Davos Diary: Growing sense not enough being done

There is deep unease this year in Davos. There is a growing sense that not enough has been done to sort out the growing global recession which is now expected to continue for some years.

This sense of worry contrasts with the brief sense of satisfaction last month over the quick action taken in November by the US authorities, the meeting of the G20, and the many other steps taken by individual national authorities worldwide.

But things keep getting worse. While asset values are about as low as they might get, many now feel that the lack of credit and finance to keep business moving is growing into a major global freefall. And it is becoming clear that the Paulsen TARP might have worked if it had been implemented quickly and effectively, but the markets have moved well beyond the idea that $700 billion of buying up bad assets would save the world. What is now needed is trillions of new money to recapitalise the banks.

The way forward to find out how to do this successfully is at the heart of this year's debate as all players agree that coordinated global action from governments is the answer.

Davos is a very effective forum for airing ideas and allowing governments, companies and academics to test out on each other their ideas. Then the governments can pick up these ideas and move to action. This is due to happen when the G20 meets in London in April, and a lot of concern is gathering around that meeting in hope that it takes radical enough decisions and then the governments implement what they say they will do.

All day yesterday people were waiting to hear what was going to come from the two major speeches by Wen Jiabao, Premier of China, and Vladimir Putin, Prime Minister and former President of Russia. Both these massive countries offer major problems to the global economy.

China's economy is in the process of contracting from over 10 per cent growth to almost five per cent, and as it goes through this major fall, it will not pay much attention to increasingly desperate requests to open up its markets and reduce trade barriers. Russia has been badly hit by the fall in the oil price from around $150 a barrel when Putin's government could afford to buy its way out of trouble, to the near $50 a barrel of today under which it cannot afford to fulfill its plans and is facing a major meltdown.with possible serious social unrest.

Last year, the World Economic Forum placed great importance on the Millenium Development Goals, which have almost dropped from sight this year. A few delegates remain committed to referring to them, pointing out that while the global recession is obviously top of the mind, the long term importance of worldwide good education, good health and eliminating corruption remains undiminished.

As one said: "A boy or girl in Africa needs ten years of education, from ages six to 16. They also need good health to fulfill their potential, and they should grow up in an increasingly transparent and honest society". This is not seen as a luxury, nice-to-have aim, but is seen as a vital part of building a more prosperous and safer world.

At least the World Economic Forum has kept the world's vital environment concerns as one of the six themes of this meeting. Global warming and the targets to get CO2 emissions under control are very much part of the meetings in Davos, and are classed as very important regardless of the recession. In fact, several speakers have spoken of the opportunities for businesses in investing in these new industries, particularly with the new administration in the US taking more interest in the multilateral process of acting on global warming. Water shortage will also become important.