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Needed, caring capitalism
- Corporate chieftains, political leaders, social activists, academicians and global young leaders had all
assembled around the end of January in Davos, Switzerland (theme: ‘The Great Transformation: Shaping New Models') for the week-long annual meeting of the World Economic Forum. - Will the eurozone survive?
- Whereas austerity, fiscal consolidation and the stabilisation funds may take care of the immediate problems, the way forward was more challenging. There was practically no growth in Europe, both in GDP and in population, for nearly five years. Continuation of this trend, besides making Europe irrelevant in the global economic scenario, will lead to much greater unemployment in the weaker countries of the eurozone. Growth can only come through enhanced competitiveness. The leaders were reflecting on new mechanisms to bring greater degree of cohesion to their political, economic and judicial institutions. Given the interconnectedness of the world, there was realisation that no country is immune to the contagion. The eurozone problem had to be quickly resolved with the available tools.
- Global outlook
- Growth of the U.S. economy is critical for the well being of the world. They are now on a growth path and the economy is expected to grow 2-3 per cent this year. Investments, exports and profitability are all growing. What came out was an increasingly confident U.S. The academics were examining ways to enhance its competitiveness. Growth will have to come without reduction in wages and, as a consequence, without change in the American way of life. The U.S. continues to have great strengths and is a leader in innovation, higher education and capital markets. But there are deficiencies as well in the complexity of its regulatory structure, K-12 education and its tax codes.
- China was a focus for discussion in view of the perceived slowdown as well as the imminent leadership change. While China's growth will slow down, there will not be a hard landing. The society was undergoing massive transformation and the popular aspirations will have to be taken care of in a more democratic manner. The next stage of their economic growth will require them to move beyond the manufacturing capability. Intellectual property creation and research capability will have to be enhanced. Chinese enterprises will have to become global, bringing with it a need for larger number of global managers.
- China is in a major phase of transition to a knowledge economy. India did not generate the same interest as it did a couple of years ago. Indians were very visible and highly respected. The contingent was large and well rounded. Decline in the growth rate of India coupled with the slow pace of reforms and the political gridlock has taken their toll. However, there was also a feeling that the pendulum is shifting to Asia and India will again be a country to watch.
- Developing inequalities
- Occupy Wall Street and the Arabs Spring revolution pointed to the problems created by the established order. The capitalist system was clearly not delivering the right results.
- The problem is that there is no other system to replace capitalism and the model had to be tweaked. A recurring theme was the need for a safety net for the poor. People were worried about their jobs and their future. Unacceptable face of capitalism had to be replaced by a caring one. However, politics in many countries divided people, rather than generate consensus.
- Discussion on governance went beyond those of nation states. Corporate governance, compensation and ostentatious living were factors leading to perceptions of inequality.
- Since the problems have largely been economic ones, have the economists served us well?
- Economic pundits have not been able to predict accurately and, therefore, there were questions on the validity of many of the economic principles.
