Davos kicks off amid deep gloom

Deep gloom marked the first day of the World Economic Forum in Davos on Wednesday, with economists, officials and business leaders seeing no quick fixes to the global economic crisis and warning against a growing protectionist mood.

• Co-chairs of the event, including Stephen Green, chairman of  HSBC, and Rupert Murdoch, chairman of News Corp, cautioned that isolationism and protectionism threatened the chances of creating a more sustainable kind of capitalism.
• Economists and some policy-makers displayed little confidence that the fiscal stimulus programmes in many advanced countries would be very effective in mitigating the degree of decline in global output in 2009 and no hope that a coordinated strategy would be agreed among rich and poor countries.
• The political and business leaders gathered in the Swiss mountain resort would be “very foolish” if they assumed that the crisis was over, Mr Murdoch said: The “binge” the western word had been on had come to an end, he added, leaving people around the world “depressed and traumatised” by the damage done to their personal wealth.
• Although panellists agreed that Davos was more than ordinarily important this year, and provided an opportunity to shape policies for when the immediate crisis has passed, Werner Wenning, chairman of Bayer, was among several saying he did not expect solutions to be found during the week-long event.
• “The crisis is getting worse,” Mr Murdoch said, and he saw no quick answer to it. “It is very important that we don’t over-react and get ourselves into a position of semi-socialism which restricts free markets.”
• The extent to which the gloom has spread from western economies was outlined by Maria Ramos, chief executive of Transnet, South Africa’s state-owned transport company. “We have to be surely concerned that we will roll back two decades of progress in the developing world,” she cautioned.
• Vladimir Putin, the Russian prime minister, was expected to set out his vision for a new world economic order in a speech on Wednesday evening in an attempt to seize the initiative from advanced economies. His address and that of Wen Jiabao, the Chinese premier, were eagerly awaited by Davos participants.
• Until recently, many business leaders hoped that Russia, China and India could provide an alternative motor for growth.
• However, the debates which are planned this week in Davos are likely to reveal rising concern that economic woes in Russia, India and China could potentially add a new note of instability into the global financial system instead – and a return to trade protectionism.
• Stephen Roach, chairman of Morgan Stanley Asia, said: “We cannot underestimate the challenges and dangers the world faces in 2009.”
• He argued that the US consumer was only in the first stages of a rebalancing that would take a number of years and reduce consumption and increase saving. In the meantime, China, the world’s workshop, would find it difficult to expand production and ”as the Chinese economy has hit a wall so has the rest of Asia”.