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Davos signals responsible globality

As a unique collection of businessmen, academics and leaders of the world gathered at Davos for the 1999 Annual Meeting of the World Economic Forum (WEF), the most important challenge facing the transition into the 21st century is to find a right balance between free market forces and the needs of the vast majority of peoples having no control over these forces but subject to some unpredictable events happening elsewhere in the globe, “catastrophically altering their own and their family’s life”, to quote Dr Klaus Schwab, Founder and President WEF. Everybody recognizes that in this age of high-tech globalization is necessary in order to share capital, goods, services, ideas, technology and knowledge in a world that has four times more inhabitants than at the beginning of this century. As entrepreneurship and free markets act as the engine for wealth, concern about the welfare of the masses and their social cohesion in a world of increasing competition makes this year’s theme “as globalization with a known face, Responsible Globality.”

Jean Chretien, Canada’s PM, expressed it best, noting that “events in Russia, Latin America, Africa and parts of Asia suggested that the western world had become too triumphant about capitalism”, pointing out that when economics and markets collapse, the losses are ultimately that of the vast majority of ordinary people in places as diverse as Indonesia, Brazil, Russia, South Korea, Thailand etc. Canada’s PM called for currency traders to be controlled, to quote “we cannot see prosperity disappear overnight because some boy in red suspenders in New York decides this is not a good currency. The free market system has to be restructured but there is no easy solution,” unquote. President Aleksander Kwasniewski of Poland warned that while under the old bipolar system the world was divided along ideological lines, under capitalism it is in danger of being divided along economic lines. Senior Minister Lee Kuan Yew of Singapore set clear guidelines for joining the free market financial system. He said that while capitalism has served Asia well by raising the standard of living, it was because of free market trade in goods and services. One could not have the same independence in financial services as excessive borrowing because of easy credit from international lenders, compounded by portfolio investors opting out of East Asian market, triggered the Asian financial crisis. When a country has weak banks, weak supervision and lack of knowledge of the international borrowing of the private sector, then it should stay away from the risk of joining a free financial market system. Mahathir of Malaysia, who could not address any Plenary Session because of late confirmation of his participation, was more vehement about his feelings on the subject, “governments who fail to act against currency speculators should be thrown out of office. Currency traders can be compared to arms traders, their actions are no less lethal than rockets and bombs.” He ruled out any early lifting of the currency controls enforced in Malaysia until the international community develops a method of curbing the currency traders. Mahathir called for currency traders to be registered in countries in which currency they are operating so that as his put it, “they behave like good boys”, their activities should be transparent and that there should be a ceiling on borrowing twice their capital assets. He asked whether any bank would allow any country to borrow 20 times their capital assets, the international community places the rights of money traders above the health of the world economy. While Mahathir is universally reviled for suggesting controls, almost every other leader suggested the same in varying ways, Chancellor Schroeder of Germany was vehement about it.

Ms Ruth Dreifuss, President of the Swiss Confederation supported the concept of putting humanity before profit, “markets do not expand into empty territories, they are home to human beings embodying a tremendous cultural diversity who occupy different places in the world economy, the big question we should be asking ourselves is how can we preserve and even promote the precious asset of human diversity?” German President Roman Herzog in his speech urged better global relations not only between countries but all foreign key players ranging from the Red Cross to multinational companies and the media. He outlined eight measures, viz (1) Promotion of democracy (2) protection of fundamental human rights (3) curbing of nationalism (4) avoidance of cultural and religious conflicts (5) better use of international and regional institutions to enhance economic and social stability (6) end to selfish “beggar thy neighbour” command policies and social dumping (7) more effective communications and (8) global research committees. To quote, “international business community should not only focus on the financial or short-term aspects but look at it in terms of peace and social justice for humanity, since financial calculations will not pay in the long run”.

The financial sector led by Goldman Sachs executives opposed any curb on the activities of free currency trade while agreeing that “billions of people have been beggared,” in the words of US Secretary Treasury Robert E. Rubin there were no easy answers and no magic wands but Rubin, an ex-Goldman Sachs partner, insisted that instead of drawing a financial mechanism for interaction, the absolute key to financial stability and economic growth were strong macroeconomics and industrial policy. To prevent such crisis from re-occurring he called for, viz (1) countries to develop and follow sound policies (2) develop measures to provide capital industrial countries to reduce the volatility of flows (3) mechanisms to induce appropriate focus risk during crisis, improved regulatory forces on risk management (4) due enquiry by industrial country creditors and investors with respect to developing countries (5) enabling all citizens to participate in growth and economic well-being produced by the global economy by promoting core labour standards around the world, increasing investments in health. He said that while the market-based economic system and global economic integration were far preferable he considered that unfettered markets do not and cannot deal with all the needs of the masses and there is need to identity processes to deal with the social issues to create a robust world economy with far less instability. When even the world’s Superpower recognizes that some sort of a safeguard is necessary, we in Pakistan have no business in putting the destinies of our peoples at risk for the sake of profit for a few money changers.

Many other world leaders addressed the Forum in different Sessions small and large, among them President Nelson Mandela of South Africa, who was given an emotional send-off in his last major appearance as Head of State, President Hosni Mobarak of Egypt, US Vice President Albert Gore Jr who called for help for the indebted nations, President Yasser Arafat of Palestine, PM Primakov of Russia, President Chandrika Banderanaike of Sri Lanka, etc. Even a small island like Mauritius stole the show. CEOs like Helmut Maucher of Nestle, Eugene Schrempp of Daimler-Benz and Eaton of Chrysler, Ted Turner of CNN, Dr Henry Kissinger, Moody-Stuart of Shell, Percy Barnevik of Investor AB, etc addressed Sessions on business, politics, social, medicine, high-tech, finance, etc. The only glaring omission was that of Pakistan from where no official delegation came. Many people were keen to hear PM Mian Nawaz Sharif in person after the explosion of Pakistan’s nuclear bomb. One could sense there was sympathy for Pakistan’s stance and that his presence would have been of incalculable advantage to the country. Most of the CEOs of business in the world were present, Davos is a unique chance where the PM along with 5-6 close aides including the Foreign Minister and Finance Minister are required. But obviously someone in the Board of Investment (BoI) goofed and the country lost this tremendous opportunity to explain our position on nuclear capability and on Kashmir. While discussing the global hot spots of 2000, a panel of experts described Kosovo, Palestine, Central Africa, Korean Peninsula, the Spratly Islands, Taiwan Straits, Indonesia, etc but there was no one at the official level to carry the ball on Kashmir. This was an amazing omission, given that both Pakistan and India are nuclear powers.

As we enter the area of globalization we have to have responsible governance, this includes using every opportunity to stake one’s flag, especially before the world’s elite. Pakistan’s only mention were the legal travails of the Bhutto-Zardari combine. In the words of Peter Eigen, Chairman of the Board of Transparency International, “Pakistani prosecutors have had to face legal challenges and obstruction as they seek to investigate the myriad financial dealings of former PM Benazir Bhutto and her husband,” and sought help from the world community to end the status quo so that rogue off-shore financial centres (based only on illegal wealth) would be excluded from the international banking system. The good news is that Pakistan climbed down from a notorious 2nd position to number 14 in the list of corrupt in among 85 countries evaluated, a long way to redeem ourselves but at least a start.

Pakistan must have a consistent policy towards the WEF. Invariably the Head of Government must go to Davos, if not at least two Senior Ministers with a small delegation. From India the Finance Minister and a couple of Chief Ministers came, even from Iran Foreign Minister Mr Kharazi was a principal speaker. Davos is a must on the Pakistani calendar or we will watch the world pass us by, diplomatically and economically.

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