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The Davos Illusion

Do "Davos" delegates really have the power to make significant changes in the world economy?

January 24, 2003

Do "Davos" delegates really have the power to make significant changes in the world economy?

The organizers of the World Economic Forum are masters when it comes to putting together an event that includes some of the best-known names in the world. Last year, they even managed to get a trans-cultural icon like the rock singer Bono of U2 to entertain their audience — with policy talk, not music.

Ultimately, however, the WEF — even though well intended — amounts to less than the sum of its parts. The promise that it makes to the world at large — that getting together the most "powerful people in the world" is a major step in solving the world's problems — is not delivered upon. Why? Because it cannot be delivered by any group of VIPs.

Bono's role at last year's meeting is a fitting example of what is right — and wrong — with the whole idea of Davos. Here, after all, is a rock icon who is not a maniacal, cocaine-snorting deviant, but a thoughtful and idealistic man. He has taken on the difficult job of promoting debt forgiveness for the world's poorest countries.

He is such a draw that he has even been featured at retreats of Republican members of the U.S. Congress — and there worked wonders to convince those doubters of the validity of his arguments. That may be a very hard sell, but it's still worth the effort.

Bono's mistake, however, is in the assumption that the "Davos Man" can also make a big difference in the matter of debt forgiveness. Bono — just as old-time favorite standbys such as South African Bishop Desmond Tutu or the writer Elie Wiesel — ascribes near-magical powers to the audience sitting in front of him.

These are "the most powerful men (and women) on earth", one testimonialist after another will intone, preferably in a husky voice. If high-powered participants only gathered the will, right then and there, to give proper consideration of this matter or that, the world could soon become a better place. Or so the argument goes.

That sounds almost too wonderful to be true — and it is. After all, we all live in a world marred — and bogged down — by complexity, legislative selfishness, tight timetables and all too many competing interests.

The presumed task of the WEF is to dispose of all the regrettable hold-ups — and to tackle the "big" issues crying out for a swift solution.

If only it were possible. If only it were desirable. If only it were true. Ultimately, what Davos does is to deny the human condition — the very complexity, ideologically-driven shortsightedness and sheer amount of near-insoluble power conflicts — that makes meaningful progress on almost any issue so glacially slow.

In fact, "Davos" — in some instances — may even make things worse rather than better. The reason: To a certain extent, it may succeed in convincing the elites assembled at these meetings that their common "spirit" can lead to grand solutions. And that might just keep them from the difficult, mundane dirty-work that is really necessary to achieve lasting change.

To explain the how and why, let's take up Bono's favorite mission, debt forgiveness. Surely, the audience assembled in front of him at the gathering in New York last year contained some of the world's top bankers. But any assumption that these are the people who can solve the debt problem is dangerously off the mark.

These days, the leaders of the world's leading commercial banks have very little to do with actually settling the crushing debt of the poorest countries. Only about 6% of highly-indebted poor country (HIPC) debt is held by the private sector.

Therefore, there is little that banks or other private actors can do to remove the yoke of debt from these countries.

Now there are some people in the Davos audience who are in a position to do something on the debt issue.

Indeed, they have already made some progress. Those people are the G7 finance ministers, their deputies and other high government officials.

But here's the real problem: Few of the grandees representing the G7 are powerful enough to actually do anything meaningful about debt forgiveness.

Worse, while they may be viewed as having financial prowess worthy of a Baron de Rothschild or John Pierpont Morgan, in reality they are simply government "bureaucrats," as U.S. conservatives would put it.

In short, they are trustees of the public coffers of the nations they represent. They are not deal makers who could act with swiftness to resolve big problems.

Ironically, the same is true for the business executives. They, too, are but trustees of other people's money.

They may be tickled to be considered modern-day Rothschilds, Morgans or Rockefellers, but they know that — if they acted the part — they would lose their jobs rather quickly.

Believe it or not, the real power in the world today is not represented at those forums. All the mighty gathered there are but trustees. Trustees of the people — whether in their capacity as tax payers and citizens or as mutual fund investors or bank depositors. And the essence of trusteeship is that the trustees must follow rules that limit the grandiose displays of power.

But back to Bono. He has surely had great success in raising the issue of third-world debt. But his success has very little — if anything at all — to do with his appearance at Davos.

Rather, it was the result of the relentless work that he and other activists have put into bringing the issue to the public's attention.

In that context, the WEF was actually a free-rider in jumping on the debt relief band wagon. Sure, it may have generated some useful additional media coverage of the issue at a time when it had already gathered plenty of momentum.

But it was hardly the major catalyst that it likes to view itself as. It acted more like a very small wheel in a very big machine.

Bono's success owes at least as much to his appearances on "Entertainment Tonight" and his highly publicized Africa tour with then-U.S. Secretary of the Treasury Paul O'Neill than to his performance at Davos.

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