davos crowd are the people who will make the decisive calls: to invest or not to invest; to spend or not to spend.

Inevitably, you hear a predominance of American voices, and they were almost universally pessimistic. The forecasting option space was anywhere between a sharp slowdown and a slump. The Chinese and the Indians, whose economies are still racing away with double-digit growth rates, looked mystified.

Some Europeans took comfort from that. I even did so myself for a while. Until Larry Summers, the American economist and academic, pointed out that if the US trade deficit continues to fall, someone else's surplus must also be cut. So rigorous decoupling is highly unlikely, however strong Chinese domestic demand may be. Then John Thain of Merrill Lynch chilled the hall with a forecast of more red ink in the investment banks. A thousand global executives were consumed with existential angst about bonuses foregone: not a pretty sight.

The mood of doom and gloom did not, however, extend to the party scene. For the first hour it was physically impossible to get into the McKinsey bash, even with a bona fide invitation. The Goldman Sachs event was more select and classy, though the guests found themselves evicted when the party was in full swing. Goldman's clearly hasn't heard about the Labour party's 24-hour drinking policy.

Citibank bravely persevered with its reception, with Sir Win Bischoff in genial charge. There was a dancefloor in the hotel lounge they used, but no-one - but no-one - was dancing. Barclay's hosted a posh dinner, as did Credit Suisse. The Deutsche Bank party was very German. If you weren't at least 6ft 3in tall it was hard to have a conversation.

JP Morgan starred the Reverend ARP Blair of St Albion's, the bank's latest business analyst recruit. And London mayor Ken Livingstone rubbed shoulders with the capitalist scum at his very own London bash. The Olympics budget will surely need to be revised upwards again as a result.

The gala night on Saturday is, by tradition, sponsored by a country that wishes to show off a little to the assembled global company. This year, there were two sponsors, Turkey and France - an ill-assorted couple, given President Nicolas Sarkozy's ill-concealed hostility to Turkish membership of the European Union any time this century.

The Turks occupied the conference centre swimming pool. I should point out that there was a wooden floor, but although the chlorine smell can be disguised, the acoustics of a swimming pool cannot be altered so easily, and are not well-suited to manic drummers and whirling Dervishes. My ears are still whistling.

The French took charge of the main hall. The choice of entertainment was, frankly, weird. Maybe they had left the selection to the Societe Generale compliance department. The cultural show was headlined by a group of breakdancers accompanied by two Russian musicians and an aerial choreographer called Fred Deb. Even late in the evening it was possible to spot that Fred was not a bloke - she performed naked, as near as I could tell.

The show was rounded off with a distinctly sub-prime song-and-dance team doing Abba and Johnny Hallyday covers.

Fortunately, French cuisine is more resistant than its performance artists to the 'new France' image-makers. Grands crus flowed like Oddbins' house red. The food was quite remarkable - little pots of foie gras and ceramic spoons full of oysters and creme fraiche. Stuff you could eat until you were sick. My wife and I had to take each other home before we exploded.

But the whole thing felt like a party given in the hot summer of 1914, with the outside world on the brink of disaster. It is not an accident that fin de siecle is a French phrase.

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