French President Nicolas Sarkozy, in a broad riposte to free-market capitalism, told a room full of international bankers and CEOs just what they didn’t want to hear: Brace for bonus curbs, tighter banking regulations and new bookkeeping rules.
It was a brazen posture for the World Economic Forum, a gathering of business and political elite at a Swiss ski resort that in many ways embodies the globalized economy. Many in Wednesday’s crowd -- including those whose companies are starting to recover after a crushing year -- bristled at Mr. Sarkozy’s keynote speech, calling it simplistic and populist.
Indeed, it echoed rallying cries of workers from the United States to Europe and Asia. And it was prescient, coming just hours before President Barack Obama’s first State of the Union address, where he is expected to address reforming Wall Street.
“There are remuneration packages that will no longer be tolerated because they bear no relationship to merit,” Mr. Sarkozy said, calling it “morally indefensible” when companies that “contribute to destroying jobs and wealth also earn a lot of money.”
The comment drew a lone clap, while the rest of the hall stayed silent.
Little escaped Mr. Sarkozy’s anti-market wrath: free trade, currency manipulation, failure to tackle climate change.
“By placing free trade above all else we have weakened democracy, because citizens expect from democracy that it should protect them,” Mr. Sarkozy said.
“From the moment we accepted the idea that the market was always right and that no other opposing factors need to be taken into account, globalization skidded out of control,” he said.
His words contrasted with much of the tone on the opening day of the five-day conference in Davos.
Business leaders resisted the idea of ratios that would govern executive pay. Some argued it would prevent companies from recruiting top talent, while others said a salary limit for a boss would be arbitrary if it was set at 20 or 25 times the earnings of a firm’s lowest-paid employee.
Bankers warned that a flood of new regulations risked choking off a global economic recovery.
“Let’s get good regulation, better regulation, but not more regulation,” said Peter Levene, chairman of British bank Lloyds.
Peter Sands, the CEO of Britain’s Standard Chartered Bank, added that his industry already has been “fundamentally changed” by tighter regulations and supervision, while Deutsche Bank Chairman Josef Ackermann said “we will all be losers” if governments clamp down on markets too zealously.
Mr. Sarkozy’s speech marked a turnaround for a conservative who once espoused freer markets and won France’s presidency in 2007 on pledges to loosen up his country’s financial and labour rules. The financial crisis sent his rhetoric and policies veering leftward.
Former President Bill Clinton, who met with Mr. Sarkozy after the speech, told AP Television News, “We talked about how the 21st century economy needs balance, balance between finance and production, balance between government and the private sector, balance between the rich and the poor.”
Mr. Sarkozy “talks to people in a way that requires them to say ‘do I agree or disagree?’ That’s very important. No one has all the answers to these problems. But it’s very important,” Mr. Clinton said.
The CEO of French energy giant GDF Suez, Gerard Mestrallet, told The AP that Mr. Sarkozy’s address “had good moments, and less good moments” -- namely, the heavy regulatory stress.
Mr. Sarkozy urged a tax on financial transactions and a tax on imports from countries that don’t heed international climate accords.
“The signs of recovery that seem to herald the end of the global recession should not encourage us to be less daring,” Mr. Sarkozy said. “Rather, we must be even bolder.”
He called for stimulus packages to be withdrawn slowly so they don’t alarm jittery markets. Mr. Sarkozy also praised Mr. Obama’s efforts to move banking away from reckless speculation.
The Davos gathering of some 2,500 people looked at a host of other problems Wednesday, including helping Haiti after its devastating earthquake.
But the most pressing concern was steadying a shaky world economy that is likely to face tough challenges in 2010. Rich world unemployment remains high and governments will be forced to pull back from lavish bailouts and stimulus packages that have propped up banks and other industries.
For all his bluster, Mr. Sarkozy pulled back from the leftist brink.
“There is no other economy than the market economy,” he insisted. “We can only save capitalism by rebuilding it, by restoring its moral dimension.”