Davos 2007: losers feel threatened, winners too are discomfited

Vidya Subrahmaniam
The Hindu, 31 January

The Indian mood alternated between happiness and dread. For the West, it was an unusual feeling — to have to applaud China and India from the sidelines, and accept that its long reign could be coming to an end. Is globalisation a double-edged weapon?

THE CENTRAL Sporthotel in Davos, more commonly known as the `India hub,' was the place for celebrity-watching this past week — as the World Economic Forum got going. Rahul Bajaj, Sunil Bharti Mittal, Jamshyd Godrej, Nandan Nilekani, Malvinder Singh, Neeraj Bajaj, Vinod Mittal, Shiv Nadar, Baba Kalyani, Ajit Gulabchand, not to mention the very, very elderly Thomas J. Bata (born 1914) — name the business tycoon and he was there, either as a boarder or as a lunch invitee or a friend dropping in for a chat by the fireside. For Indian business reporters stalking the hotel, it couldn't get better — all the "who is buying out whom" scoops were happening here live, and even better, the biggest, and the grandest in industry could be buttonholed for an interview or, at the minimum, for a juicy quote.

The mood was buoyant, although the Indian contingent was nowhere near as imposing as it was in 2006 — the year of the swashbuckling "India everywhere" campaign marked by a swanky ad blitz, high-profile events and dazzling Bollywood-Hollywood action. This year Finance Minister P. Chidambaram was conspicuously absent and all three Chief Ministers scheduled to attend dropped out. The India events — a spate of dinners, several Bollywood nights and one fashion show — were hardly the best we could offer; the settings were tacky, the food indifferent, and the foreign presence less than impressive. As a cheeky commentator said, "this time it is `India nowhere'." Yet in the end the glitter and shine, or the lack of them, did not matter. What mattered was that at Davos 2007, India, till recently hyphenated with Pakistan in all international meets, evoked the same breathless admiration — bordering occasionally on fear — as China.

Said Ajay Khanna, former Chief Executive officer of the India Brand Equity Foundation (IBEF), who spearheaded the 2006 campaign jointly with the Confederation of Indian Industry (CII): "Last year we changed the perception that India was slow, bureaucratic and inefficient. Our campaign marketed India as a modern, vibrant democracy, as a brand to watch out for. The result: Davos, which was all about China, China and China, is today speaking of India and China in the same breath. India is going overseas, Indian companies are becoming multinationals. And though we consciously kept a low profile at this year's annual, we were given 51 speaking slots."

CII president R. Seshasayee seconded the opinion: "We have moved from a generic promotional campaign to specifics. Look at how often India popped up in conversations here. India was there within 15 minutes of any discussion, it figured in every one of the key sessions."

So was Davos 2007 a conquest for India? What of the world? At the top of the pops once again were India and China — the new whiz kids, the global winners in a race where the once dominant were losing steam. Yet the celebration and applause might have got just a bit uncomfortable for the Indian team judging by the number of references to poverty by Kamal Nath & Co. The team had much to crow about: India's "superlative" growth trajectory — 8.3 per cent this year, expected to top nine per cent, with some luck even 10 per cent, in the next five years — its growing global appeal, the rush of FDI inflows, Indian industry's multinational ambitions and so forth.

However, the happiness seemed to be tempered by fear of how the Davos triumph will play out at home: The more India was feted in Davos, the Mecca of capitalism, the more brickbats it was likely to get at home, and for proof there were two precedents — Narasimha Rao's 1996 defeat and the "India Shining" disaster. At one India-related session, a prospective investor questioned Mr. Kamal Nath on domestic reaction to Indian reforms. The Industry Minister was candid enough to admit that voters were wary of reforms. "In 1996, all the reformers lost the election.

Three hundred and fifty million Indians earn less than a dollar a day. Reforms can only work if they impact the poor positively. If I tell them I went to Davos to sell reforms, the Indian voter will tell me to go take a walk."

The Indian mantra

Inclusive growth seemed to be the Indian mantra this Davos season. The Ministerial team set store by it as did the flock of businessmen wining and dining the rich and the influential at the WEF's many venues. Even as he sang paeans to the "Spirit of Davos," Mr. Rahul Bajaj admitted that "inequalities are rising among and within nations." Said he, "Forget the NGOs who keep shouting about globalisation. Look at Joseph Stiglitz [participating at the meet], he's completely against it." Mr. Sunil Mittal, co-chair at WEF, expanded on the subject at the opening plenary, following it up with a press meet: "At the upper end, it is a very small pyramid of high growth. We must have inclusive growth, people outside have to be brought in. If the world does not harness this restless pool, we could be looking at trouble."

If the Indian frame of mind alternated between happiness and dread, for the West it was an unusual feeling to have to applaud from the sidelines. Applaud it did but underneath the magnanimity was fear — fear of the unknown with definite signs of a U.S. slowdown, and confirmed news that economic power was inevitably shifting in favour of non-Western players.

Planning Commission Deputy Chairman Montek Singh Ahluwalia summed it up: "There is a clear recognition that the U.S. is not the only locomotive power. The U.S. slowdown is certain, the question is: Will it be a soft or hard landing?

For India, good news came even as the annual got under way with Peter Torreele, WEF Managing Director, announcing to the media that for the first time emerging markets accounted for 50 per cent of the world economy. The theme of the 2007 annual, "The Shifting Power Equation," was the cherry on the cake. The theme was nothing if not an implicit acknowledgement that the monopoly of the West was coming to an end. The German Chancellor, Angela Merkel, set the tone for the annual in a speech remarkable for its candour and introspection: "The world economy is currently undergoing a tremendous process of change. A lot of things have turned upside down which for a long time we had taken to be a given." Ms. Merkel attributed the change to three epoch-making events — the fall of the Berlin wall; the IT and communications technological revolution; and the enormous changes occurring in India and China — "the transformation they have undergone from static command economies to vibrant, market economies." Ms. Merkel noted that one-third of the world's population had suddenly become "not observers but players"; the new players represented "new opportunities" and a "completely new balance of power." Further, "we, the original team, don't find our way about anymore ... old customs, habits, fiefdoms no longer guarantee successes."

The German Chancellor pointed out that in just two years China was poised to become the world's biggest exporter, overtaking the United States and Germany.

The China-India theme song was a constant at the meet. The session on "The Global Economy" saw Laura Tyson, Professor of Economics at Berkeley, forecasting another "goldilocks" year despite the expected U.S. slowdown because of greater Chinese consumption. Jacob A. Frenkel, vice-chairman, American International Group, predicted a future piloted by China and India: "Demographic changes will redistribute economic might to Asia, making the world a very different place within 20 years."

Yet for all the ovation China and India got at Davos, it was clear that the gurus of globalisation were intensely apprehensive about what the emerging equations meant for their own future: Globalisation, which the West foisted on developing nations — and successfully too judging by Davos 2007 — could prove to be a double-edged weapon. E. Neville Isdell, Chairman and Chief Executive Officer, The Coca-Cola Company, U.S., cautioned that even though "globalisation has never been healthier, there is a danger that the challenges of the global economy will lead some societies to look inward and raise barriers." The fears were more explicitly expressed in the session on "Globalisation and the Middle-Class." Lawrence H. Summers, Charles W. Eliot University Professor at Harvard, observed that the "[Western] middle class is nervous — and rightly so." He added that wages were stagnant, and even declining for many who felt their jobs were threatened by overseas competition.

Mr. Stiglitz had the last word. He told The Hindu : "The euphoria is over. The U.S. is entering an era of protectionism, and there are fears that this could threaten globalisation."

The ironies are too large to miss. India is in the global spotlight, yet it cannot bask in the glory for fear of losing out at home. On the other hand, the West is finding that in the game of globalisation it started many years ago, it could end up the loser.