PoppedKernel Simplex: China

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Out and About at the World Economic Forum

The World Economic Forum, in Davos, Switzerland, hosts a dynamic, intelligent, and opinionated group of approximately 2,000 international business and political leaders, referred to, in some press accounts, as "rulers of the universe."

As we partake in the broader Davos Experience, we're talking to a large cross-section of participants - leaders of the world's most respected businesses to non-profit practioners at the world's most respected NGOs - for a unique take on this year's Forum. This is what we're hearing after just a couple days (most of this comes from off-the-record conversations with well-positioned Forum delegates, so we are unable to attribute most of it to specific individuals):

Problems and solutions. We spoke with an internationally renowned business leader and seasoned problem-solver, who provided some of his insight and perspective on this year’s Forum:

He bemoaned that too much focus at this year’s Forum is on problems and not enough is on solutions. He thinks the number and nature of agenda topics make sense, but the way they’re being discussed leaves something to be desired.
Continuing on the theme of solutions, he commented on the Goldman Sachs backlash that, as of late, has monopolized press coverage in the aftermath of the financial crisis. (That is, Goldman's profits are skyrocketting, and the company is on the verge of paying out huge bonuses. This, when many have claimed that their financial viability was salvaged by the government’s decision, in the eye of the financial storm, to pay Goldman 100 cents on the dollar for faulty AIG credit, as part of the AIG bailout). He said that Goldman’s is an emotional problem – it represents such a small piece of what’s going on and what needs to be solved in the broader financial crisis context – and as such needs an emotional solution, not a rational one. So we won’t be surprised if in the coming days, weeks, or months, Goldman responds, not with a numbers- or data-driven solution to address the public’s hostility and Congressional concern, but rather with a symbolic or feel-good solution, likely non-profit, or “common good,” in nature (which ironically won’t much touch their bottom line, but will address the hostility).
Of the tone at this year's Forum, this sought-after mind called it “somber.” Whereas last year, delegates were shell-shocked amidst the depths of the financial crisis, this year, delegates are keenly aware of the unprecedented nature of the recovery ahead and their responsibility in blazing a trail out of it.

Bill Clinton. Bill Clinton is to the World Economic Forum as Michael Jackson is to 80's pop music. So his presence is cause for great fervor, even among the Forum's elite class of participants.

One off-record-conversation he’s had this year was with a group of promising global talent that the Forum christens its “Young Global Leaders” (YGLs) – a young group of 200-300 promising thinkers, business managers, and political leaders, chosen annually by the World Economic Forum. Clinton spoke to the YGLs about current events including Afghanistan-Pakistan, US Healthcare, Haiti. When we asked one YGL whether the discussion was juicier than what we would read in the papers, this YGL responded, "It's Bill Clinton. He's not stupid. He knows everything he says is on the record.” But while Clinton didn’t vary much from what he’s said in the past, this YGL still thought it somewhat of a coup for him and about 50 other YGL's to get Clinton all to themselves for about an hour.
Bill Clinton is also spending a lot of his time raising funds for Haiti relief, most likely doing a lot of back-slapping and arm-twisting at his Clinton Global Initiative (CGI) party, during the Forum’s first night. “Nightcaps” as they’re officially called by the Forum, this nighttime party was one of the year’s most exclusive at Davos.

Refugee run. Outside the walls of the Forum’s main hall is something called the Refugee Run, a joint effort between UNHCR (The UN Refugee Agency) and Crossroads Foundation (a non-profit dedicated to raising awareness of (and support to combat) the plight of the world’s less fortunate through experiential learning) meant to provide Forum delegates with an intimate understanding of the global refugee problem. For one hour, it places delegates in the environment and mindset of what it’s like to be one of the world’s 42 million refugees – bare tents, crying women, warring gunshots, barking soldiers, dark silence, and frightening unpredictability. In only its second year at the Forum, the Refugee Run boasts delegate participation varying from Ban Ki-moon to Richard Branson. According to one of the Run’s organizers, it was Branson’s participation in last year’s Refugee Run that inspired him in May 2009 to finish Mia Farrow’s hunger strike (after Farrow's frail health prevented her from continuing) to protest Sudan's removal of several humanitarian agencies from Dafur, a region known to produce a large number of refugees living in terrifying conditions.

New leadership. We ran into Bill George on the streets of Davos. (He's fast becoming the de facto, resident expert on leadership for The Popped Kernel). In our ten minute walk through the crisp air and snowy sidewalks, he made clear his optimism for the new generation of leaders, slowly taking over key positions in business and politics internationally. He thinks this new group of leaders brings with it an unprecedented consciousness of and for the common good. Remember, this is the man who, in our interview with him in November 2009, told us that the financial crisis of '08-'09 was driven not by sub-prime mortgages, so much as by “sub-prime leadership.”

Banking regulation. Bankers and financiers are uneasy, if not outright worried, about the banking regulation that the Obama Administration proposed a few weeks ago.

The regulatory curbs aim to prevent the "too big to fail" mentality of the recent economic crisis that, in retrospect, incented big banks to take disproportionate risk, whereby if they're right, they reap huge rewards and if they're wrong, taxpayers pick up the tab. There's also an element of disentangling investment activities, whereby banks would not be able to run hedge funds, nor would they be able to trade on their own behalf.
Congressman Barney Frank, Chairman of the House Financial Services Committee, is omnipresent at the Forum (We saw him outside his hotel, inside the Newsweek luncheon, and of course, he's a power center inside the main hall). Congressman Frank is in a position to shape Obama's banking regulation in the House, and as such, participants are clamoring to hear what he has to say as well as influence his committee's ultimate direction on regulation. Of the influence that financiers and their lobbyists are trying to exert, he says, "I don't pay any attention to it. It has no effect on public policy. We have been glad to discuss things with them. They have information, but we have decided to go ahead with this (regulation)." (as quoted in the International Herald Tribune)
Larry Summers, Obama's chief economic adviser, is also at the Forum. In the Forum's main hall, he clarified and defended the Obama regulation with moderator Charlie Rose.

What has become clear, since Obama's announcement two weeks ago, is that there will be regulation - everyone has accepted that as fact (which is a feat in and of itself). What is less clear is what exactly the regulation should or will be.

China. Much hay has been made of the fact that China represents the largest delegation at this year's Forum.

People are starting to talk about the "China consensus" as opposed to the "Washington consensus" - the notion that what comes out of Bejing is more influential to world affairs than what comes out of D.C. Additionally, bets are being made on when exactly China's economy will over-take America's (2020 appears to be a safe bet).
Some Western delegates have been overheard calling China’s presence here "arrogant," not so much for its size as for its attitude. One delegate framed it relative to India’s presence and tone: “India is begging; China’s just being. China's here. They’re listening. But there’s an air that they can manage it all better. But that’s not necessarily true. And that concerns me.”
A seismic shift is happening both politically and economically as the Sleeping Giant awakens from slumber and rises to power. Its ascent is highly controversial in that the implications are far from certain. Where there is uncertainty, there is discomfort. And where there is discomfort, there is a desperate effort to control the situation to regain lost comfort.

This is partially what's happening at the 2010 World Economic Forum. From China to banking regulation, countries and companies, among the chaos of uncertainty, are sizing each other up, both partnering and undermining, at the whim of self-interest, to solve their problems and hopefully, at the same time, the world’s ills. In parallel, from Bill Clinton's fundraising to the Refugee Run's awareness building, the energy and effort behind humanitarian aid is strong and resilient. The question isn't so much about which forces will beat out the rest (financiers vs regulators, self-interest vs public good), but rather how these forces will work harmoniously together.

That is what the World Economic Forum is all about. For an organization that values thought over action, we might end up with more questions than answers by the end of the week, but those questions will hopefully be the right ones, which of course, is the first step to any effective solution.

Bill Clinton and the World

Bill Clinton gave us a treat at this year's World Business Forum: his framework of the world.

Unlike other speakers at this year’s Forum, Clinton did not use a teleprompter or projected slides. And his paper notes? Apparently just for show – he rarely looked at them. This was the stuff of Bill Clinton legend – speaking off-the-cuff about complex issues in understandable terms. Unfortunately, Clinton fell short of legend this time inside Radio City Music Hall in New York; he meandered and had difficulty staying on point. But his content – why we should care about AIDS in Africa, bombings in the Middle East, and climate change – was no less compelling.

Clinton’s worldview starts with the premise of globalization – although he prefers to use the word “interdependence.” While Clinton rejects the idea that interdependence leads to peace and security outright (See The Complete Idiot's Guide to World War I), he believes it’s possible, if we address three persistent global challenges: inequality, instability, and unsustainability.

Challenge #1: Inequality. “The world is too unequal.” One billion people live on less than $1/day; Half the world population lives on less than $2/day. While people in the developed world live a long time, a quarter of the world still dies from either AIDS, malaria, or bad water (80% of them are children aged five or younger). If global warming proceeds at its current rate, water will become even more scarce, and the developing worlds’ problems aggravated.

“We can be made more secure by eliminating inequality,” Clinton said, citing “10-20 countries in eastern and southern Africa… many of them Muslim… who love the US.” This, at a time when the US has lost significant credibility elsewhere in the world. In these countries, many of which Clinton has visited, nobody has been thinking about Al Qaeda. Why? Because “we have cared whether their kids live or die.”

The lesson is simple and powerful. Focus on the basics and see positive results. In this case, the more we care, the more secure we are.

Challenge #2: Instability. “The world is too unstable.” What seems real one day is gone the next – money, health, security.

In cases, small and large, that span the globe, wealth has diminished like at no other time and to such a degree, since the Great Depression. A local police station in England had to fold because their pension investments in Iceland vanished in the country’s bankruptcy. China, in a short period of time, went from having plenty of cash ($2 trillion in reserves) to not enough (post-crisis they “had nobody to sell to”).

In a more interdependent world, a virus in one part of the world can cause more than just isolated deaths, but also widespread panic and disruption. Swine flu has wreaked havoc in both real and perceived terms. It’s closed down school districts in the US, halted the tourism industry in Mexico, and taken the lives of many. The world is, for lack of a better term, freaking out about it. And with every new report of another well-known person contracting it (e.g., President of Costa Rica and Colombia, Tony Blair’s wife, Harry Smith of the CBS Early Show, Landon Donovan of the US National soccer team), the threat feels more real and the worry continues to worsen.

Terrorist organizations remain a major destabilizing force internationally. Post-9/11, they have managed to hit Madrid, London, Bali, and Bombay, not to mention the countless spots in the war-torn regions of the Middle East and Central Asia. At the same time, as counterintuitive as it seems, “we’re more secure because everyone’s working together.” Without collaboration in the intelligence and law-enforcement communities – that is, positive interdependence – several calamities might have occurred: Al-Qaeda in the Balkans, the millennium attack out of LAX, hi-jacked plane(s) from Indonesia to the US, Holland and Lincoln tunnel bombs in New York.

Across the various sources of global instability, the way to address it is the same. The more vigilant and cooperative we are, the more secure we become.

Challenge #3: Unsustainability. “The world is too unsustainable” because of climate change. 95% of “serious scientists” believe that if we don’t cut CO2 or methane, then temperatures will increase, oceans will rise, and 100 million people in coastal regions will become climate change refugees by 2050, having been forced to uproot by Mother Nature and settle elsewhere. In Australia, Conservatives and Liberals are debating, not about whether the problem is real, but rather how to best solve it… everyone agrees it’s a problem.

Clinton also focused on sustainability in the US. He painted a rather dire portrait of where the country is headed if income continues to decline, college costs continue to outpace income growth, and healthcare continues to cost more while covering less (and also outpacing income growth). He cited the need for a new source of jobs every eight years to remain competitive. Solving climate change, Clinton believes, is the way to do that (e.g., “green” jobs and projects). He’s not shy about the size and difficulty of the task at hand, saying that if done right, it “would be the greatest thing since we mobilized for WWII.”

In the challenge of unsustainability lies a significant opportunity for positive change. The country or company or individual willing to invest in it, could save the world’s future, if not own it.

The world in which we now live is vastly different than the one in which Clinton took office. Then, in 1992, there were only 50 websites worldwide. Today, more than 50 new websites were created during Clinton’s speech at the Forum alone. Our world is much more connected. What we do affects others more so now than ever before. The more we understand that, the more willing and able we are to address the challenges of global interdependence… and experience the peace and security associated with it.