No new solutions at Davos for economic recovery.
Participants in the World Economic Forum in Davos, whose official opening took place yesterday, stated clearly the causes of the global crisis. However, none of them has a recipe on how to emerge from it. Vladimir Putin, who opened the Davos forum, does not have it either.
Nearly every second person addressing the forum reminded it that the current crisis was the most extensive, destructive, and symbolic of the past 50-80 years. The reason for this is the absence of regulation and transparency in the financial markets, resulting in a total lack of trust and a financial collapse.
"The djinn is out of the bottle," "there is no way back," "we must find a path to economic recovery" – such were the catch phrases opening the CNBC TV debates timed to coincide with the Davos session.
The accusations and complains – about the lack of responsibility among leadership and management or inadequate evaluation of assets and risks - could be heard here and there. Three pubs could unite into a holding, issue IFRS reports and successfully trade their papers on a stock exchange, chairman of the VTB board, Andrei Kostin, said sarcastically at a session on the harsh lessons of global misregulation.
There were many disputes and more questions asked than answers given at the Davos sessions. Is there a way to increase the role of the state, which is now forced to recapitalise assets in the economy, but not make it too excessive? What should be done for this purpose? Are we now fraught with another debt bubble on the market of state borrowings, in which governments are the only creditors who are willingly given money by those who have it? What kind of strategy will be used to withdraw from assets? How do we create a new global regulator and which institution may serve as its basis – the International Monetary Fund, the UN, G-20, or any other?
Big business circles, regulators and economic elites in industrialised countries are ready to look for answers to these numerous questions together with the developing markets: it was telling that Chinese Prime Minister Wen Jiabao and his Russian counterpart, Vladimir Putin, opened the current Davos forum rather than Europeans or Americans.
The forum founder, Klaus Martin Schwab, faced a difficult task: to arrange the agenda in such a way that both the Chinese and Russian premiers – as if each of them - opened the forum. The Chinese Prime Minister opened the first plenary sitting, but the session opened by Mr. Putin was officially called the opening one. Carlos Ghosn of Renault Nissan and Michael Dell, founder and CEO of Dell Inc., asked him questions.
The premiers made some similar statements, claiming that the crisis was connected with inadequate economic methods, runaway consumption, uncontrolled growth of financial institutions, unrestrained pursuit of profit, distorted rating agency data, and weak regulation.
Of course, there were some national specifics. Wen Jiabao wished the forum participants a happy Chinese New Year, and Vladimir Putin could not help but hint that the crisis first erupted in the United States.
Wen Jiabao said the crisis seriously affected the Chinese economy and that there was a fall in demand for Chinese exports in particular (here, the microphone suddenly cracked and the sound got fainter). However, China promptly reacted to the situation, Wen Jiabao continued. They changed tax policy and introduced ten measures to boost demand and another ten to support the currency exchange rate, as well as many other measures – it took him nearly half an hour to enumerate them. As a result, the Chinese economy will grow 8% in 2009 (with the 2008 figure being 6.8%).
"This can be achieved through hard labour," the Chinese Prime Minister said calmly.
As for Vladimir Putin, he promised to reduce taxes levied on energy companies. He also said that the only way to ensure truly global energy security was to form interdependence, including swapping assets, suppliers, consumers, and transit countries, without any discrimination or double standards. Mr Putin did not say what assets could be swapped in the world energy market, but he praised the new gas routes, such as the Nord Stream and South Stream gas pipelines.
Questions about Russia's GDP and the 2009 budget deficit were tactfully avoided. Replying to Mr Ghosn's question on whether Russia will continue to help its majors, the Prime Minister said the government was already helping them – by cutting taxes, for example. When asked by Mr Dell whether Russia needs help to develop new technologies, Mr Putin retorted that help should be given to beggars and cripples, but Russia can do without it. He noted that Russia's school of mathematics was among the world's best and that the Electronic Russia programme provided all Russian schools with access to the Internet. The Prime Minister promised that Russia would not take the road of isolationism.
A British IT company's manager, when asked whether he was satisfied with Mr Putin's speech, said that he was quite satisfied. According to him, the main thing was that the Russian Prime Minister did not speak about isolation or oppose his country to the rest of the world.
"In trusting each other, we must opt for greater interdependence in all economic and political spheres and return to basic values" – this was the keynote of Mr Putin's speech according to Arkady Dvorkovich, the Russian President's economic adviser.
Who is to blame?
The entire global growth system has suffered a major setback, with one regional centre endlessly printing money and consuming material wealth and another manufacturing inexpensive goods and saving the money printed by other governments. This is unearned welfare, welfare on credit, Mr Putin said in conclusion.
Yelizaveta Ivanitskaya