The annual gathering of the World Economic Forum in Davos this year meets in perhaps the most gloomy circumstances this century, and early briefing papers for the gathering make depressing reading.
By far the most heavily used word of the Forum, which begins in just over a fortnight, will be risk – risk in world financial markets, risk to the geopolitical stability of the world, risk to the environment, and risk to the global information system. In a worst-case scenario, if all these threats arise at the same time, it will be a bad year.
The financial risk is probably the most immediate and the most serious, at least in the short term. Davos attendees will hear how the sub-prime crisis, which began last summer and which is still working its way through the world’s money markets, could go into meltdown, strangling liquidity globally and cutting off the essential cash-flow from the economic system.
Time will only tell on this one, but presumably the delegates from the Middle East, sitting on a growing pile of liquidity as energy prices escalate, will not feel as nervous as their counterparts in the United States and Europe, who find themselves at the wrong end of the equation on this issue. Davos will hear the message assessed in these chilling words: “The resilience of the global financial system will only become fully evident under conditions of severe stress.”
Geopolitical risks are always there, and if Middle East businessmen are in danger of being complacent over their comparatively comfortable cash balances, they will be jolted back to reality by the Davos conclusion that the region still represents a threat to stability, according to the briefing documents.
However, Davos finds two positive factors that may make the region a little safer in 2008 – the end of the presidency of George W Bush, and declining levels of violence in Iraq.
Straws in the wind for world stability, perhaps.
On the environment, the forum considers there is a danger the creaking financial system will force business leaders to postpone or delay vital measures to address climate change. This is a real problem. There were signs towards the end of last year that climate change was being pushed up the business agenda, with concerted statements from industrial chiefs followed by a more positive meeting of leaders in Bali. If this momentum is halted by a sudden financial crisis, it would be dire – most business people now realise time is crucial in dealing with climate change.
In this context, it is encouraging Mohammad Al Mady, the head of Saudi Arabia’s industrial conglomerate Sabic, is placing climate change at the top of his agenda. Davos will hear of other threats too – an acceleration of the rise in basic food prices; the possibility the global information highway will collapse due to overload or external threat; and the threat of bird flu.
So amid all this gloom, it seems entirely appropriate the Forum is asking its attendees and observers one basic question: “What one thing do you think countries, companies or individuals must do to make the world a better place in 2008?
If Emirates Business readers want to attempt an answer, I would be happy to receive them, and open this column up as a forum for public debate ahead of the Davos summit.
Davos asks the crucial question