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Talk of austerity, remorse at Davos

Ashley Seager and Larry Elliott

Number one theme of the meet is the economic crisis

Davos: The annual World Economic Forum kicks off for the 40th year later on Wednesday with quite a different mood prevailing than in recent years when masters of the universe would strut their stuff and tell governments to get out of the way.

Now the pendulum has swung rapidly back the other way and it is politicians who are turning up in force to try to come up with urgent solutions to the global recession that threatens to turn into a depression to match that of the 1930s.

The wealth creators of recent years have suddenly become the wealth destroyers, though there were already many nervous people at last year’s five-day conference in the frozen Alps as the credit crunch was already six months old.

Bankers, though, assured the world that they understood the problems, were fully on top of what their organisations were doing and would steer the world’s economies through the downturn.

Last year they felt no need to cancel any of the lavish parties they threw in Davos’s swankiest hotels. That was before the collapse of Bear Stearns and Lehman Brothers, before the rescue of U.S. mortgage corporations Freddie Mac and Fannie Mae, before Bank of America was forced to swallow Merrill Lynch and before the pride of British banking had to be taken over by the government.

The message from WEF’s founder Klaus Schwab is that some of the people responsible for the mess the world is in have to say sorry. Mr. Schwab, who has defined the WEF’s mission as being “committed to improving the state of the world”, wants the meeting to focus on business morality, questioning whether business needs its equivalent of the Hippocratic oath taken by doctors.

“People should feel remorse,” said a Davos insider. “Some people should be apologising.” In the new mood of austerity, banks are claiming they are cutting right back on entertaining lavishly.

There has also been a shift from business to government — there are 40 heads of state this year, more than twice the usual number. British Prime Minister Gordon Brown is attending, along with Germany’s Chancellor, Angela Merkel, Russia’s Prime Minister, Vladimir Putin, and China’s premier, Wen Jiabao.

They probably all wish that John Maynard Keynes could attend to advise them on how to solve the global financial crisis that is threatening to get worse before it starts to get better. But they can expect a powerful performance from Barack Obama’s chief economic adviser and former Treasury Secretary, Larry Summers, who will take a couple of days off from putting together his boss’s stimulus package for the world’s biggest economy. The WEF organisers say there have been cancellations but no more than in a regular year. There will be 2,600 people in attendance, slightly above the 2,500 they think is optimal.

Celebrities will be much less in evidence than in previous years — Bono is finishing off his new album and there are no Hollywood stars. — © Guardian Newspapers Limited, 2009

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