Davos and the new pessimism

The World Economic Forum in Davos has been given a lot of negative press over the last few years as a meeting place for world economic leaders to mingle and discuss world economic issues while the rest of the world suffers. This year the theme is The Power of Collaborative Innovation, but most of the reports from Davos are not focusing on the formal themes but a global level of pessimism. The chart shows that confidence may differ around the world but the direction is the same, down.

World growth is slowing which means there will be less collaboration between countries and more old style mercantilism. Innovation will also decline and less money is spent on R&D. A new conservatism with funds is already taking place with the stronger credit controls. There will be less money for anything that is cutting edge. The new pessimism comes from nay quarters. Finance has failed economies as it has not been able to solve the age old problems of creating return without risk. Slow growth is driving new views on trade protectionism which will have the same impact as seen during the great depression more slowing of growth.

Yet, the focus of Davos on innovation may be one of the most important themes of the next few years. There is a new interest in Schumpeter and the ties between the need for innovation as a driver of capitalism. We need new thinking about how to reduce the impact of credit crisis. The same old thoughts about monetary and fiscal policy may not be helpful.

http://www.weforum.org/en/events/AnnualMeeting2008/index.htm