Where Confidence Was Waning

During the WEF meeting, attendees felt rained upon by pessimism, like the figures in "Wood carvings named Procession Sad" by Davos artist Andreas Hofer.

Imagine gathering 2,600 people from around the world for five days in a remote Alpine resort with record snowfall. Some will come alone, but others—including more than 40 heads of state—will arrive with entourages. Then arrange for reasoned dialogue on some of the most contentious and portentous issues of the day among hundreds of CEOs, public officials, thought leaders and even a few labor chiefs and “Occupy” protesters.

This is the Rubik’s Cube that the Geneva-based World Economic Forum had to align for its 2012 annual meeting in Davos, Switzerland—the 10th such gathering I have attended. The world from Davos this year could hardly have looked more different from the one I first witnessed in 1997. Back then, American executives could bask in the glow of U.S. economic growth. Participants from around the world seemed eager to learn how the American model had succeeded.

This year, U.S. business leaders still appeared in substantial number, including Google’s Eric Schmidt, Archer Daniels Midland’s Patricia A. Woertz and JPMorgan Chase’s Jamie Dimon. But the home market for American executives has become less promising, growth is slower, and the mood far more sober. Social problems also seem deeper. Among the most vexing of these social problems is the jobless recovery in the West.

A contrary trend is the growing worldwide demand for high-end human capital, the talent on which stimulating innovation and managing complexity so often depends. In some regions, the expanding demand for engineers and other specialists has far outstripped trained supply.

At the same time, the rising demand for highly educated workers has exacerbated still another social problem—the growing income disparity between university-graduated, white-collar employees and those less fortunate. In its seventh annual Global Risks report, the World Economic Forum noted that, in the view of a survey panel of more than 400 experts and industry leaders, “severe income disparity” has emerged as one of the world’s most probable threats, surpassing financial risks and natural calamities.

Meanwhile, the rapid growth of Brazil, China, India and a host of other emerging economies continues unabated. Their enormous populations, with large fractions still underserved, should sustain growth for decades to come.

Still, several executives from the East cautioned that their rapid growth should not be based on mimicking the West. In finding their own way, Asian companies are likely to be led by Chinese enterprise. Over the past 10 years, China has already become “the de facto leader of Asia,” observed one government minister from the region, and over the next 10 years, he confidently predicted, China will become the “de factor leader of the world.”

To compete, business leaders in the West are taking measures that might have been left to government leaders in the past. If institutional investors, equity analysts and corporate directors can also be drawn into the job-generating agenda, those attending the World Economic Forum’s annual meeting in 2013 could find themselves talking more about job growth than joblessness, not only in the East but also in the West. A return of confidence and optimism to Davos would be welcomed by all.

Editor’s note: A longer version of this piece was originally published on Knowledge@Wharton on Feb. 1, 2012.

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