Feb 6, 1998

DEVELOPMENT: IDOLS CHANGE IN THE ANNUAL PILGRIMAGE TO DAVOS

Geneva, Feb 4 (IPS/Gustavo Capdevila) -- Over the past 27 years, the World Economic Forum in Davos, Switzerland has become a kind of 'arc de triomphe' under which world leaders, CEOs and neo-liberal gurus parade, the winners of the campaigns for globalisation. 

Out of the Swiss resort town have emerged, consecrated, the models to be emulated worldwide, such as the Japanese economic miracle, the Asian tigers and the IMF's structural adjustment programmes. 

But a different panorama arose from the latest annual gathering which ended Tuesday, reflecting the instability of the global economy and the relations among its myriad actors.  

Japan has suddenly dropped from the head of the class and must now deregulate its economy. Just as the Davos gathering was getting underway on Jan. 29, the head of the World Trade Organisation (WTO), Renato Ruggiero, said the opening of Japan's market insufficient.  

The WTO discredited Japan in relation to the other industrial powers, the US and Europe, predicting that the Asian crisis would hit the Japanese economy hardest.  

Predictions of the collapse of economies under the onslaught of the Asian crisis were predominant at the six-day meeting at Davos.  

In the United States, the president of the Federal Reserve Board, Alan Greenspan, dealt the first card when he said the U.S. economy would slow down due to the difficulties plaguing its Asian associates.

The echo of that remark was heard in the mountains surrounding Davos, where Rudi Dornbusch, with the Massachusetts Institute of Technology, repeated his gloomy forecasts on the economies of Russia and Brazil.

But George Soros, the financier who speculates with enormous interests in the Southern Cone of the Americas, said the Brazilian economy would not be hit hard by the Asian crisis. 

Suggestively, the presidents of the countries of that subregion - Carlos Menem from Argentina, Fernando Henrique Cardoso from Brazil and Eduardo Frei from Chile - avoided formal contacts with the press.

Latin America was the area which sent the greatest number of leaders to Davos, the three South American presidents joining the presidents of Mexico, Ernesto Zedillo, and Panama, Ernesto Perez Balladares.

Obeying a tacit mechanism, the leaders of countries in need of financial support attend the meetings to attract transnationals interested in investing.  

But Indian economist Jagdish Bhagwati, economics professor at the University of Columbia in New York, and a renowned trade economist (and a former advisor to the GATT), told the daily 'The Times of India' just a month ago that the mere presence of countries at Davos "speaks of failure."  

Bhagwati in that interview also berated the IMF (and indirectly the WTO) and its push for capital account convertibility, favoured foreign investments for new productions, but had reservations on hostile 'take-overs' and countries wooing foreigners for short-term capital flows or allowing freedom of movement for capital and removing controls on portfolio flows (all pushed and advocated by the WTO in the name of financial services liberalisation).  

The highest profile leader of the Asian countries in crisis present in Davos was the prime minister of Thailand, Chuan Lekpai, who gave his assurances that southeast Asia would recover its rate of growth, although he acknowledged the gravity of the situation.  

The director general of the WTO confirmed that the Asian crisis could have serious repercussions on trade as well as on the social front.  

The head of the WTO ruled out protectionist measures as a solution to overcoming the crisis, although he accepted the possibility of new regulations to keep the situation from getting out of control.  

Concern among the decisive sectors of the economy with respect to the evolution of the crisis was evident at the gathering and immediately afterwards. The greatest worry was that the crisis could sweep away the advances achieved by more than two decades of open market policies.

Ruggiero insisted that the only possible therapy was "more of the same" - in other words further deregulation - because "it is not the time for protectionism."  

But while there is heavy insistence on a multilateral system without barriers, the two dominant powers - the European Union and the United States - have begun to sound out the possibility of a bilateral accord to protect themselves as the crisis sweeps through the rest of the world.