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'Action' as common as 'gloom': Davos debate dominated by financial and economic crisis

Written by Simon Maxwell


This was my eighth consecutive Davos – my last as Director of ODI, my first as Chair of the World Economic Forum (WEF) Global Agenda Council on Humanitarian Affairs (which post may or may not last beyond June and may or may not mean an invitation next year). Inevitably, I was led to reflect back on the highlights of previous years: chairing big meetings on Africa at the time of Monterrey and the New Partnership for Africa’s Development (NEPAD); and generally being part of a movement to keep development issues central at the WEF. 

That movement was smaller this year, and development itself was less visible in a public programme dominated inevitably by the crisis. No Bono. No Jeff Sachs. No Zoellick. No Dervis. That doesn’t mean Davos is on the verge of collapse, as some newspapers have suggested. There were still 2,500 people there, with for example, at least six UK Government Ministers, not to say at least six members of the ODI Council! 

There were plenty of development topics behind the scenes, especially in private meetings on food, agriculture, health, education, water and climate change. Many of these were focused on specific initiatives and actions. In fact, the word ‘action’ was used as often as the word ‘gloom’.

The big issue was the crisis. At the beginning of the week, the focus was on recovery and regulation in rich countries. By the end, and especially in the closing plenary, brilliantly chaired by Nik Gowing (ODI Council), there was much more of a sense that this was a global political and social crisis – albeit the Tuesday crowd was mostly finance and business, and the Sunday crowd was more academic, aid and civil society. Moses Naim, editor of Foreign Policy, said ‘2008 was the year of financial collapse; 2009 will be the year of political collapse’. That may give us the space and impetus we need.

The global financial and economic crisis
Doom and gloom on the financial side, of course, and a certain amount of mud-slinging and buck-passing – e.g. Nicholas Taleb (author of The Black Swan) calling for toxic deal makers to suffer the same penalties as toxic food adulterers. Anger at continued bonuses for bankers ($18 billion in the US). Talk of repentance and retribution, of a ‘Remorse Fund’. Fat chance. Business leaders were all battening down the hatches, as one logistics CEO made clear: ‘For the past three or four years, I’ve given very little thought to cash management, which has been managed by others. Now, I do nothing, I mean nothing, else’.

For us, the question is how the impact on developing countries featured. The answer, I think, is to be found more among politicians than business leaders. Blair, Clinton and Brown were all good on this, also Kofi Annan, and, of course, the UN leaders, especially Josette Sheeran of the World Food Programme (WFP) and Ann Veneman of UNICEF. Premier Wen of China spoke about social protection as part of the response to the crisis in China. Business leaders were less likely to bring the subject up.

I took every opportunity to make the strong points from our crisis team on a likely fall in financial flows to developing countries (25% according to our estimates, but Gordon Brown says 75%, from $1 trillion to $250 billion), the growth loss ($50 billion for Africa alone), and the consequent impact on poverty. One statistic I worked out for a piece for Kofi Annan’s Africa Progress panel a couple of weeks ago was that every African woman, man and child would lose 10 days’ income in 2009. That was before growth forecasts were downgraded again. I also asked whether there would be job riots in 2009, to match the food riots of 2008: this week there have been strikes or riots about jobs in the UK, France, Mexico, Russia . . . Hard to keep up, but my piece chimes with warnings about the political risks in 2009.

In terms of what to do, one question is how to use the fiscal stimulus in creative ways that help both developing and developed countries. In the 1980s, the Brandt Commission said that growth in developing countries could have the same effect as reflation in Germany, and surely the effect would be bigger today.

There are big implications for philanthropic flows and contributions, which will certainly decline – by up to $40 billion according to one estimate. There were many worried university presidents and NGOs at the meeting. Harvard has lost $8 billion of its endowment (=$40 million a year in lost income). The question is whether there are new philanthropic business models. The session I chaired had a number of venture capitalists with interesting ideas and examples. They all agreed that charities would simply have to reorganise and work in new ways – mergers, creating markets where none exist (e.g. in health care). There were some sceptics who felt that new charity models neglect unpopular causes (e.g. orphans: good, needle exchanges for drug addicts: bad).

Business people were saying ‘don’t ask for money, but we do have empty planes and trucks, or people with nothing to do’. Ask for those. I used Caroline Ashley’s argument that maintaining good business practice in a downturn (Corporate Social Responsibility +) conveys competitive advantage.

Values are at the heart of re-messaging. I used the ‘seven principles for a global re-boot’ that I have written about on the blog (Democracy and the rule of law are the norm; human rights are respected; individuals are able to maximise their capabilities and potential; excessive inequalities are addressed; the environment is protected; governance is effective and transparent at all levels; and there is a high degree of accountability). However, I really liked seven Gandhian aphorisms presented by Jim Wallis (a US religious leader). Gandhi condemned:

  • Wealth without work;
  • Pleasure without conscience;
  • Knowledge without character;
  • Commerce without morality;
  • Science without humanity;
  • Worship without sacrifice; and
  • Politics without principle.

It’s interesting about values. It has sometimes been hard to secure sufficient prominence for values, but by the end of Davos I did feel exhilarated about the possibilities opened up. It would be wonderful to have President Obama on the platform next year, leading a conversation about global social inclusion and laying out a programme for inclusive globalisation.

Tomorrow, in part two of my view from Davos, I’ll say more about the discussions on three additional and pressing issues: business and development; climate change; and humanitarian issues. Lots to say on all of these.